8/12/2018 The Confluence of Facility Planning and Supply Chain Strategy - Area Development

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The Confluence of Facility Planning

and Supply Chain Strategy
An efficient, cost-effective supply chain can be achieved by considering
logistics early in the location decision process and continuously sharing
information.

Richard J. Maturi November 2012

     

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ccording to Mickey North Rizza, vice
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incurring a $1 billon loss for the first three quarters of 2012.
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8/12/2018 The Confluence of Facility Planning and Supply Chain Strategy - Area Development
cost steel slabs from its Brazil plant. A shrinking steel market and high
shipping costs put the final nail in the coffin for the ambitious project to
gain a foothold in the U. S. market. With potential suitors for the plant
bidding in the $1 billon range, ThyssenKrupp’s faulty supply-chain
decision looks to cost them dearly as they try to shed their money-
draining Alabama facility.

“Companies often fail to consider the critical risk areas in their supply-
chain equation. It is essential that management thinks through what can
go wrong and the implications of such failures to their total operation,”
warns Rizza.

Security of Supply
“In the aftermath of the Japanese tsunami and other recent supply
disruptions, security of supply is the key issue looking forward.
Depending on the industry, manufacturers rely upon third-party
suppliers for half or more of their value added. Firming up the supply
chain can take several simultaneous paths including culling down the
supplier list to those of strategic importance, developing multiple source
relationships, increasing inventory levels, strengthening strategic
relationships, and “going all in” with suppliers,” says George F. Brown,
CEO and co-founder of Blue Canyon Partners, Inc. of Evanston, Illinois.

Brown advises assessing the implications of a supply-chain disruption

on production and margins, determining the availability of alternative
ingredients or suppliers, and developing strategic supplier relationships.
“Large corporations and small companies my have thousands or
hundreds of suppliers, but only a small number rise to the level of
strategic supplier status. The days of squeezing the supplier for the last
nickel of savings are over; it’s time to turn to strategic relationships that
benefit both parties,” stresses Brown.

Impact on Facility Decisions

Such strategic supplier relationships impact facility planning and
management decisions including development of co-located facilities,
new product development in conjunction with suppliers, and housing
supplier employees within manufacturing, engineering, and
warehousing operations.

“Building these new strategic supply-chain relationships takes a new

mindset on both sides of the equation. Concentrating on ‘Show me the
Money’ metrics will deliver benefits to both parties,” points out Brown.
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“Improving your inventory-turns metric can significantly cut costs,
improve flexibility and improve cash flow,“ said Narayan Laksham, CEO
1
and founder of supply chain software company Ultriva, headquartered
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Laksham continues: “Cloud-based supply-chain software creates an
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lead times and trigger points generates the supply shipments so that the Companies?
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“Manufacturers are beginning to learn that supply-chain management is Manufacturing in the U.S.
more that just ‘leaning on’ their suppliers to shave pennies off the cost of
a part, raw material, or component. Transportation and logistics should 5
play a bigger role in the site selection process earlier in the decision- Negotiating Incentives for Your Next Capital
making process. Many larger corporations, like Caterpillar, work with Investment
their suppliers to set up supply warehouses and operations close to their
production facilities to ensure supply without interruption. The new 6
$200 million Caterpillar plant near Athens [Georgia] will provide 1,400 In Focus: Examining Commerce’s Misguided
jobs, but we know it will also add several thousand more jobs as the Auto Imports Investigation
supplier base builds out around that plant,” says Page Siplon, based out
7
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8/12/2018 The Confluence of Facility Planning and Supply Chain Strategy - Area Development
of Savannah as the executive director of the Georgia Center of 2018 Leading Metro Locations: Pacific and
Innovation for Logistics. Mountain Metros Dominate the List

It should be noted that Siplon was recently appointed to the newly

formed U.S. Advisory Committee on Supply Chain Competitiveness,
which will act as a liaison between industry and government. The
committee’s advice will also be useful in the development of a national
freight policy and in executing the National Export Initiative, which
aims to double U.S. exports by the end of 2014.

Information Sharing FOLLOW AREA DEVELOPMENT

“Manufacturers are walking a fine line trying to counterbalance the
efficiency gains of manufacturing in low-cost overseas facilities against
minimizing the risks and costs of timeliness, warehousing,  TWITTER  LINKEDIN  RSS
transportation, and customer support. While it is difficult to assess the
risk associated with each strategy component, it is also essential for core
competitiveness and success of the overall supply-chain network,”  NEWSLETTERS
further comments Douglas Kent, vice president of Avnet Velocity, part
of Avnet, Inc., one of the world’s largest suppliers of electronics  Insider: Exclusive content from Area Development
components. Magazine focusing on all aspects of site and facility planning
from state and local incentives to corporate surveys and
beyond, delivered right to your inbox monthly
“In order to achieve a successful strategic supply-chain relationship, you
need to share, share, share, and share some more. The more  This Week: Site selection, facility planning and
information that is passed along the supply chain, the less risk exists of workforce development thought leadership curated from
around the web delivered to your inbox weekly
a supply-chain disruption. It sounds stupidly easy, but in reality it is
hard to implement,” warns Roman Bukary, head of Manufacturing and
Wholesale and Distribution for cloud-based business management Choose your industry...
software firm NetSuite in San Mateo, California.
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“Don’t just send over orders to your supplier, help it plan in advance for
your orders. Pre-negotiate purchases and scheduling. Make your
supplier your partner. Encourage them to co-locate inventory closer to
you to cut down lead times and increase inventory velocity. Today, it’s
all about logistics; labor costs are no longer driving the facility location
decision. You must manage inventory-in-transit effectively. In addition, SPECIAL PRESENTATIONS
supply-chain management is not only for large corporations; smaller
companies can also benefit from the cost savings and flexibility derived 2018 Gold & Silver Shovel
Awards Recognize States’
from perfecting your supply-chain management,” advises Bukary.
Efforts to Attract High-Value
Investment & Large Job-
NetSuite client Mountz, Inc. — a manufacturer and marketer of Creating Projects
precision torque tools, control equipment, and measuring equipment —
made the decision to relocate its three branch-based worldwide 32nd Annual Corporate
distribution centers to one facility in Alabama in order to increase Survey & the 14th Annual
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According to company president Brad Mountz, based in San Jose,

California, “We are able to link all of our subsidiaries and facilities with West Coast "Tech" Cities Top
the cloud-based supply-chain software. It’s a strategic part of our List, Smaller MSA's Show
business in order to leverage growth. I was tired of being held hostage Workforce Chops
by computer programmers. They did not add any value to our
organization…they were a drag. Now we have better planning,
budgeting, and control over the supply-chain process. We have 2017 Top States for Doing
eliminated bottlenecks and improved delivery with less overhead. We Business: Georgia Ranks #1
Fourth Year in a Row
eliminated the non-productive assets and redistributed that cash flow
toward assets that would re-emphasize growth of our business.”

Perfecting your supply chain can take many forms, but always involves
strategic thinking and sharing of information. Management must take
an overall view of the business and supply-chain risks and rewards in ADVERTISEMENT
order to perfect its supply-chain network and reap the benefits.

 Richard J. Maturi
Richard J. Maturi is the author of 21 books and more than 1,200 articles. His
most recent book is "Triple Crown Winner: The Earl Sande Saga," about the
to jockey of all time. He is a member of the Denver Press Club.

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