The gas prices which was quite low few years back has now stabilized at a much higher level and is likely go up due to increase in demand from developing nations. This forces the companies to consolidate orders before shipment or fill the containers to optimize shipment. This again leads to increased inventory cost with a risk of ending up with redundant inventory.
The revelation that “Manufacturing should be where the Market is” is starting to make sense for the manufacturers as they see the outsourcing beyond the pure cost. The economic crisis has highlighted the need to carry less inventory due to uncertain demand patterns.
“The central hallmark of demand driven supply chain is an electronic kanban system which achieves savings in several key areas,” according to Narayan Laksham, CEO of Ultriva, (www.ultriva.com). Laksham insists that, “Existing manufacturing companies are seeing some stability in the market place with definite prospects of growth. It appears that more companies are viewing outsourcing in a more critical manner than just going for it. This uncertainty has also generated substantial interest in lean manufacturing techniques with in these organizations”.
The downsides of outsourcing manufacturing are:
- Long lead times – hence the need to carry substantial buffer inventory to compensate the long lead times and transit times
- Planned demand – Due to long lead times, the production has to be forecasted and therefore cannot change to market fluctuations quickly
- Increasing number of FG SKUs – Since production has to be planned in advance, there is a guesswork involved in which to stock and which not to
- Quality issues – This is becoming more relevant as the quality problems are found after the fact and the large batch quantity combined with long lead times makes it a management nightmare
- Quick product changes – Product designs are most effective when it is closer to the manufacturing. Building prototypes and changing designs becomes a difficult proposition when they are miles apart. Communications barriers (language, distance, time zones) contribute to delay in introducing product quickly to the market place.
Ultriva’s flagship product, Ultriva electronic kanban, eliminates stock-outs while reducing inventory levels up to 75 percent. Ultriva Lean Scheduling complements demand-driven replenishment strategies by optimizing production schedules in real time around the most variable customer demand. Ultriva Supplier Replenishment extends the replenishment capabilities of Kanban to include schedule-based replenishment, discrete POs, min/max, consignment and VMI (vendor-managed inventory) replenishment methods. Ultriva’s products are in use in more than 100 plants worldwide, incorporating more than 4,000 suppliers, transacting over one billion dollars of inventory and reducing manufacturing costs for industry leaders such as AGCO, Emerson, Ingersoll-Rand, McKesson, Rexnord, and Timken.
Ultriva
Cindy McGowan
408.248.9803
Professional Marketing Firm for the Manufacturing Community and Manufacturing Journalist to most manufacturing magazines Article Source:http://www.articlesbase.com/software-articles/transportation-costs-influence-2010-manufacturing-according-to-ultriva-ceo-1609536.html