Challenge No 5. Understanding and identifying the supply chain

Challenge No 5.

Understanding and identifying the supply chain

Developing a business case and scenario-planning review for your operation as well as for your current and backup supplier network is imperative to any strategy execution. Applying a multi-factor assessment to analyze cost, volume, standardization, value risk, etc., to your supplier network will give the foundation for scenario-planning and network optimization that will increase competitiveness.

If you currently have a supply base in China, evaluate what options you may currently have for supply chain agility. Consider the necessity to bring suppliers to North America or develop local, existing supply bases in key value chain areas.

“We have multiple clients pursuing options for flexible and secondary supply chains, investing in feasibility studies for multiple supply chain alternatives, to see what options they have. It´s not enough to evaluate current market situations like taxes and tariffs and try to adapt to current market situations. You must develop multiple scenarios because the global market is in constant and accelerated change,” mentions Jorge Ortega.

It´s extremely risky to rely on just one provider. “We have seen entire value chain shifts from the impacts of just one company´s decision to relocate. When a key provider must make tough decisions for survival, it´s definitely going to affect others. If you rely on a limited supply base, you put yourself at risk, even if you maintain great relationships. Identifying alternatives is the only way to be agile and proactive in today´s market, and that is translating to competitiveness among global companies.” – Carlos Alvardo, VP & Sr. Partner / Strategic Advisor of Prodensa Consulting Services.

Success Cases

EXAMPLE 1 An aerospace company that started operations in Mexico in 2015, doing aerostructures form OEM’s, was directly impacted by the tariff dispute between the US and Mexico, as one of their main raw material was steel and other metals that were now classified as sensitive and had an increase in import duties. After a thorough analysis, the International Trade Compliance team defined 2 strategies that minimized the impact of the import duties: 1) Changing the raw material from raw steel to steel components that were duty free according to their HTS code and regional value, and 2) Identifying local vendors in Mexico that were able to provide the same quality of certified steel for minor assemblies. EXAMPLE 2 When the earthquake and tsunami hit the industrial areas of Japan in 2011, several Japanese companies with operations in Mexico were left with no inventory of raw material and with increasing purchase orders from their customers in North America. In a team effort and taking advantage of Prodensa’s national network and coverage, most companies were able to identify national vendors to meet their increasing demands, as the Mexican facilities were the only ones to continue operating as their corporates in Japan were forced to shut down due to the natural disasters.