Issue link: https://iconnect007.uberflip.com/i/535707
44 SMT Magazine • July 2015 What is with landed Costs? There is a lot more to getting your product delivered to the consumer than just placing an order with the vendor that quotes the lowest price. The calculation of landed costs is much more complex than adding the BOM costs to the labor costs. For this reason the drive to man- ufacture in areas of the world where labor rates are at their lowest is rife with risk and misinterpre- tation and littered with stories of failure. When calculating landed cost there are many things to take into account. Firstly, what will it cost to manage the supply chain? If you choose to manufacture in an entirely different time-zone and ge- ography from your R&D and purchasing, how often will you need to visit and what impact will that time have on your product development and product introduction cy- cle? What about the proxim- ity to your customer? Where are they and what level of direct or indirect fulfilment do you need to provide? What about all the costs related to shipments? And what about the cost of the time taken for your product to reach you or your customer if it is at sea for four weeks, plus the associated cash flow implications of that stock? Then there's a whole story about re- verse logistics and what the supply chain looks like when field failure or a recall occurs. Regionalization, On-shoring, and Right-shoring What we really need to consider when se- lecting a supply chain geography is where the best place is to make our product in terms of cost, not in terms of price. A lot has been said in the media around the on-shoring debate and the idea that manufacturing is moving back from low-cost environments to higher- cost geographies. I don't see this. I see prod- uct moving to lower-cost geographies that are spread around the world rather than just in Asia. That means Mexico for the Americas and Eastern Europe. The important thing is to pick the right geogra- phy for you. That might be Shenzhen or Chengdu, but it might also be around the cor- ner from your headquarters or your biggest customer or perhaps a distribution hub. It might even mean the vendor being close to your design team and speaking the same language. More importantly, perhaps your best solution is not being a single geography at all. You may need a multi site supply chain to fulfil your product in multiple countries. You might even need a local NPI (new product introduction) facility that you can collaborate closely with, which then provides a gateway to a larger global footprint. Think Outside of the Box and Beyond the Vendor Your supply chain isn't just you and your vendors. It is you, your vendors, their vendors, and their vendors' vendor. You need to integrate the entire supply chain and you need end-to- end visibility and traceability—to mitigate risk, as mentioned before, as well as avoid surprises. Some of the suppliers to your outsourcing partner will be on your AVL (approved vendor list) and some may not, but everything they do impacts on you, on your costs and on your brand, so get involved. This can be a great source of savings in the supply chain. Looking at the entire supply chain collaboratively can make things run more CuTTING COST, NOT PRICE continues the important thing is to pick the right geography for you. that might be shenzhen or Chengdu, but it might also be around the corner from your headquarters or your biggest customer or perhaps a distribution hub. " " FeAture