10 July 2007

Extending a supply chain doesn't just mean finding a low cost supplier

Many European organisations have been shifting their focus from local manufacture to import and distribution from an increasingly long supply chain, all in the name of reducing the cost to serve.

I found this article today which describes the quality problems with some products sourced in China. The article refers to US importers and distributors, but the same issues face European importers and distributors.

Now, I'm not making the case that European good, Chinese bad. That wouldn't be accurate, but I have little doubt that the importers and distributors mentioned in this link thought that they were dealing with good products which met the appropriate safety standards. Apparently that assumption isn't enough to guarantee that delivered quality meets local requirements.

It also means that additional activities may need to be built into these long supply chains to make sure that quality standards are maintained. That will have the impact of increasing the cost to serve although it is unlikely to make these sources uncompetitive until their wage rates increase substantially.

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