Win Foreign Markets with an "Asset-Right" Speedy Production Cycle

Posted by Dynamic Language on Aug 9, 2016 Aug 9, 2016

asset right supply chain management While in the US and in some foreign markets, product differentiators are a strong component of assisting consumers in their buying decisions, this is not the case in some foreign markets. It is valuable to do a more formal analysis of what is really essential to a customer — versus what would be nice to have — and to look at the extent to which a change might translate into new sales and increased market share.

The widespread increase in connectivity, particularly through mobile devices, has taught consumers to believe in the power of their voice and demand instant gratification. Companies have heightened demand to ensure orders placed are processed without error, processed quickly, and delivered via the fastest method of transport. Tomorrow’s supply chains will need to combine varying methods of transports to gain a competitive advantage to giving consumers their rewards

A leading industrial goods manufacturer decided to perform a sensitivity analysis for their customers in China, Africa and the Middle East with the theory that speedier production times would lead to an increase in customers. Customers in these geographies typically had short planning cycles for projects, meaning they got started quickly and were inclined to take whatever product was available, regardless of brand. The key was understanding the relationship between delivery speeds and increased sales. The company developed a manufacturing strategy of building stripped-down versions of its products in the U.S. and distributing finishing-touch responsibilities in regions where increased speed mattered the most. This strategy has come to be known as an asset-right production model.   

Research from Performance Measurement Group (PMG) finds that operating more distribution points closer to the customer is a characteristic of leading companies. PMG data shows that Best-in-Class Supply Chain Companies have:

  • 20 percent higher profitability than bottom-tier supply chain companies
  • A strong focus on ensuring that their supply chains are driving forward revenue growth; their sales growth outpaces bottom-tier supply chain companies by almost 50 percent
  • 2 times as many distribution centers as bottom-tier supply chain companies, indicating that increasing the distribution network in a strategically managed fashion can result in greater operating efficiency

By implementing an asset-right production model, this allowed the company to reduce the complexity that their core manufacturing plants have to manage while avoiding unnecessary capital investment. In addition to those benefits, an asset-right footprint also simplifies procurement and inbound logistics, allowing local options to be procured and managed in the region instead of overseen by the operations team back at headquarters.

 

Topics: manufacturing, supply chain management, business