Sourcing During Uncertain Times

  • By Josh Green
  • · October 15, 2008
  • ·

The past week has been an historic one in the financial markets, and this morning’s retail sales results are just a reminder that we’re not out of the woods yet – and probably won’t be any time soon. The Federal Reserve warns that we face “one of the most challenging economic and policy environments in memory”, and the IMF says the recent events constitute “the largest financial shock since the Great Depression.” Unfortunately, no one can say how much worse things will get – and how long a recovery might take. This uncertainty poses a unique challenge for the manufacturing community. We’re hearing from our customers that they’re cutting their order sizes and, when possible, delaying their orders until they have more visibility into what the future holds. Beyond taking prudent steps such as these, is there anything you can do in the face of uncertainty? Yes. Presume that things will settle down (they will), and plan for the moment when they do. Here’s how:

Position yourself to have maximum leverage once things settle down

As you and your peers delay orders – and cut order sizes – factories that have been living on the edge will go under. Once things do settle down, everyone will be making urgent requests of those factories that are still standing. (Delayed orders will turn into orders that need to be filled asap!) These factories will not be able to make everyone happy. Make sure you’re a priority at that critical moment. The more orders you place during the lean times – and the bigger your order is at the moment things settle down – the more important you’ll be to your factory when it counts. If you’re spreading your orders over a large number of factories, consider consolidating your orders with a smaller number of factories in the months ahead.

Identify backup factories

If a key factory goes under – or can’t meet your needs when everyone jumps back in with urgent requests – you need a back-up plan. Look within and outside your network for factories that have the same capabilities as your existing factories. For each and every factory that you use, you can and should have a back-up factory in mind.

Bottom line: planning now will save lots of headaches later.

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