In the Downturn, Are Dual Sourcing Strategies Best?

I recently came across a column that suggests dual sourcing is critical to protect supply chain integrity. According to the author, Robert M. Schooks, who serves as director of the Center for Manufacturing Improvement at Saginaw Valley State University, lower prices from global sources may not outweigh the "high disruption costs, should they surface," from overseas suppliers. Schooks suggests that, "the skill of balancing your needs should show a combination of domestic and international suppliers. If you order first from your local faster supplier and then tune in the overseas supplier to maintain your needs, you will achieve safety and cost reliability that could protect you should something negative occur anywhere in your supply chain."

Another suggestion -- that suppliers in today's challenging times where finding new business is more difficult than keeping existing customers, might be willing to take on -- is to have global suppliers take ownership and greater responsibility for warehousing and inventory management locally. Alternatively, today's economic climate might also be cause to negotiate more favorable payment terms with current overseas suppliers that might allow for the greater warehousing of local inventory to create buffer stock without increasing working capital requirements. Sure, you might get some push back initially. But I guarantee that many global suppliers are most concerned about losing business, and if they realize that you've got good local alternatives, they'll play ball when it comes to payment terms. That is, if they can still maintain sufficient cash flow to fund their operations.

Jason Busch