An important metric used to measure spend management is purchase price variance (PPV), but what is PPV and why is it important for supply chains?
The Benefits of a Global Supply Chain
The past few years have brought many lessons surrounding the limitations and vulnerabilities of supply chains when disruption strikes. One way that supply chains can bolster their resilience and improve their overall efficiency is by diversifying. We have put together some of the key benefits of global supply chains.
For a long time, supply chains have preferred to outsource certain tasks to other countries for benefits such as reduced labour costs and/or cheaper supplies. While the cost of labour in many countries is rising, thus leading certain supply chains to look towards reshoring, many businesses will still find that certain materials or stock will be cheaper by looking further afield.
Diversifying a supply chain to operate on a global scale gives you access to a wider market, presenting the possibility of finding the best-cost materials. Strategic sourcing is particularly useful here as the total cost is evaluated, meaning freight costs and shipping times are also accounted for, which can sometimes offset the savings of buying cheaper parts from further afield.
As well as being able to access better-priced products by using the global market for your supplies, you will also have access to a greater variety of parts and components.
Opportunities to handle more inventory
Next on our list of global supply chain benefits is the chance to store and handle a higher volume of inventory. By accessing lower costs, you can afford to buy more stock, and by having multiple facilities across different regions, there will be plenty of space to store it.
While it isn’t a good idea to hold more stock than necessary due to storage costs and the risk of obsolescence, having sufficient stock reduces the effects of manufacturing disruption and reduces lead times, especially in times of global shortages.
Access to the best partners
While there may be some great potential supply chain partners locally, it is only by diversifying globally that you can benefit from access to the full market of suppliers and supply chain partners.
As well as having access to the best potential partners, other suppliers will also be more likely to improve their offerings to compete for your business if they know you have plenty of options. Even existing partners may be willing to renegotiate your deal if they know you are willing to diversify your supply chain because they will want to retain your business.
More options for sourcing components
As the coronavirus pandemic proved, disruption can very quickly cut off access to things we take for granted, such as suppliers and even on-site workers. If the entire operation of a supply chain takes place in one region or country, then any restrictions that come into force in that area can slow down the entire operation.
By diversifying globally, businesses have more options when it comes to sourcing components, particularly those that are hard to find or in shortage. In times of disruption, this becomes even more important as certain channels are closed for sourcing components, while others may remain open.
Quicker shipping to distant locations
Supply chains that have their entire manufacturing operation in one place do benefit from faster manufacturing processes due to quicker delivery times of parts and components. However, the shipping costs and delivery times to the end user will be much higher when they are further afield.
Having manufacturing facilities or distribution centres located at diverse global locations will allow you to get products to the end user much faster. Without this capability, it may not be financially viable to ship to certain regions at all, potentially cutting off the business from an entire section of the market.
The benefits of a global supply chain are far-reaching, improving a business’s potential resilience, efficiency and profitability. You can experience many of the benefits of a global supply chain by partnering with a distributor that has access to the global market, providing a single point of contact for an extensive range of parts and components.