I hope that you have enjoyed the article “Supply Chain Optimization Simplified.”
I am sure many of you are wondering, “Will I ever need supply chain optimization technology?”
Well, here’s a little test. Imagine that you are requesting bids for nuts and bolts in a situation with these characteristics:
- There are three bidders – Alice, Bob, and Carol
- You need 20,000 nuts and bolts at your Atlanta warehouse, 15,000 units at your Boston warehouse, and 25,000 units at your Chicago warehouse
- Alice cannot supply Atlanta, Bob cannot supply Boston, and Carol cannot supply Chicago.
- Alice is going to bid $1.10 for a nut and bolt pair but give you a 10 cent discount if you buy 20,000 units
- Bob is going to bid $1.05 for a nut and bolt pair, but give you a 3 cent discount if you buy 10,000 units or a 6 cent discount if you buy 20,000 units
- Carol is going to bid $1.11 for a pairing, but a 9 cent discount if you but at least 25,000 units.
- You’re implementing a dual sourcing strategy to mitigate supply risk down the road, and you’re going to insure that any selected supplier is going to get at least 25% of the business.
So which suppliers would you choose, assuming that delivery, service, and quality were otherwise equal and price was the only variable?
I suggest working out your answer and then listen to the associated podcast and/or download a transcript to compare your answer with the answer that Michael Lamoureux of the Sourcing Innovation Blog came up with. After you realize that the answer isn’t all that easy to get to and realize the fact that real-life supply chain situations can be much, much more complicated, you may be more open to adopting supply chain optimization technology.
By the way, courtesy of Michael, the transcription for this particular podcast is FREE. They usually cost $20, so I’d definitely download a transcript if I were you!