Are%20Lean%20Production%20and%20Global%20Sourcing%20Compatible?

1
Are Lean Production and Global Sourcing
Compatible?

• Just-in-time
• Shipping times
• Freight costs
• Inventory levels
• 30 days of inventory for shipping by sea
• Time and forecast accuracy
• Design-for-Manufacturing
• proximity helps
• Need frequent and quick replies

2
Delivery Times for Each CCT Plant and Market (in
days)
To Markets U.S. U.S. Europe Europe Pacific (Japan) Pacific (Japan)
From Plants Air Sea/ Land Air Sea/ Land Air Sea/ Land
California -- 7 4 14 3 16
Ireland 4 14 3 5 NA NA
Singapore 4 25 4 35 4 18
3
Freight Cost and Product Type(Percentage of Cost
of Goods Sold)
Low-End Product High-End Product Peripheral (Monitor)
Air Freight 5.4 4.0 20.9
Sea Freight 1.2 1.0 1.0
4
Inventory/Sales Ratioand Pipeline Time
Short Pipeline Long Pipeline
Mean pipeline time (in days) 23.25 40.6
Mean Inventory/ Sales Ratio 0.67 1.87
Inventory cost as CGS 1.27 3.54
5
Distance and Monthly Sales Forecast Errors
Local Market Remote Market
Mean 30 day forecast error 12 22
Mean 90 day forecast error 38 45
6
Solutions

• Frequent visits to suppliers
• Build in domestic plant first, then outsource
• Teleconferences
• Incorporate DFM rules into CAD
• DFM and TQM are more feasible than JIT and
  low inventory