I write smoker cooking recipes and gas grill reviews so why am I writing about supply chain? It\’s not only because I have a Masters degree in logistics and supply chain management it\’s because I see so many of our beloved barbecues and smoker manufacturing operations moving from being “made in America to “made in China” and the extended supply chain forces manufacturers to think differently about how they satisfy the market and that impacts both you and me.

Generally speaking an area of low cost labor is usually a significant distance away from the point of sale and this means that the time from manufacture of the product to actually selling it is a long time. Let\’s assume that it take two months to ship a container from point of manufacture to the point of sale and there\’s a shift in customer demand from (for example) charcoal barbecues to gas grills? You\’re stuck with upwards of 3 months stock (taking into account the buffer stock at the point of shipment and the point of sale) and nowhere to sell. There\’s only one thing to do and that\’s to reduce the price. Dependent on your margin, this could be the difference between making money and losing money.

Likewise a long transit time means that even with the most generous of credit terms, you\’re going to have to pay the full cost of manufacture before selling anything. Being able to finance this gap maybe dependent on the bank and should it increase due to factors beyond your control you may be going cap in hand to the bank to borrow more money just to finance your supply chain. Businesses that fail to appreciate this point often fail and that failure is usually described as “cash flow problems”.

Consider this point in the barbecue business. Sales are booming in the summer and orders to the manufacture are going out to ensure that demand is covered. The last thing that you need is to have all your new stock arriving in September and the end of the season. Accurate demand forecasting is an absolute priority.

To summarize this supply chain point, if you have large volumes of a constrained product range and minimal seasonality then a long supply chain is sustainable. If you have low volumes, high product differentiation and high seasonality then maybe a long supply chain will cost you more than the benefits of outsourcing to a low cost country.

How do manufacturers manage this complexity?

One way to manage complexity is to postpone the point of final assembly until it\’s closer to the customer. In other words wait until the demand is known and then assemble the product that\’s required rather than on that isn\’t. This could be handled in the barbecue business in the following way:

Imaging you are buying a grill and can\’t decide between one with three burners and one with four burners. Rather than have two fully assembled grills (and the cost associated with them) sitting waiting for your to choose, the manufacturer simply has one carcass common to all grills and two cooker tops, one with three burners on and one with four. When you make your decision, the final assembly is made and then the product is shipped.

Now think about this on a national scale, the big grill retailers such as Amazon and BBQGuys can use postponement to dramatically reduce their cost of inventory. Have you ever wondered why so many grills are starting to look similar to each other and why some have common parts? They\’re probably even made in the same manufacturing plant.

Author Bio: Paul Yates normally writes smoker cooking recipes and gas grill reviews. He does have a Masters degree in supply chain management but prefers to off his expertise in his barbecue forum.

Category: Business Management
Keywords: supply chain,extended supply chain,long supply chain,low cost,extended supply,supply chain forces