Two months ago I dealt with the question, Going forward, where will my supplier be located? I showed that there is an ongoing evolutionary change from the past characterized by the notion of my supplier is located somewhere, to the present concept of my supplier is located everywhere, into the future idea of my supplier is located nowhere.

Last month I dealt with the question Going forward, who will be the supplier? As I explained, the answer to that question is no one because in the new factory model, customer and supplier merge into a single entity.

This month I deal with the question, Going forward, what will be the role of the factory?

Lets go back a bit here. In the past, a factory was traditionally defined as a large machine built to produce something. Building the factory traditionally began with a seemingly single question: What do you want to produce? Once you knew what it is you wanted to make, everything fell into place. In those days, success was measured by how well-how efficiently and at what cost-the factory produced that something.

The only challenge was to define what that something is. It was not enough to decide, "I want to produce men's woven shirts." A factory that produces fine Sea Island cotton dress shirts will not successfully supply Wal-Mart with chambray sport shirts because the factory structure of the two operations are dramatically different. The machinery is different. The workers are different.

The best way to meet this challenge was first to ask your customer what he needed and then to build the factory to build those needs. For many years most customers provided the same answers: I want a factory that will produce W number of units per style, at X quality, in Y period of time and at an average of Z FOB price. In short that factory was all about the product.

Setting up this traditional factory was a relatively straightforward operation. It was located in a specific place (or places) -perhaps 10, 000 miles away from the customer-with offices and machinery. It was defined by the production process itself -cutting, sewing, finishing and packing.

Now, however, the traditional factory model has finally become obsolete. Actually it was fundamentally flawed in the first place. The recession has simply exposed the existing flaws of the factory-as-a-product-maker paradigm.

The new supplier paradigm that we need to be looking at is based on two targets:

  • To take over most of the manufacturing operations previously performed by the customer and thus reduce direct costs.
  • Speed-to-market, not just by reducing lead times in the production process but in the pre-production and post-production processes.

In a sense, in order to attain these two goals, we are looking a single word: This is service, because real speed-to-market is the result of an entire range of services.

The move from a product-oriented operation to a service-oriented operation now dictates where the supplier is located. In the past, as long as the factory existed only to make a product, all communication was one-way instructions-from the customer to the factory:

  • This is the product I want and how I want it made: Technical sketch and Tech Sheets
  • This is the sizing: Spec Sheet
  • This is how I will ensure you do what I want: Buying Office

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Refer the newsletter of: The Birnbaum Report/Strategic Sourcing for Garment Importers