Why your Supply Chain footprint matters

Supply Chain design is a key buzzword these days and every Supply Chain professional is somewhat familiar with what that means. One key aspect of any Supply Chain design strategic analysis is to evaluate whether your Supply Chain footprint i.e the location of your Plants, Warehouses etc. is optimal. So one of the questions you may ask is, what are the factors that are driven by the location of a plant of warehouse? The illustration below shows some of these factors with explanations below.


Costs: Obviously, cost is one of the primary factors driven by your Supply Chain footprint. Some examples are:

-Transportation cost:  You move products through your Supply Chain so obviously your footprint directly impacts the distance your products need to move and hence impacts your transportation costs (Inbound as well as outbound).

-Labor Costs: Your footprint geography significantly impacts your Labor costs.  It also impacts your ability to source the skill set that you need for your operations.

-Facilities Costs: Costs like rent and utilities are also drive by the location of your footprint.

-Taxes: Your location and the type of operation performed impact the taxes that you pay. The footprint also impacts the taxes you pay when you ship your products.

-Procurement Costs: The costs of raw materials (if you are sourcing locally) is also driven by the geographical location of your facilities.

Customer service level:  It is common sense that the closer you are to your customers, the faster (and cheaper) you can get the products to them. Essentially, having  a significant presence closer to your customer improves your service levels.

Risks: The location(s) of your footprint, as well as number of locations impact your Supply Chain Risk. If you are currently established in a location that is prone to risks like Political risks, risks pertaining to natural disasters etc., you should start thinking about mitigation strategies. Also, if you have your entire manufacturing concentrated in one or two locations, you should start thinking about diversification to add some extra capacity as well as some flexibility in your manufacturing footprint. Low Cost Country (LCC) sourcing presents an additional risk element as it impacts Supply Chain responsiveness.

Carbon Footprint: If your footprint minimizes distance traveled, your carbon footprint reduces along with your Transportation costs. Also, if you are located close to power plants that are loss emission type, your utilities consumption will be optimal from a carbon footprint perspective.

Disclaimer: This is a personal blog site and views and perspectives expressed here are solely my own and do not express the views or opinions of my employer.

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