And Why the Dominican Republic Could Save Western Hemisphere Logistics
I love Walmart’s concept of an enterprise sourcing platform, an innovation that could revolutionize logistics sourcing.
The megaretailer is collaborating with tech company Bamboo Rose on the project. Paired with a new Western Hemisphere supply chain hub, an enterprise sourcing platform (ESP) could unite siloed systems and improve efficiencies across Wal-Mart’s end-to-end supply chain.
For the supply chain hub, the Western Hemisphere need look no further than the Dominican Republic. The Caribbean nation has the three Ls – location, land and labor – to become THE supply chain hub in the West. All it lacks is investment for logistics infrastructure – a fourth L – and a technology lighthouse – a fifth L.
All in, the 5Ls could make the Dominican Republic a modern-day lighthouse for the Western Hemisphere.
These two innovations could be key for your organization to survive and thrive in an age of simultaneous deglobalization and globalization.
Supply Chain Sourcing Done Wrong
What is sourcing in supply chain? Supply chain sourcing is a specific segment in procurement. Sourcing associates identify, evaluate and select suppliers to buy goods or raw materials for business operations.
Sourcing plays a key role in your company’s quality, cost and availability of goods and services.
Take a company called Jim’s Childrens’ Wear. Jim has various buyers who procure goods for sale.
One lady buys shoes. She buys them from India. One lady buys girls’ clothes. She buys them from Bangladesh. The guy who buys boys’ clothes purchases them out of China.
If the sourcing people did their job, the company purchased all those shoes and clothes for the best cost per piece. However, adding in transportation often doubles the overall expense.
This happens because buyers often don’t have visibility into what other buyers are doing. They operate in silos, seeking the best price. They often don’t factor in transportation, warehousing and other supply chain costs.
Even Worse Operational Silos
Ever notice how two weeks before Christmas the stores have too many shirts? But that company’s online store is out of stock for those same shirts? Or vice versa.
That’s because corporate structure often makes sourcing even more siloed and inefficient.
Some companies separate their eCommerce division from the retail store division. That leaves two buyers sourcing the same products for two different supply chain streams. Sometimes they even buy the exact product or raw material from different places.
This mismatch leaves store managers with that inventory overload of shirts. To clear shelf space, managers must slash shirt prices by 50%.
The smart consumer will notice the 50% markdown on shirts at the store. Some will buy the shirt at the store and return it online for a full refund.
Enterprise Sourcing Platforms and Supply Chain Visibility
An enterprise sourcing platform will give buyers that visibility, breaking those silos.
The 3 buyers for Jim’s Children’s Wear? Without an enterprise sourcing platform, buyer 1 has no idea what buyer 2 or buyer 3 are doing.
Collaboratively, they could have developed a consistent strategy.
Perhaps overall costs and timing would have been better by sourcing large segments of their market from India, Bangladesh, Brazil or somewhere else.
Of course, in an age of perpetual disruption, we know single sourced supply chains are evil. Insightful buyers will realize this. Optionality – multiple sourcing options – is the only way to build resilient supply chains.
Optionality, by definition, makes supply chains more complex, not less. An enterprise sourcing platform will provide visibility to your buyers as they add multiple sourcing options.
An enterprise sourcing platform will allow your buyers to go beyond single sourced supply chains. they can go beyond buying clothes and shoes.
After all, your company is buying goods. And you want to buy those goods at the best price, the best transportation cost, the best overall cost – and the best timing.
Sourcing associates will collaborate with buyers, product development teams and suppliers, according to Progressive Grocer. Associates will have visibility into purchasing decisions made by others.
Sure, each option might come from one location. Your first option could be sourcing everything from India, your second could be sourcing everything from Brazil and your last option could be Central America, Mexico or elsewhere.
But with an enterprise sourcing platform, each option will include transportation and other costs – a total sourcing solution. And all buyers will be working from the same playbook.
A Western Hemisphere Logistics Hub Slices Turnaround Time, Inventory
The need for optionality makes it imperative that you pair this new sourcing concept with a sourcing hub.
Let’s go back to Jim’s Children’s Wear. If they source everything from India, that’s a single-source supply chain. (Something Amazon is trying to trick retailers and ecommerce businesses into signing up for.)
When (not if) disruptions interrupt sourcing from India, out of stocks will proliferate. That’s why bringing your goods to a nearshore supply chain hub like the Dominican Republic makes sense.
Say each division of Jim’s Children’s Wear needs to ship one full container a month to the United States.
With three divisions, that’s a container a week with one week off. One container has shoes. One has girls’ clothes. One has boys’ clothes.
If sales skyrocket on boys’ clothes, the supply chain has to wait a month for the next container.
Instead, your company’s first option should deliver a mixed container every week to the nearshored supply chain hub. Each container has enough shoes, girls’ and boys’ clothes to last until the next delivery.
You’re still shipping a container every week or so (three containers a month). But each division only waits a week, at most two, for replenishment.
Sourcing each option from one area and delivering to one supply chain hub increases turnaround time. Each division only waits a week or so. This allows buyers to change quantities of each good in response to consumer demand. This drives inventory and expense out of your supply chain.
This is all made possible by a nearshored supply chain hub and the enterprise sourcing platform.
The Dominican Republic Can Be THE Lighthouse to the West
The birth of container shipping in the 1950s led to the development of major supply chain hubs around the world. Singapore, Hong Kong, Los Angeles/Long Beach and Rotterdam are just a few.
In past centuries, lighthouses guided ships and kept them safe. These days, supply chain hubs have a similar function, guiding ships, planes, trucks and other logistics assets across the globe.
The Dominican Republic has the three Ls to become THE supply chain hub in the West. Location across major East-West and North-South supply chain routes. The land for added infrastructure. It has the labor to build that infrastructure.
For the Western Hemisphere, The Dominican Republic makes the most sense as the next great supply chain hub.
All the Dominican Republic needs is another two Ls – logistics infrastructure and lighthouse technology.
Today’s lighthouse technology is not a beacon on a tall building. Today’s lighthouse technology is based upon an end-to-end digital supply chain control tower.
The combination could make the Dominican Republic the logistics hub and lighthouse to the Western Hemisphere.
Easing a Difficult Supply Chain Transformation
- What is the definition of globalization? Globalization refers to the interdependence of economies, cultures and populations.
- What is the definition of deglobalization? Deglobalization is the movement toward a less-integrated world, characterized by local solutions, onshoring, tariffs and border control.
Many Western nations see nearshoring and friendshoring as pillars of the region’s economic future. This means simultaneously deglobalizing from risky geographies while globalizing in less risky areas.
Such transformations are difficult and time-consuming, but they are not impossible.
Walmart’s enterprise sourcing platform could be on tool in your toolkit. A nearshored supply chain hub in the Dominican Republic could be the other.
I’m excited about these innovations and the future of logistics in the Western Hemisphere. I would love to discuss how your enterprise is handling the need for more diversified sourcing solutions. Reach out and let’s talk.
- Deglobalization? Not Easy. – Tompkins Ventures
- Amazon Store Fulfillment: Why Ring No. 2 Will Kill You – Tompkins Ventures
- Nearshoring Requires an Entirely New Ecosystem
- The Right Shift(s) for Deglobalization – and Globalization
Jim Tompkins, Chairman of Tompkins Ventures, is an international authority on designing and implementing end-to-end supply chains. Over five decades, he has designed countless industrial facilities and supply chain solutions, enhancing the growth of numerous companies. He previously built Tompkins International from a backyard startup into an international consulting and implementation firm. Jim earned his B.S., M.S. and Ph.D. in Industrial Engineering from Purdue University.