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5. Implement differentiated supplier replenishment programs
Similar to customer replenishment programs, supplier replenishment programs should be
segmented based on supplier/component dynamics.
Many companies today use a combination of owned and outsourced factories as well as a
combination of shorter-lead-time, nearshore capacity and longer-lead-time, offshore capacity.
These different supply modes must also be synchronized with the ordering and customer
replenishment programs on the front end of the supply chain.
For example, nearshore capacity can be used for enterprise customers requiring configure-to-
order capabilities with short lead times, while offshore capacity with longer lead times can be
used for make-to-stock retail channels. Lead-time responses using offshore capacity will be
driven by the transportation mode—ocean freight (long lead times, low cost) versus air freight
(short lead times, high cost). A company with high-gross-margin products can afford the
flexibility provided by air freight; however, for low-gross-margin, commodity products, moving
from ocean freight to air freight will mean the difference between making and losing money.
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