Figuring out the optimum mix between complete production at the source and downstream postponement is a delicate balance, says Brennan. Manufacturers must account for a number of factors, including the cost of production overseas, logistics considerations, fuel prices and the need to meet regional customer requirements. As labor costs in China continue to rise, however, companies find themselves looking to models that stress production closer to markets in the West.
There are also complexities associated with serving emerging markets. Often a manufacturer will have to work with an established local partner in those countries. They will need to gain understanding of "a supply chain that is totally different than a mature market," Brennan says. "They basically have to give that market over to the local partner who owns that relationship."
Vetting local partners is "a tremendous challenge," he says. Not only must the original equipment manufacturer ensure that it's working with a trusted local entity, but it also has to prove the value of the relationship to the partner. In addition, the merchandiser might need to create products that are specifically designed for local markets. "It's a real education for some of the brands," says Brennan.
Yet another challenge for manufacturers is proper warranty management. OEMs need to determine how much a particular product is worth supporting, and what kind of network it needs to create for returns and repairs. Customer segmentation can help to identify the most profitable customers, as well as determine the right level of service for each market and account, Brennan says.
