Another reason for close-by manufacturing

In a number of previous posting, I’ve argued that in the I-Cubed Economy manufacturing it tied closely to other production activities, such as product development and services. All of that argues for keeping manufacturing local. Here is another reason — financing (from the Your the Boss blog on the New York Times):

When you source your product from China, and need to wait up to 90 days for each order, you have to carry extra inventory as stock-out protection — another big hit to your cash flow. When you use a domestic supplier, you can turn to FedEx or UPS to solve your problem overnight. That means you don’t have to carry as much extra inventory.
With a long supply chain, an entrepreneur faces tough choices because the company’s cash is tied up with suppliers and customers. With credit still tight, companies can end up struggling to cover the inevitable cash shortfalls that come from growth. Some companies resort to doing things like factoring — borrowing off their accounts receivable at interest rates that can top 20 percent — or bringing in outside investors and private equity money, decisions that cut into either net income or equity.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s