Outsourcing has had a lot of implications of the many parts of a supply chain (Imberman, 1998). In the past, OEM manufacturers could easily work with any lean management systems with regards to their inventory, since they produced most of the components themselves. But over the years, and due to increased outsourcing, these manufacturers today have to contend with a leaner inventory since there is a great deduction in the number of fist tier suppliers to OEMs (Imberman, 1998). Instead of having to contend with a large and diverse inventory due to the high number of suppliers, OEMs now have to deal with fewer, but much larger suppliers due to outsourcing. What this means for the OEM’s inventory management system is that it has had to shift from being supplier oriented to being product oriented. For example, if Intel had to deal with a thousand suppliers for its products, back then it would have a huge inventory centered on numerous suppliers, but now their inventory is leaner due to reduced number of suppliers and concentration on first tier suppliers. This makes current inventory management much easier.
Direct shipments are also becoming more common today, with most products leaving a manufacturer and going straight to the customer. Ensuring the shortest lead time often requires cutting down on the number of hands that shipments have to go through in the manufacturing process and prior to reaching their final destination with the end user. Therefore, by introducing direct shipments, goods do not have to go back to OEMs for inspection. For example, an OEM such as Microsoft does not have to receive the finished Hewlett Packard computer for inspection, but rather it goes directly to the consumer, greatly reducing the lead time. Thus, indeed, direct shipments are a great way of saving lead time.
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References
Imberman, W. (1998). Outsourcing: Pressure on suppliers to expand services and lower costs. JOM , 50 (12), 80.
