Sunday, August 11, 2013

Importance of Middlemen in Global Sourcing

Supply chains are getting further complicated as the economies are globalizing at levels not seen before. The role of middlemen (or sourcers) has changed from producers who used to supply directly to suppliers to malls or end retailers who specialize in finding 'cheap' production based product 'reliable' supply. A recent article in New York Times on "Linking Factories to the Malls, Middleman Pushes Low Costs" talks about Li & Fung, a hongkong based company who marvels at finding cheap labor and supply across Asia and glove to feed the malls. It owns no clothing factories, sewing machines or fabric mills, with 15,000 suppliers in over 60 countries. 

There are several questions of interest here: 
  1. How important are these companies for the benefit of supply chain ? Do they help to improve profits of manufacturers who would otherwise not sell to developed markets?
  2. How does costs, reliability, lead times affect the purchasing decisions, prices, and profits in such a complex global supply chain system?
  3. What kind of contracts can achieve operational efficiency in the supply chain?
  4. With an increasing emphasis on fair-trade and local sourcing, what is the future of such middlemen?

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