Friday, June 05, 2015

Dual Supplier Strategy


Wiggle vs Chain Reaction

This article stresses the importance of Dual Suppliers (or better).  See also Second sourcing

Colloquially: Don't keep all your eggs in one basket

OR:  Always have a backup plan

Two phrases that Agata and Marcus are quite passionate about.

Real World Example

Being reliant on a single source of anything breeds dependence and the possibility over time the relationship between consumer and supplier can become distorted.

Buying Sporting Goods In Switzerland

- We exercise daily and make use (to the point of exhaustion) a constant stream of cycling, running, trail and swimming clothing and equipment.

- One should recognise Switzerland, as a country with an embedded health and Sports Ethic

- It's a country where children get weekly Skiing lessons and Swiss obesity rates are low compared to neighbouring countries

- Switzerland is outside the EC, and maintains many Sports stores selling Swiss sporting goods at high prices and elite imported Sporting goods at preposterous prices.

So, most of our Sporting goods are personally imported, unless local Swiss shops are within about +20% of the imported price (we think that is pretty generous, right?)

- We choose Wiggle UK as a Primary Supplier

- We choose Start Fitness and Chain Reaction as secondary suppliers.

Our Chain Reaction Order

Marcus recently noticed that his last 1000 CHF  (about 1070 USD, or 700 GBP)  of purchases was spent exclusively with Wiggle.  So it was time to give Chain Reaction another shot

- Chain Reaction website Not very slick by comparison to Wiggle

- Order for about 150CHF (+ duty and tax) made
- Goods that we checked are all at least +5% more expensive than Wiggle
- Goods took a staggering 20 elapsed days to arrive
- Goods are not tracked
- DHL delivery is 14GBP extra, cf Wiggle charges 4GBP
- In case on non delivery a painful lost goods form has to be completed
- I was on the point of completing that form when goods notification of arrival was received.
- In our case since they have closed the local post office and we were out at work/ other, we have to go to a remote post office in a neighbouring village to pickup the parcel

Start Fitness
- Website Average
- Postage costs very high!
- Postage delivery times long  (but quicker than Chain Reaction)
- Returns not as good as Wiggle.

An Apology To Wiggle

Previously I've been quite critical of Wiggle for switching from regular posting to courier DHL as shipper for International packages.  But I must now humbly apologise.

- Using DHL had our last Wiggle order, was picked, shipped and delivered in less than 36 hours, from pressing the order button to DHL man arriving

- Just incredible
- Respect: a slick ordering processing and delivery Wiggle.
- There is paper admin post delivery with any courier order we have to settle customs and import costs separately, this is a moderate pain.

Back in the Day

Many years ago I worked in UK retail.  Do you remember the standard mail order footnote:

May take upto 30 days to deliver!  

Just think how much supply chain and logistics have improved to shrink 30 days into less than 36 hours.

In Industry
For Marcus and Agata we apply common sense Engineering principles of second sourcing to our everyday lives as shown above.

Try not to get dependent on a single supplier!  They might go bust, or become uncompetitive.  Etcetera.

A real world commercial example that sort of troubles Marcus, is the manufacture of IBM POWER hardware. IBM POWER processors and support chips  form the backbone of IBM's UNIX  (AIX)  and even IBM Mainframe systems.

- This wikipedia article is definitive  

- I have used IBM POWER hardware since 1989 with the IBM RTPC or 6150 as it was called in Europe
- IBM incremented the hardware design ... POWER4, POWER5 etc. Today we are at POWER8
- Get the POWER8 Opcode reference pdf here
- Power Architecture roadmap 2013

- October 20 2014, IBM sold its POWER chip fabrication business to Global Foundries

- Global Foundries press release
ARMONK, N.Y., and SANTA CLARA, Calif., October 20, 2014: IBM (NYSE: IBM) and GLOBALFOUNDRIES today announced that they have signed a Definitive Agreement under which GLOBALFOUNDRIES plans to acquire IBM's global commercial semiconductor technology business, including intellectual property, world-class technologists and technologies related to IBM Microelectronics, subject to completion of applicable regulatory reviews. GLOBALFOUNDRIES will also become IBM's exclusive server processor semiconductor technology provider for 22 nanometer (nm), 14nm and 10nm semiconductors for the next 10 years
- IBM actually paid Global Foundries 1.5billion USD for the deal   (i.e. they paid money on the sale not gained money)
- So now, IBM does not own the manufacturing facilities that provides the key electronics for its main UNIX or Mainframe systems
- And I know of no second source supplier
- What on earth were they  (IBM) thinking.  For me a recipe for disaster.

In Summary: As a consumer, don't get too reliant on any one supplier, and for a Manufacturer, you would have to be quite insane to rely on a single manufacturer for any key components of systems that you produce.

In our case we try to keep 2 suppliers going in the UK, but currently Wiggle is so good, Chain Reaction so slow, and Start Fitness (unrealistic postage) that our personal strategy struggles.