Buying vs. Leasing
your Supply Chain: Lessons Learned From ‘Brew Masters’
There are plenty of pros and cons for both buying and leasing a part of your supply chain. At the end
of the day, most think about cost. Which of the two will be the lowest cost
while still upholding company’s values? Last weekend I learned about one
organization that outsourced their
logistics, helping reduce costs while maintaining their corporate standards.
This company, Dogfish Head, is at the top of their game when
it comes to their business model. They hired
MicoStar Logistics, a logistics company founded in 1996 that provides a
comprehensive solution to eliminate waste and inefficiency in their industry. Some
logistics companies are overpriced for their services, but Microstar is able to
keep costs down because they use ‘just in time’ keg inventory, less freight by
keeping the kegs local to a geographic area when possible, and realizes the
earnings on their own investment for the life of their assets/kegs.
Instead of Dogfish Head
paying for freight and other logistics costs to shipa keg from Delaware to any
of the 29 other states (plus D.C.) and then back, they are able to ship one of
MicroStar’s kegs and exchange for
another one within their state’s depot. This not only reduces logistics
expenses, but the brewery also does not have to invest in more kegs than
they need. With more capital, Dogfish Head can create more
brews, invest more into distribution, or buy a treehouse from Burning Man to
use on their front lawn (Seen here: http://www.engineeredartworks.com/wp-content/uploads/2010/06/spth-dogfish1.jpg). In addition, Dogfish Head is helping the
environment because less fuel is used in
this model. Considering that Dogfish Head produces roughly 5,400,000 gallons of
beer a year, it is easy to see how some big savings can be realized from this decision.
Whatever industry you are in you may face the decision to
buy or lease a service for your product. Most companies are looking for the
lowest cost. Some companies want to own their entire supply chain so there is
no compromise to their quality. There is plenty of room in the spectrum to find
the balance.
Lessons to learn from this story are:
·
Know your values and the expectations of your
customers and do not compromise your quality just for costs
·
Identify highly rated companies providing the
service for your industry and location but be aware that set up cost for a new
supplier could be too high when comparing buying versus leasing
·
Find out if the money saved can be used for more core responsibilities of your
company
·
Know if your company has the experience in the
service to invest not only money but time and personnel on the service without
being a waste
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