Vanderlande reimagines a supply chain network

Vanderlande serves customers in three regions: the U.S., Europe and Asia. Among these, Europe currently generates the greatest revenue, and the U.S. is the largest source of growth. In Asia, China represents the largest potential for future growth. The supply delivery model is predominantly region-for-region in Europe, while the U.S. and Asia have a combination of regional and global sourcing. It’s common to outsource a significant portion of production to subcontractors, especially in the U.S. and Asia.

Global vs. local sourcing

Global sourcing leads to more cost-effective production, less inventory uncertainty and lower stock levels due to demand pooling effects. Local sourcing can lower lead times (if one also secures raw materials locally) and increase resilience in the face of higher ocean transport rates or other disruptions.

Customers also often appreciate the opportunity to support local production. It’s also worth considering the advantages of locally sourcing all U.S. or Asia demand, comparing global sourcing from China or from Eastern Europe and determining how local or global sourcing affects each Vanderlande product group.

Manufacturing in-house vs subcontracting

Does it make sense for Vanderlande to concentrate on their own manufacturing capabilities or increase their level of subcontracting? What is the effect of a segmented manufacturing strategy where their own production focuses on high value-add items and while outsourcing other items?

Custom-made solutions have always been a key differentiator for Vanderlande. However, maintaining this level of complexity would be difficult as they continue to grow, and not all complexity adds value for customers. Is there enough scope to reduce lead times, costs and complexity by keeping some items in stock? If yes, which items are most suitable?

The evaluation approach

What would be the effect of a 50% increase in ocean transportation pricing? How about if labor costs in China increased by 25%? Before running any scenarios, Vanderlande built a baseline supply chain model to enable the evaluation. Data collection and validation was a painstaking, time-consuming process, but it was worth the effort. The quality of the inputs resulted in a highly accurate model and a tool that provides high-confidence, investment-grade findings.

From the beginning, stakeholder management was essential. In Vanderlande’s case, the U.S. team’s involvement was fundamental. The team brought innovative ideas and identified attractive opportunities to improve the supply chain network, reducing landed costs by up to 10%.

Getting the right balance between global and local sourcing

The study concluded that it makes sense to increase local sourcing from the perspective of both cost and service. This means using the global network for certain product groups to benefit from low-cost country sourcing (specifically from Eastern Europe and China). European factories will also supply specific product groups to the global market and function as backup sourcing for other groups.

There’s an ideal balance between in-house manufacturing and outsourcing production to a third party. The continued growth of the business requires making intelligent trade-offs for each product group instead of increasing in-house production capacity. Vanderlande could confirm that its manufacturing strategy — which focuses production capacity on value-add and tactical load items instead of volume — is valid.

Reducing customer lead times by keeping fast-moving and high-commonality items in stock

In the short term, fast-moving and high-commonality items (which make up about 32% of spend) will be made-to-stock. This will reduce lead times by 6-9 weeks with a low risk of obsolescence. Vanderlande can increase the portion of fast-moving and high-commonality items in the medium term by motivating customers to choose standard items through their inherent faster lead times and lower costs.

Impacts of the new network strategy

Vanderlande will see the most profound effects of the new network strategy in the U.S. and Asia. In both cases, local sourcing will increase, and own production will focus on high value-add items. Transformation will increase as Vanderlande devotes more manufacturing capacity to configure-to-order (CTO) and the share of engineer-to-order (ETO) diminishes. The new paradigm will redefine how Vanderlande delivers their custom solutions to its customers — with shorter lead times, lower costs and increased profitability.