So it is time for a rethink. First, forget the term chain and understand that it is really a network since non-linear participants such as chemical and machinery firms have become far more important in the process of leather making, and are provoking tanneries into thinking about new ways of doing things to improve efficiency, or respond better to consumer expectations. Since serving customers is the function of business we need to listen more carefully as whole segments of activity from shipping, through inventory management, proximity to market, innovation, the environment, security and authenticity of supply are being reconsidered.

One thing that a rethink should permit is a reduction in transaction costs through better customer relationships. If we are to offer faster lead times to suit an “at once” world of consumers, we need to have close and open arrangements between companies. Trust needs to be very high so that tanners can have confidence when buying raw material, or moving leather part way through processing so that they will not be left with unsold stock.

For many decades, chemical companies have had arrangements with trusted companies to hold stocks at tanneries, and only invoice them when they are actually used. We need to look towards a similar approach for tanners where vendor managed inventory established on a just-in-time basis puts leather beside machines in customers’ factories precisely when needed, using all the resources of modern IT.

You might think this is a ridiculously impractical idea but, in reality, it is a very simple one which implies sharing development and plans beforehand, which in itself is highly advantageous to all parties in terms of managing and understanding costs and priorities as well as pushing creativity forward.

“Transaction Costs” are two words whose actual definition is as elusive as the meaning of the weasel words “heavy metals”, but in this scenario one can see how using a supply chain revamp will benefit speed and accuracy, and certainly reduce costs for the long term. And make for better products.

Mike Redwood

20th July 2016

Follow Mike Redwood on twitter: @michaelredwood

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