Manufacturing consolidation center role

This case describes the role of consolidation centers in the lean supply chain. The description here articulates the rules for designing a consolidation center, a supply chain middle man that makes the total chain more effective. Consolidation centers are playing an increased role in many supply chains, particularly as feeders to manufacturing operations that produce complex products with many components. Every supplier cannot or will not link its operations with its customers. The consolidation center enables this linkage — at least until better suppliers can be found. In some cases, consolidation centers are under the control of third-party logistics providers responsible for ordering material, its transportation, and its preparation for the manufacturing center. 

Manufacturing companies usually do not set up from scratch a consolidation center that is several miles from their plant, because transportation would then require road trucks. This type of situation arises mostly when an existing trading company is drafted into the role of consolidation center. If it has a facility that is less than a 15- to 20-minute drive from the plant, then it is not worth building a new one nearer. This facility then taps into a different labor pool from the plant, and can recruit employees for whom the wages it offers are an improvement. 

Another prominent example is partnering between manufacturers and third-party logistics providers, or 3PLs. The third-party providers leverage their expertise and infrastructure to fill what have been internal roles in material management. An example is the consolidation center described in a case study in a later chapter. Forging supply chain partnerships, we believe, is indispensable in improving supply chain operations and competitive position. 

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