Unfortunately, supply chain disruptions have become a fact of life for manufacturers. Global shipping delays, raw material shortages, labor gaps, and rising transportation costs force businesses to reevaluate how they source, stock, and deliver critical components. In response, many manufacturers are investing in supplier hubs and co-location strategies, bringing key suppliers physically closer to production facilities.
These hubs and co-location scenarios can reduce lead times, improve collaboration, and build resilience against future disruption when paired with a strong multi-site ERP system. But how do these strategies work, and are they right for your operation?
What Are Supplier Hubs—and Why Do They Matter Now?
A supplier hub is a local storage or logistics facility where suppliers deliver materials or subassemblies ahead of production. Often located within minutes of the main production site, these facilities are used to:
Supplier hubs or distribution centers are a great way to keep needed raw materials and components close, removing the risk of delays.
- Stage inventory for just-in-time use
- Reduce shipping costs and delays
- Improve visibility and inventory control
Suppliers may retain ownership of inventory until it’s used in production, or the inventory may be managed by a third-party logistics provider (3PL). In either case, supplier hubs allow manufacturers to be more responsive without building up large on-site stockpiles.
Why it matters in today’s supply chain environment:
- Unpredictable lead times: Border delays, port congestion, and freight shortages can slow down even routine shipments. Hubs act as a buffer.
- Rising logistics costs: High fuel prices and labor shortages have driven up transportation costs. Staging inventory nearby cuts down on distance and delays.
- Supplier diversification: As companies shift away from single-source overseas vendors, nearby facilities help consolidate deliveries from multiple regional suppliers.
How Is Co-Location Different?
Co-location goes a step further than nearby facilities. Instead of just storing materials nearby, co-location involves physically embedding suppliers within or next to your facility. That could mean:
- A shared production campus
- A leased space within your plant
- A dedicated on-site team from the supplier
With co-location, suppliers can collaborate more closely with production, respond to last-minute changes, and align more precisely with your manufacturing schedule.
Benefits of co-location:
- Real-time collaboration: Engineering and operations teams from both companies can work side-by-side.
- Rapid issue resolution: Quality issues or design changes can be addressed on the spot.
- Zero-distance logistics: With no trucks or transit time, materials arrive exactly when and where they’re needed.
Real-World Example: Furniture Manufacturer Improves On-Time Delivery
Consider a custom furniture manufacturer that builds high-end upholstered seating and case goods in the Midwest. In the past, they sourced pre-cut wood frames and specialty hardware from out-of-state suppliers. This created challenges like:
- 3–5 week lead times
- Freight delays that impacted production
- Frequent material shortages for custom jobs
Frontier is a scalable, flexible multi-site ERP system that is designed to optimize your operations, be it through supplier hubs or co-location.
To solve this, the manufacturer set up a supplier hub just minutes from their plant. Several key suppliers began staging weekly deliveries at a nearby 3PL warehouse, with inventory levels and restocking coordinated through the company’s multi-site ERP system.
As the partnership deepened, the manufacturer invited one of their wood frame suppliers to co-locate a small cutting and assembly team inside their facility. That team now builds frame kits on demand, based on real-time order data coming through the ERP system.
This shift delivered measurable improvements:
- Faster turnaround on made-to-order products
- Lower material waste from real-time adjustments
- A 25% boost in on-time production rates
- Reduced freight costs and fewer inventory disruptions
By bringing the supplier into the production process—both physically and digitally—the manufacturer created a more agile, customer-responsive operation.
The Role of a Multi-Site ERP System
Neither hubs nor co-location can operate efficiently without a robust multi-site ERP system. Your ERP must manage inventory across locations, track supplier deliveries, and coordinate production schedules in real time.
A good, scalable ERP enables:
- Cross-location inventory tracking: See what’s on hand in your plant, hub, or supplier-run space—all in one system.
- Automated demand triggers: Generate supplier restocking orders based on real usage and forecast data.
- Integrated scheduling: Align production plans with inbound inventory to reduce downtime and overstock.
- Lot traceability: Track supplier components by lot, batch, or serial number for quality control and compliance.
- Performance visibility: Compare efficiency, cost, and output across sites, suppliers, and products.
With centralized data and automated workflows, your ERP becomes the nerve center that keeps your multi-site supply chain running smoothly.
Are Supplier Hubs and Co-Location Right for You?
A Supply Chain Management Review article notes, “Analysis revealed that supply chain co-location can drive significant improvements for companies. The best-case scenario, the supplier park model, can deliver up to 45% cost savings, a 30% reduction in speed-to-market lead times, and more than 80% reduction in CO2 emissions from transportation.” These strategies are a good fit when:
- You rely on critical components with long or variable lead times
- You need to respond quickly to customer-specific configurations
- You’re scaling operations and need better control over inventory flow
- You want to deepen collaboration with strategic suppliers
- You already have—or are investing in—a multi-site ERP platform
Like any supply chain transformation, implementing hubs or co-location requires a high degree of coordination, visibility, and trust. But for many manufacturers, these models offer a clear path toward lower risk, better agility, and stronger customer service.
Final Thoughts
For manufacturers navigating today’s supply chain volatility, supplier hubs and co-location represent a proactive shift toward flexibility, speed, and smarter sourcing. When supported by a powerful multi-site ERP system with supply chain management features, like Frontier ERP, these models streamline communication, reduce risk, and help you produce on time, every time.
If your operation is looking to reduce lead times, control logistics costs, and improve supplier relationships, it might be time to rethink your supply chain footprint—and bring your suppliers closer than ever before. To learn more about Frontier’s supply chain features and other optimization tools, click below or see us at the AWFS® Fair 2025 in July!
