Are there specific steps to take that make a supply chain organization best in class? What works for one OEM or manufacturer may or may not work for yours. Here at MFG.com, we’ve found trends that offered temporary benefits over the years. We’ve also seen some that were short-lived or not as valuable.And we’ve found some buy-side and sourcing trends that have ‘legs.’ These are the best practices of higher-functioning manufacturers regardless of size or economic conditions.
These have stood the test of time, and we see them adopted by more and more OEMs. Some offer flexibility or nimbleness for organizations to adjust to shifting industry trends. Some offer systematic balance and insight into supply chains that help to mitigate risk, avoid breaks in supply, and lower costs more efficiently.
Some may be obvious to you. You may have already deployed or reorganized with one or two. But each of these trends are worth you time to investigate for improving your sourcing and manufacturing posture.
Not Just Suppliers, But Partners
Many companies are realizing that doing business today transcends the ‘simple transaction’ with the supplier – order, receive, and pay for the part/assembly/service. More and more, they are realizing that the processes of finding and qualifying new suppliers, developing compliance with communications or financial systems, and other corporate requirements all add significantly to costs. Think of this as the equivalent of set-up and change-over costs to custom parts manufacturers.
Aligning suppliers more closely with organization can greatly reduce the risks around many supply chain interruptions, including those mentioned above. This approach also creates a dialogue between the buyer and supplier that enlists the supplier as a partner in product development, improvement, and efficiently/cycle time. And each can directly impact your company’s bottom line.
Here are 4 pillars of an effective supplier-partner program:
- Monitor Supplier performance & health
- Define specific milestones and goals
- Enable two-way communications for continuous improvement
- Measure performance of both buyer and supplier performance regularly
This approach will create a more manageable supply chain and stable of high-functioning suppliers by focusing your organization on the total cost of ownership of a product, as opposed to price alone.
Supply Chain Management and Organization
Often over-looked is the internal organizations that are responsible for supply chain management (SCM). In many cases, we’ve seen companies invest in software management system, labor, and other resources to improve SCM while maintaining legacy organizations and influences that are years and sometimes decades old. This approach of relying solely on technology brings with it two detriments.
First, it often sustains the notion that supply chains are separate functions to be managed away from primary divisions or functions in the organization, making communications difficult. Second, it further separates critical pieces of the organization puzzle that should be aligned – engineering, design, development, quality, and supply chain – and adds unnecessary costs and complexities.
By maintaining SCM as a separate entity, we often hold it responsible for performance issues out of its actual control. Combining SCM as part of product or project teams within the organization can greatly enhance the insight and real data that more accurately identify trouble spots or process improvements.
Closer Integration Is Key
At MFG.com, we’re seeing movement toward enterprises of every size taking steps to ‘simplify through alignment.’ Whether more closely aligning suppliers with the OEMs core processes or internal resources around projects, processes, or products, the benefits are the same:
Improved products, less costs, and more profits.