Bill Gaw's, Best-in-Class,
Basic No. 03: Point-of-Use Supply Chain
Companies will never
achieve their full growth and profit potential, let alone gain the
benefits of their supply chain management system, as
long as business leaders continue to talk about value-added supplier
partnerships while continuing to treat their suppliers as
Material handling and inventory storage are two of manu-facturingís high cost, non-value-added activities. The elimination of the stock room, as it is known today, should be a strategic objective of all manufacturers.
Moving materials to their point-of-use is not a new concept. The auto industry has done it from its beginning and all industries have had success with point-of-use, low cost hardware.
Supply chain development is the key, and itís time to realize that there is much more to increasing supplier contribution to gross profits than simply placing purchase orders with the lowest price bidder.
"Strategic Outsourcing" that focuses on getting
the right materials, in the right quantity, to the right place, at the right time
and at the lowest "total cost" must
replace "beating-up" on suppliers for price reduction
A manufacturer of electronic component test equipment, in response to its need to increase factory floor space to build a new multi-function tester, decided to convert stockroom space into a production area.
It was agreed that none of the new tester parts would enter the remaining stockroom and that all common parts would be relocated to their using production areas as "point-of-use" inventory.
The key to making this project a success was the development of a powerful supplier support network that provided timely and innovative "point-of-use" logistical support.
Effective communications, information integrity, scheduling flexibility and responsiveness, best-in-class quality, special materials transportation handling racks and a positive continuous improvement (Kaizen) mindset were some of the characteristics of the developed relationship.
years after the start of the project, this manufacturer was a market
leader and most of the credit goes to their supplier development
team and the powerful supplier support network that it helped
In todayís competitive business environment, many manufacturing companies are turning to value-added supplier partnerships to achieve the material availability performance that is a requisite to successful point-of-use inventory.
When a company forms a partnership that performs one of the links in the supply chain, both stand to benefit from the otherís success. The power of supplier partnerships is undeniable.
To a great extent, they have the best of both worlds: the coordination and scale associated with large companies and the flexibility, creativity and low overhead usually found in small companies. Suppliers have knowledge and insight but arenít burdened with guidelines from a distant headquarters.
have long forms to fill out and weekly reports to render and can act
promptly, without having to consult a thick manual of standard
operation procedures. In an increasing number of industries,
value-added suppliers are proving to be fiercely competitive Ė
delivering high quality, competitively priced materials to precise
buyer schedule requirements.
An excellent way of establishing the partnership relationship is to treat each other as an extension of oneís business. The value-added supplier should look to his partner for services such as special procurement help on capital equipment and training needs and maybe some process engineering or quality engineering assistance.
The buying partner,
on the other hand, should look to the supplier partner for product
development input, cost containment ideas and high quality
parts/components/ assemblies delivered the
right time, in the right quantity, and at the lowest possible "total
Most business leaders underestimate the depth and breadth of business skills that are required to initiate and nurture a supply chain management program. Usually, these leaders hold suppliers at armís length and struggle to keep any economic gains to themselves.
In fact, organizations
often try to weaken a supplier to ensure their own control of
profits. This of course is ridiculous and is the first obstacle to
be overcome if point-of-use inventory is to be successfully
implemented Ė for without a strong supplier network there can be
no point-of- use inventory.
Business people in pursuit of point-of-use inventory should be advocates of: 1) business integrity, 2) day-to-day supplier cooperation, 3) free exchange of information, 4) responsive decision-making and 5) supplier profit sharing. Supplier development and strategic outsourcing requires a "from the top down" commitment and investment to produce a "been there-done that" team of professionals that can make it happen.
Individuals that master LEAN and are agile and quick to respond clearly
have the edge. To Increase your edge...
Knowledge and implementation
know-how you'll not find in the books at Amazon.com,
neither in YouTube videos,