Manufacturing Basics and
Hi MBBP Subscribers,
How important is a company's supply chain?
Just ask your front line leaders what's their most pressing problem. More than likely they'll respond, "Part Shortages!" The last time I asked some production people what they needed to improve their performance the answer was, "Just get us the parts and we'll kick butt."
The importance of an effective supply chain in a company's pursuit of best-in-class manufacturing can't be overemphasized. To that end, I'm not leaving the subject until you have a chance to read one more article on the importance of a strong managed supply chain.
So if you agree that your supply chain is important, be sure to read this week's MMBP Bulletin article: "Supply Chain Management."
Have a nice day, and stay connected.
Business Basics, LLC
Business Basics, LLC
Supply Chain Management
It is futile for manufacturers to try to reform their operations without a strong managed supply chain. To create technology intensive products --- and what product isn't these days --- U.S. manufacturers spend on the average, 65 cents of each sales dollar purchasing production materials and outsourced activities/processes. At the same time, JIT assembly operations require perfect quality and timing at the receiving dock. Parts have to get better and cheaper.
Increasingly fragmented markets demand more flexible manufacturing, which means, in turn, key suppliers who can stand and deliver under enormous pressure, change over quickly to new product programs, or master new technologies to make --- even help design --- robust components. Indeed, corporate product design teams, whose lead times are shrinking fast, need all the help they can get --- especially the subtle suggestions for improving a product that only the people who manufacture its subassemblies and components can provide.
Supply chain management is thus no longer a task for old-style purchasing managers. Strategic manufacturing is becoming a partnership between the companies that preside over design, assembly, and marketing of finished products, and fewer, smarter suppliers --- often single-sourced suppliers. Getting this partnership going, and keeping it competitive, is no easy feat. It may be the single most important task of the people who run the manufacturing organization. How should they approach it?
The first point, which is obvious but important, is that the cheapest component is, in the long run, not necessarily the least expensive. Once the cost of poor quality is factored in --- downtime on the line, rework, scrap, warrant work, legal fees, and so on --- the cheapest may well be the most costly. Managing the supply chain means aiming for the lowest "total cost, the lowest cost when all is said and done, not the lowest initial price per unit. Because poor quality is so expensive, buyers have to use more care in selecting suppliers than ever before; they must learn more about suppliers than they ever cared to know before. They need to engage in careful research and mutually Beneficial relations with key suppliers, not counterproductive tests of strength.
Another, less obvious point … purchasing managers have long advocated the award of two or more contracts for the supply of critical materials. Presumably, competition drives prices down and insures on-time deliveries, and, besides, does a company dare put a whole production line at the mercy of a supplier? This is anachronistic thinking. When capacity permits, manufacturers are better off with single-source key suppliers. A carefully selected and managed supplier offers the greatest guarantee of consistently high quality and on-time deliveries. Suppliers who feel part of the family permit manufacturers to subject them to rigorous inspection, certification, and education.
There are six questions that will determine whether a company will achieve dramatic results from a supply chain management program.
Supply chain management, in the end, is based on interdependency and respect. The supplier needs a responsible, steady customer for its products and services. Manufacturing companies recognize that they need key suppliers to help them provide their customers with the level of quality, speed and flexibility they require.
Most attempts at implementing and managing a supply chain achieve limited positive results? Why? Poor preparation … a company should have absolute control over its internal operations before it plans and executes its supply chain management program. If you're struggling with supply chain management at your company, make sure that supply chain basics are identified, implemented, and mastered.
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