[NEXT LEVEL BLOG]

There are a number of very real threats to every company’s supply chain, like a natural disaster, a major facility accident, and even an intentional subversive act. The likelihood of any of these types of incidents occurring increases for companies with extended global supply chains, short product lifecycles, and unpredictable markets. Today, the number and types of threats that can undermine a supply chain are greater than ever, and the reason redundancy has taken on even more importance in supply chain management.

Of course, there’s no way to prevent disruptive or catastrophic events from occurring, but a company can take smart steps to prepare for and deal with them – and, in the process, ensure business continuity. When it comes to the supply chain, the best way to ensure your company’s ability to quickly get back up and running is to institute redundancies in the supply chain.

With the opening of global markets and expanded trade agreements, securing, training, and utilizing quality low-cost suppliers in the supply chain has become a targeted strategy to reduce costs and open up opportunities for market expansion. However, there are often situations where local sourcing is the best choice for supply chain stability and lowering total delivered cost. Focusing on piece price is the single greatest mistake procurement and operations managers can make in determining the optimal supplier mix.

 

When global industrial manufacturers start thinking about class “C” parts requirements, minds instantly go to unit cost. When using millions of fasteners spread between regional manufacturing centers, each responsible for with managing unit costs, production-line efficiencies and inventory costs, cost has to be right, and uninterrupted supply can’t ever be an afterthought.

Sourcing “C” class parts from low-cost providers inherently creates challenges with guaranteeing availability and quality. Without meeting quality expectations, low-cost supply ends up meaning nothing.

Before jumping into implementing a custom VMI program that will undoubtedly result in improvements to your current supply chain management, there’s another important opportunity to improve efficiencies that’s often overlooked. That’s to conduct an engineering and design review of the products that drive the depth, breadth, and complexity of a company’s parts requirements. This is a rigorous examination of the key design elements of products, looking for practical ways to reduce parts inventory SKUs and potentially simplify the manufacture and assembly of these same products.

Working closely with our customers’ engineers, we search for parts redundancies that can be eliminated with simple design or drawings modifications. Manufacturers with exhaustive product offerings who haven’t gone through a disciplined parts consolidation process will almost always have a surprising number of redundancies uncovered, for no other reason than that in most new product design and engineering efforts, designers are not limited to current parts inventory. 

The motivation behind implementing a vendor managed inventory (VMI) program is to streamline your supply chain in ways that ultimately save you space, time and money (in labor, inventory, energy). But too often we see VMI programs that aren’t focused explicitly enough on directly accomplishing these things. 

The best VMI programs are aligned with – and contribute to – an organization’s overall Lean journey and consider where the organization is on the journey.

This is part 2 of a 2-part series looking at how a custom VMI program can and should result in significant reductions in working capital. The first post looked at Supply Technologies’ proprietary approach to assessing each customer’s current situation, what we do with that assessment, and the roles that forecasting and production planning play as a custom program is implemented.

Part 2 looks at inventory management, inventory ownership & distribution, and technology & systems as areas that can contribute to working capital reduction with an implemented program.

There are a number of factors that contribute to a successful custom VMI program, but perhaps the most critical in achieving the program’s goal of reducing operating cost and working capital is a thoughtfully designed and well-executed implementation plan – one that includes:

• Parts Requirements: An understanding of the projected parts consumption and the current supplier inventory pipeline
• Sourcing Plan: A practical strategy for sourcing parts, both imported and domestic, with long lead-times
• Quality Plan: An agreement on the quality requirements and inspection of parts, and the Production Part Approval Process (PPAP)
• Transition Plan: An agreement on the program takeover strategy – what’s best for you: “flipping the switch” to the new program or a gradual transition from the existing program?

At its core, our comprehensive implementation process is designed to seamlessly transition your current operations to the new program with the fewest number of interruptions. In fact, the primary goal at launch is that your program is completely ready to improve efficiency on the very first day of operation. Our programs consistently deliver parts and materials to the production floor – on time and on budget – managing process change and deploying without production interruption. Further, teams of our senior people from every department are on-site and in place to provide the structured training to ensure the program’s success.

With this kind of process in place we’re able to successfully implement custom VMI programs even in highly complex situations, like these two examples, both of which resulted in timely startups at all plants involved:

This is part 1 of a 2-part series looking at how a custom VMI program can and should result in significant reductions in working capital. This first post will look at our proprietary approach to assessing the current situation, what we do with that assessment, and the roles that forecasting and production planning play as a custom program is implemented.

Seth Swanner, Vice President of Sales and Marketing of Supply Technologies, shares his views on the industry and the dangers concerned with “custom” VMI programs that are being marketed by many competitors.

In my earlier blog post I discussed some of the key aspects involved in deciding on the right vendor managed inventory (VMI) program for your business – because the last thing your company needs to do is incur additional costs moving into a program that was initially supposed to save you money. In taking it a step further, I’d like to outline some of the benefits realized when your VMI program is developed based on the specific needs and processes of your organization rather than built around an off-the-shelf solution.

• Better consumption control and parts velocity management

• Reduced costs across multiple areas of your business

• Improved cash flow through creative programs such as “pay on consumption”

• Resource reallocation opportunities to focus on other key initiatives within your supply chain

• Improved time management/efficiency

• Improved quality standards and component traceability

• Minimized and mitigated inventory liability

• Reduced interruptions on production lines

• Increased manufacturing square footage and production floor space

• Streamlined Just-In-Time (JIT) solution for your production floor team 

We have a special term for what we do at Supply Technologies: we call it “Total Supply Management™.” As you might imagine, we’re often asked, “Is that really different from Supply Chain Management (SCM)? How?”

Practitioners today define SCM as the oversight of materials, information and finances as they move in a process from supplier to manufacturer and ultimately to the end user. At Supply Technologies we take it a step further with Total Supply Management™ by identifying and integrating the soft costs impacted by SCM decisions and practices, utilizing seven disciplines over and above unit cost to assist in accurately defining Total Cost of Ownership and adding real value to your business.

• Global Sourcing
• Logistics
• Custom Program Development
• Implementation
• Quality Assurance
• Engineering Efficiencies
• Advanced Technologies

By allowing our Tactical Process Analysis Team (T.P.A.T.) to visit your production facility, we can understand all of the day-to-day challenges related to your supply chain and production. The result is a multi-dimensional view of the business and identification of potential improvement for the greatest impact.