The other day I met with supply chain managers from manufacturing companies with products as diverse as electronic circuit boards to airplane cabling systems to conveyor systems to water filtration systems and even furniture.
The one thing in common is that it’s not business as usual. This economy is creating havoc on even the very stable manufacturers in the area. If the economy has not affected your business yet … it is definitely coming.
Companies can save the most dollars by improving their supply chains.
Today supply chain managers are taking a very close look at their suppliers. The old adage of, "You are only as strong as your weakest link," is critical to the success of the supply chain. Some manufacturers are watching how suppliers pay very carefully for any telltale sign that a company may be in trouble. One flag could be discovering that your suppliers have an "automotive side."
Other ways to know if your supplier is financial at risk might include a reduction in staff and/or late deliveries. Sometimes you can get good information if you simply ask how they are doing.
There will be an increase in supplier assessments. The key here is not the assessment itself, but what you will do with the information you gain. It is critical to develop scenario plans for the information you receive.
"You cannot cut your way back to profitability!" – Anonymous.
The supply chain sight line is not what it used to be … it is very short today. Manufacturers will find it extremely advantageous to get their orders shipped ASAP so to stave off any possible “buyer remorse” or even worse, order back out. Inventory turns need to be quicker. Supplier bases should be ratcheted down 20 to 30 percent. If your suppliers are talking about raising prices … that might be a huge red flag!
While some manufacturing is coming back to the United States as a result of time and cost … some manufacturers will be insourcing their outsourced work to keep their people employed.
Supply chain managers need to be strategic thinkers. Transactional work costs money. This economy will provide opportunity to make change as there has never been so much wind at our backs.
Manufacturers are not seeing a lot of price reductions … certainly not in line with the price increases that were abundant earlier this year on some commodities. Rollbacks are slow and surcharges are still a problem.
This is a good time to do a value stream map on the supply chain processes. The exercise is important especially when creating the future state. Once the vision is set, the gaps can be addressed through Lean processes.
A word of caution: be sure short-term strategies are aligned with long-term goals.
Another strategy to think about is creating a "worst case scenario" around each of your commodity and key suppliers. What would you do if you lost your supplier today?
Where there is loss, there is also opportunity. This is a time when good suppliers can rise to the top of the list as poor suppliers are fired. Keep close to your customers and take advantage of possible new opportunities created as a result of this economy.
As manufacturers look to create opportunity in new products, it is critical that the supply chain manager be part of those strategic endeavors at the top of the process to align the supply chain to insure quality materials, speedy delivery and sound pricing.
Today’s supply chain manager position is much more than buying and managing materials, it is about strategic sourcing and managing demand. How well is your supply chain managed?
Linda Kiedrowski is president of The Paranet Group Inc., a Brookfield-based consulting company for manufacturers. The Paranet Group will co-present the Manufacturing Summit Breakfast with BizTimes Milwaukee on Thursday, April 30, at the 2009 BizTech Conference & Expo.
