One of the key steps manufacturers can take to grow their business is knowing their supply chain inside and out. This article focuses on how manufacturers can strengthen their supply chain relationships and improve the efficiency of getting their product manufactured.
Know your supply chain manufacturing process
Very few companies can make an entire product on their own. Many rely on supply chain manufacturing and operate with a network of suppliers and partners to help them get the job done.
When ordering processes run smoothly, manufacturers can easily assume all is well. But, we all know what happens when we assume. To establish a stable supply chain, manufacturers must know the status of partners and suppliers, as well as the state of their relationship with them.
2 Steps to establishing a stable supply chain
Step 1: Check your sources
From time to time, check in on your supply chain sources to verify that what you believe to be true is still true. Checking your assumptions will generally uncover areas where something is different than expected. Finding those discrepancies sooner rather than later will allow time to evaluate whether the potential impact to your company is major or minor.
Investigate component lifecycle
The lifecycle of electrical components can change without much warning. Divisions of component manufacturers are bought and sold frequently. Even though a component is still being made, it may have been transferred to a new manufacturer, which means it might be given a new part number and issued a new specification.
Remember when the RoHS (Restriction of Hazardous Substances) regulations went into effect back in 2006? Many manufacturers reviewed their product lines and discontinued components that were not RoHS-compliant to reduce complexity and expenses. Investigate component lifecycle statuses to ensure they match well with the lifecycle of your product.
Understand how your custom part manufacturers build your parts
When a supply chain partner like a contract manufacturer (CM) makes custom parts, a manufacturer generally needs to invest time to get the supplier up and running and make sure the CM will make custom parts correctly. Verifying that a vendor is doing well and that it still values the business relationship is important.
Regardless of the vendor’s status, make sure that you have complete documentation for the parts it builds in case you need to add another vendor. Also, understand the actual process used to build your parts. If you are unaware of certain steps in building a part, that may keep another supplier from ramping up successfully.
Check on the supply situation
Check on the last few builds and look for trends that could have an impact on your business. Did any part pricing or lead times change? Have deliveries been on time, late, or early? Has quality been consistent? Hints of problems generally appear long before serious disaster strikes. If something seems not quite right, note areas of concern, validate existence of a problem, and find a solution before the situation becomes critical.
Step 2: Evaluate your sourcing relationships
Relationships establish boundaries and modes of interaction between companies. They also establish communication paths, mutual understanding and respect between the parties. Building relationships takes time and energy, and so does maintaining them.
The better your relationships with key supply chain vendors, the more likely they will be true partners looking for situations where you both can succeed. But the value of a solid relationship is most apparent during the stressful times when challenges put a strain on your business. During those times your true partners in business will shine.
Sign contracts with key suppliers and contract manufacturers (CMs)
While you should have contracts in place with all of your supply chain partners, having more comprehensive and detailed contracts with suppliers of key components is crucial. In addition to price and supply guarantees, your contract can require early notification of changes and establish priority in shortage and back-order situations.
Contracts with your contract manufacturers are just as important. A quote and purchase order can get product rolling down the line. Buying and building to a long-term forecast can get you preferred pricing. But what happens when you increase your forecast by 3X? And who benefits from cost savings from yield improvements that both parties helped achieve? Establishing good contracts up front gives you practice in working out business details when things are easy and helps establish a solid working relationship. That practice and relationship will come in handy when the unexpected happens and conversations become more difficult.
Stay in touch with your supply chain partners
When was the last time you audited any of your supply chain vendors? When was the last time you called and asked how they were doing? Have you gone to lunch and had conversations about changes they are seeing in their business? You may not have control over your vendors’ business, but you need to be aware of what is happening to them and understand where risks lurk for you. You need to know where their business is going and how you can benefit from their plans for the future. None of this can happen if you haven’t spoken with your vendors in a long time.
The importance of establishing stability in your supply chain manufacturing process
Supply chain manufacturing is crucial for many businesses — most manufacturers couldn’t make their products a reality without it. Keeping close ties with supply chain partners and understanding how partners build products can help a manufacturing company scale when the opportunity arises.