Optimising the global supply base of mid-sized specialist manufacturers
For any manufacturing business, the supply base is key to unlocking many capabilities. Tweaking a product design or switching suppliers to gain new options may be the right thing to do, but it can be rife with complications – particularly for mid-sized, specialist manufacturers.
Change for manufacturers can be prompted by many factors, including issues with a component or supplier, regulatory amendments, innovation in raw material or manufacturing processes, or end-user requirements.
Whatever the motivation, selecting a new supplier or changing a process or product design can help unlock savings. And failing to make changes can cost companies dearly or lose them the competitive edge.
It’s important to maintain the right framework and experience around how to change parts. This can shift urgent changes from a significant operational risk into an opportunity to take the initiative.
Here we examine some of the difficulties and how they can be overcome.
Challenges changing products or suppliers
There are always barriers and blockers impeding change. For example, manufacturers can have very specialised requirements. That specificity typically means there’s a smaller market of suitable suppliers to draw on and purchasers are likely to have limited power and influence within it.
Another challenge holding back companies can be the investment of money and effort needed to make modifications. Carrying out research and development work on new or tweaked designs, and ensuring they pass necessary qualification tests, is demanding for time-pressed engineers. Just a change to the formula or grade of materials used could require two to six months. And often the lack of specified standards in this sector can mean it’s a struggle to find the knowledge required to carry out the testing work – even for critical parts.
All this can lead to a ‘if it’s not broke, don’t fix it?’ mentality about switching suppliers or changing a product, and makes management support and commitment a must.
Finally, there is often the assumption that suppliers will be resistant to product or process changes and will baulk at potential added costs. However, suppliers are often willing to help and may already be looking for customers to invest with, especially if they’re trying to build their credentials or move into a new market.
…suppliers are often willing to help and may already be looking for customers to invest with, especially if they’re trying to build their credentials or move into a new market.
Difficulties working with overseas suppliers
There is often a need or desire to source overseas – sometimes because the local market no longer exists or, indeed, because a centre of excellence has developed elsewhere. However, businesses often fail to invest time and money in the supplier relationship management required to maximise the potential of these arrangements.
Distance can easily be blamed for a lack of regular, honest communication on issues that need to be shared and addressed by both sides. Furthermore, internally, people often make ill-informed assumptions concerning the quality, capability and scalability of production facilities overseas, which may be of a much higher specification than presumed.
Specialist manufacturers will often be buying tens of thousands of different parts and may be able to group together different components or assemblies to simplify and expedite production. Building two or three trusted overseas partners who can provide a substantial proportion of those parts can be a good way to start. Make sure you’re able to tackle internal concerns around shipping costs and delivery times and invest time to stay in regular contact with those suppliers. Consider what approach will work best for you and the supplier, such as vertical integration or a long-term deal to make it financially viable. Sometimes it’s less about price and more about how you contract that is the key to the right deal. Honest, open communication is often what secures the most symbiotic arrangement and it will start the relationship off on the right foot.
Sometimes it’s less about price and more about how you contract that is the key to the right deal.
Buyers need to be clear about their priorities – be it time, cost or reliability. Being clear about your expectations can avoid problems further down the line and regular contact keeps both sides informed. It also enables both parties to be aware of industry developments. For example, robotic welding is now a reality for even small batches – so that is something suppliers need to keep on top of – and a joined-up approach can help you benefit sooner from these technologies.
Continuous dialogue also helps keep suppliers honest and alert. This ongoing effort requires people to be driven and curious, which can result in improved performance or even competitive advantage. So, visit suppliers, but also get comfortable with video conferencing to stay in touch.