By taking these three approaches, mid-sized specialist manufacturers can overcome common issues, create their own opportunities and build on new or existing relationships.
1.) Do due diligence and know your supply chain
The first piece of work to do ahead of any change is due diligence. Refine your market analysis to review who the players are, as well as understanding your own supply chain. Invest time getting to know those suppliers, their processes, facilities, how they are set up and what they’re capable of. Understanding what they struggle with is just as important as knowing what they do well – and it’s wise to understand how they themselves source materials.
All this information may create new opportunities that would not have been considered had you not done your research and had broad conversations with suppliers.
Sharing projections and setting your suppliers goals is also important. Applying an element of pressure for them to help you with reducing costs or improving reliability, for example, can help focus attention on areas for improvement.
Perhaps your business hopes to scale-up over time. A three-to-five-year roadmap of what supplying you looks like clarifies expectations, prepares suppliers for the future and encourages them to invest alongside you.
A three-to-five-year roadmap of what supplying you looks like clarifies expectations, prepares suppliers for the future and encourages them to invest alongside you.
Remember, new developments are happening all the time. You need to be aware of any changes in the market and industry to avoid risk and maximize cost and efficiencies. Robotics, additive manufacturing, the use of recyclable materials, computer-aided design are all changing rapidly and it could be that tolerances can be upgraded or processes made more accurate, which may open new production methods for better prices, speed or batch sizes.
2.) Flag potential risks and have a means to overcome them
If something is going wrong in your supply chain, it will probably get worse unless there’s an intervention of some kind. Be on the front foot with risks, especially if they’ve already started to become issues. Perhaps your products are meeting their specification on paper but not operationally, which might be affecting warranties and impacting cost and reputation. Or maybe the pricing of raw materials conflicts with your long-term pricing agreement. Be aware of it and don’t stop talking to the supplier – ensure you talk to them during the good times and bad.
Don’t expect suppliers to guess your requirements and don’t be afraid to have difficult conversations up front. Sometimes manufacturers identify certain risks around the deals but fail to articulate them or actively give feedback to suppliers and work to overcome them. In other words, don’t wait for contract renewals or price hikes but work through them together.
Don’t expect suppliers to guess your requirements and don’t be afraid to have difficult conversations up front.
Consider the risks of critical components and how your business might be affected by any potential disruption in the supply chain. And don’t forget broader risks, such as potential trade wars or country tariffs that could impact competitive advantage or make the sourcing location less than ideal.
Be aware of the risk of changing versus the risk of staying with a particular supplier or sourcing location.
It would also be a mistake to assume every problem raised with a supplier will lead to an attempt to charge you more. They may be happy to work on improvements. Perhaps you could help them buy better, for example, or assist with benchmarking or forecasting.
It’s not always possible to move or make changes quickly, so staying on top of issues is essential.
3.) Communicate, transfer knowledge and set clear expectations
In many cases, a client signs a contract but doesn’t really help their supplier understand their business or what’s expected. Companies tend to forget this part.
We recommend investing a chunk of time up front, such as three to four months, transitioning new suppliers so they understand where you’re going and why, and how they can grow with you.
They also need to be clear on what they’re making, what it’s for, and why tolerances or materials matter. The transfer of this tribal knowledge is essential to ensure they understand exactly what each product is and why it’s designed in a particular way. It’s not enough to simply send parts, samples and drawings, you also need to help them factor in planning and sequencing. Communication needs to improve three or fourfold with open access to critical people including engineers and product professionals.
Don’t assume they understand your products or business, avoid setting them up to fail and instead talk to them. If you enable reciprocal communication, they may even be able to suggest improvements and streamline processes.
Set clear objectives, have an agreed understanding about lead times and try to sit down and forecast together.
On the flipside, get to know their team and culture, ask how they have transitioned new clients in the past and consider making it a contractual obligation to give you access to certain individuals or resources. With all this communication with suppliers, remember to keep your own colleagues informed. If your colleagues understand why a change is being made, they are far more likely to support it.
…ask how they [your suppliers] have transitioned new clients in the past and consider making it a contractual obligation to give you access to certain individuals or resources.
As with any strong relationship, frequent, honest discussion is required to maximize its potential. Be up front with suppliers – that way, they can give you what you need.