Supply Chain Strategic Development

Supply Chain Development – Part 1

It is not uncommon today to read of an OEM observing that their supply chain is under stress and that it could become an obstacle to further growth.

My first reaction is to ask the OEM what steps they have taken to develop their supply chain to step up to these new challenges, whether they be capacity or technology. How long has it taken to design the new X/Y/Z? Well that’s how long you have had to develop the supply chain accordingly.

I recently had a conversation with a Chief Engineer who although accompanied by a representative of the Procurement department, was clearly leading the discussion regarding the supply of materials for his prototype build. It highlighted a number of issues that need addressing if our Manufacturing Sector is to continue its recovery.

Supply Chain development is a Strategic necessity that is truly cross-functional when being implemented. Contributions from Quality, Engineering, Purchasing, and possibly HR, not forgetting Accounts, are required in order to establish a beneficial relationship with a new supplier. But who should pull these contributions together? In short, the Supply Chain Development team. However, the SME on the receiving end, cannot deal with two/three/four different contacts for varying elements of his development. He needs just one - the facilitator.

This development process starts with the strategic realisation and subsequent acceptance that the existing supply chain is not sufficient for tomorrow. It then flows down the line to an operational level that takes the strategic need and translates that need into a robust and secure plan.

The purchasing supply officer has a requirement for components to be delivered on time and on price. The Engineer has a requirement for components to be delivered to his design and specification. The Quality engineer has a requirement for components to be delivered to the prescribed quality standards. The HR representative may be concerned about worker welfare within the supply chain. All have a reasonable input.

The Supplier has any number of issues to deal with in order to comply with these issues but has probably less than 10% of the customer's resources to allocate to the task in hand. And that may simply not be enough. Here is where we come to our Supply Chain Development team.

An accepted principle of Purchasing is the 70/30 split. Supplier 1 provides 70% of the supply, supplier 2 provides the balance of 30%; the logic being that should the primary source fail – for whatever reason – there is a prepared source ready, and able, to step into the breach. But that then leaves supplier 2 supplying 100%, a situation no buyer should accept. Here we look to the Supply Chain Development Team and the companies it has been working with. Having been given time to establish the necessary relationship with the client, supplier 3 should now ready to step into the gap left by supplier 2 stepping up. It is also worth highlighting at this point that if you are single sourced, it is questionable as to whether you comply with ISO9001:2015.

Getting supplier 3 to this point can take a great deal of work, is not the work of a moment and should not be entered into lightly. Nor can it be done without a serious commitment from the client. But if the client, in this instance the OEM, chooses to take this route, he can start to future proof his supply chain.