Category Archives: Manufacturing

Five Ways to Maximize Profits from Supplier Automation

A recent article in Industry Week on 5 Ways to Maximize Profits from Supplier Automation had some good tips on how to maximize your return from your supplier automation, provided they are implemented properly. This post will explain how to get maximum results from Industry Week’s tips.

  • Avoid the 80/20 trap

    When you only automate 80% of your suppliers, what happens is that the remaining 20% consume 80% of your procurement staff’s time and effort who have to enter data, track down errors, and deal with inquiries that would be avoided with an automated system. In other words, 80% isn’t enough. You have to keep automating until the return isn’t worth the investment. While this number will vary from company to company, generally, you have to insure that at least 90% of all document exchange is automatic, if not 99%. You keep going until the ROI (annual savings / annual cost) of automating the next supplier is less than c, for c between 2 and 3.

  • Make it Affordable and Beneficial

    Not only does it have to be affordable, but it has to make your suppliers’ lives easier. If not, it won’t be adopted.

  • Beware the Middle Man

    As the article says, another unnecessary, and completely avoidable, cost, for both you and your supplier, are the recurring monthly fees charged by “Value Added Networks” (VANs) or other such middle party service providers. Let’s face it, you know who your suppliers are, and your suppliers are quite willing to make their catalogs available to you for free because they want your business. Don’t pay an extra fee for what you already know and have access to.

  • Make Supply Chain Data Actionable

    Automating document transfer enables transaction savings by significantly reducing processing costs, but it doesn’t provide strategic savings unless you act on it. Make sure the tool allows for event driven, alert-based workflows that allow you to detect unexpected events and patterns as they happen so that you can make course corrections “mid-stream”.

  • Measure and Respond

    Continuously benchmark tool usage and process times and take action if the benchmarks don’t continuously improve.

Share This on Linked In

Sometimes the Cantankerous Supplier is Right!

Even if they are too late with respect to demonstrating their correctness.

But let’s back up. Recently, on the Purchasing Certification Blog, Charles penned a great post on “the real reason buyers don’t want to give suppliers feedback”, which, in his words, were

BECAUSE WE DON’T WANT TO PUT UP WITH THIS CRAP!

where the crap in question was the salesperson effectively saying, with their incessant badgering that no other company can produce the same product of the same quality at the same price with the same service, that you are stupid. You don’t know how to make a good decision and you don’t know how to evaluate prospective suppliers.

As Charles’ points out, it happens all too often, and most of the time, the supplier is full of crap. But sometimes the supplier isn’t — and this is often true in custom manufacturing and services. I see it in IT all the time. The buyer doesn’t really understand what’s involved in building or customizing a piece of enterprise software or system and goes with one of the low bids and ends up getting a stinking pile of crap that not only costs 50% more due to project and budget overruns, but is delivered full of bugs, doesn’t include 20% of the originally specified functionality, and takes three times as much manpower to support as it should. In the end, by the time all of the extra service and support costs are factored in, it costs three times as much as the high bid from the one firm that really understood what it was doing. The same is true in custom manufacturing. There are some corners that can’t be cut, and accepting a bid that does so leads to long term cost ramifications.

However, the supplier should still back off once the buyer has made an award decision, even if it is the wrong one. Because it is not the buyer who made the stupid decision, but the supplier. If the supplier truly had a better product of a better quality at a better price and service level, then the supplier should have taken the time to provide the buyer with the education she needed to understand that when the supplier had the opportunity. Instead of chest thumping about how great they are and how they are so much better than the competition, the supplier shouldn’t have even tried to sell at all. They should have said “we know we can meet your needs better than any of our competitors, but that’s not important. What’s important is that you understand why we can do that. For you to truly understand how we are better, you need to understand what the major drivers of cost, quality, and service are around this product. So we’re going to help you with that.” And if they truly were the best solution, then the buyer should be able to see that and choose them. (And if they truly were the best solution and the buyer didn’t see it, is that a buyer the supplier really wants to be working with?)

And regardless of whether or not the supplier has the best solution or not, once the buyer makes her decision, the supplier has to back off, and this is the only appropriate response from the supplier.

“We’re very sorry to hear that you chose someone else. We still believe we could provide you the best overall value with respect to your needs and would appreciate the opportunity to try again at the appropriate time. Could you let us know when you expect to be going out to market again for this product so we can contact you again at the appropriate time to request the RFP? Also, if your chosen supplier proves unable to meet all of your needs, please feel free to reach out to us at any time. Thank you again for the opportunity and we hope to have another opportunity to compete for your business again in the future.”

Anything more and the buyer has every right to blacklist the supplier.

Share This on Linked In

If You Want to Survive as a Manufacturer, Just Get Efficient

Industry Week recently ran a lengthy article on how “the manufacturer’s world has changed forever” which purported to provide advice on how manufacturers could learn from other’s successes and mistakes and gain a greater share of customer preference, the key to success in today’s everyone-is-an-expert marketplace.

The article had seven tips, which were good, but generic and just as applicable to retailers and distributors as they are to manufacturers. The reality is that the key to success for a manufacturer is efficiency. An efficient manufacturer has a high rate of production, produces minimal waste, maintains high quality, and is very cost efficient — to the point where its total cost per unit is lower than that of its competitor. That’s the ultimate key to survival in this economy — being more competitive than your competitors.

Thinking like today’s buyer is for the designer.

Getting rid of the dead wood is implied.

Anticipating change is a fact of life.

Determination is a timeless key to success.

Urgency is the normal state of affairs today.

Inspiration is the sign of every true leader.

Alignment is the first step to getting efficient, but …

until a manufacturer is efficient, it’s chances of survival are slim. So just get efficient.

Share This on Linked In

Seven Things Manufacturers Should Be Able To Do With S&OP Data

A recent article in Industry Week summarized “five things manufacturers should be able to do with S&OP data” that were quite good. So good, in fact, that this post is going to summarize them before adding two more things that manufacturers should be able to do with S&OP data.

  • Minimize SurprisesAn effective S&OP process that focuses on collecting and understanding demand data from internal stakeholders and trade partners is essential if you want to minimize surprises such as a delayed shipment, insufficient supply, or raw material shortage.
  • Optimally Manage InventoriesHaving the right amount of product, at the right time, in the right place is key to increasing margins, cash to order cycles, and customer satisfaction, among other benefits.
  • Improve MarginsImproving margins is often an area that’s under-emphasized in an S&OP process, and yet [it] is ultimately the most important factor in the health of a company. Making sure the relevant S&OP data, such as average product unit cost, inventory levels, logistics costs, anticipated margins, customer satisfaction rates, etc. is shared across marketing, finance, supply chain and the executive suite is critical because input and shared data amongst all functional groups is what drives margin improvements.
  • Improve Customer Satisfaction RatesImproved customer satisfaction gives you the ability to build stickiness with customers, which leads to profitable relationships. Knowing what your customers need, when they need it, and delivering on that need in a timely fashion is key to increased customer satisfaction — and good visibility will allow you to do just that.
  • Better Resource UtilizationEach part of the S&OP process should leverage the data as fuel for the decision making process as this allows for fact-based resource allocation which enables significantly greater resource utilization.

These are great starting points, but don’t stop there when you can also use S&OP data to:

  • Decrease CostsOnce you have an effective handle on demand across all product lines, you can use that knowledge to negotiate the best prices on parts against true volume levels. No more lowball estimates to be safe or missed rebates due to overly aggressive estimates.
  • Effectively Prioritize NPDOnce you have an effective handle on sales across product lines, you can determine which types of products sell the best, and which products in the pipeline are the most likely to be successful. Focussing on these products should allow the company to most effectively utilize its resources.

Share This on Linked In

Optimization is Supply Chain’s Simulation

A recent article over on Industry Week pointed out how Simulation is “Empowering Product Engineers to Save Time, Money (and the Planet Too)”.

According to the article, simulation helped:

  • NatureWorks design a new biodegrade chip bag for SunChips,
  • Balzer Pacific Equipment Co. design and manufacture a new barge to carry 6,000 tons for a client that required less steel and saved $20,000 in steel costs, and
  • Unverferth Manufacturing Co to create a new strip-till subsoiler in only 3 months that was ten times stronger than its predecessor, required less parts and cost thousands less to make.

Optimization offers similar benefits to your supply chain. It:

  • allows you to redesign your supply chain network to be more efficient,
  • allows you to source the optimal amount of product at the optimal cost, which saves you a ton of money,
  • and allows you to complete sourcing projects in weeks that used to take months.

So stop waiting and just do it.

Share This on Linked In