Tag Archive: vendors

The Resilient Supply Chain: Do You Have Vendors or Partners?

December 1st, 2018

Since we did research on “The Squeeze” for a speech on the the squeeze in aerosapce (meaning:  how does the supplier in the middle between the Tier 1 suppliers who supply final assembly parts for an airplane and the powerhouse mills survive, or preferably thrive), we have been thinking a lot about the supplier relationship.  Coincidently, we also heard a lot on this topic at the Association for Supply Chain Management (ASCM/APICS) international conference as it is a hot topic across all industries. There was an almost identical discussion occurring with retail and the consumer goods industry. Last but not least, all of our clients are seeing the relevance of this topic.

What is the “right” answer?  Of course, it depends!
To manage “the squeeze”, one of the keys is to create partnerships with your key suppliers.  The rest can be vendors since they are not core or significant to your success. However, your key suppliers must be partners and collaborators.  For example, one of the best ways to handle the middle position in the aerospace world is to bring your customers and their demand together with your suppliers and their capabilities.  

Here are a few ideas that all depend on being a partner:

  • Collaborate with suppliers on new ideas/design concepts to reduce materials and waste for you AND up your supply chain.
  • Become a partner of your customer and gain access to demand information as it becomes available and help translate that into a benefit for your customer, you and your supplier.
  • Leverage pricing and volume across the supply chain for a win-win-win.

Although these ideas relate to aerospace, the same concept applies with every client.  When I was VP of Operations and Supply Chain for an absorbent products manufacturer, we used these same concepts to find win-win-win solutions in your supply chain.  We partnered with key vendors to redesign materials (that performed better at a lower cost), redesign packaging, reduce waste in our manufacturing process which required teaks and collaboration with both material and equipment suppliers and more.  By following a partnership route instead of the “vendor” negotiation/beat up on price route, we turned our situation around from bad to good.

We found private equity backers who wanted profitable growth.  However, soon after, the market changed and oil and gas prices were continually rising which significantly impacted our material costs (and were unavoidable) while our private equity investors still expected the same profit improvements as before.  Our business was also heavy in transportation cost since the product was bulky which was also an issue with rising oil and gas prices. Thus, we collaborated with customers, material suppliers and freight suppliers for win-win-win solutions. It “worked” and we were able to offset the price increases while growing the business in a profitable and scalable way.

These types of situations are common in today’s business environment.  

Do you view your suppliers as vendors or partners? And who are you hiring to manage these relationships?  Transaction-oriented purchasing folks or strategic relationship procurement resources?

 



The Resilient Supply Chain: Can You Get Trucks?

October 3rd, 2018

Are you able to find trucks?  This is quickly becoming a major question that needs to be answered.  Every driver has at least 12 options. Why will he/she take your load?  Are you attractive to carriers? That is the key question. After all, you can carry inventory so you are responsive (assuming you planned well and have the right inventory at the right place at the right time) but if you cannot deliver, it was all for naught.

According to the Journal of Commerce, truck rates are up in the low double digits half way through the year.  And, they are expected to go up to 15% before slowing down to 7-10% increase in 2019.  However, these rate hikes are quite the shock to businesses. Many clients are tell us that there are times they cannot find a truck, whether they pay 15% more or not. What are you doing to ensure you have a resilient supply chain?

Here are a few questions to ponder:

  • Do you view your carriers as partners or vendors? – Undoubtedly, if you view them as vendors, you probably aren’t delivering on-time or are paying double or triple the going rates.  
  • Do you have a backup carrier? – I learned this lesson from the Director of Purchasing who worked with me at PaperPak.  He kept a backup supply of our critical material so that if anything went wrong in the supply chain, he could “turn it on”.  This meant we were paying higher prices on an ongoing basis to keep this backup supply. Naturally, our board members were not happy about the increased cost.  However, he was “right on”.  Eventually there was a strike at the ports and our supply was delayed. Because we had been bringing in backup supply all along, we were able to turn up the production and cover our needs seamlessly.  Do you have a backup in place you are confident will be there when you need them?
  • Are you proactively partnering with your carriers? – When supply chain challenges arise, do you proactively collaborate with your carriers to resolve the issues?  Are you willing to think outside the box and try new and innovative ideas?
  • Are you an attractive customer? – How you treat people will either make or break success.  People tend to do business with people they know, like and trust. Are you finding ways to improve your customers’ conditions?  Remember you cannot just decide to become attractive when you need your suppliers. It is a way of doing business.
  • Do you need trucks at all?– Perhaps it’s time to re-think your strategy.  Should you consider rail, air or another method?  Can you partner with your customers or suppliers in a new way?  How about collaborating with competitors? Or, you could consider insourcing vs. outsourcing. 

Think outside the box and start early.  Waiting until there is an issue is no time to think about resolving one. 

It seems such a basic element to have trucks where you need them and when you need them.  Yet it often isn’t viewed as a priority.  Why not take stock of where you stand and put some thought into your path forward?

You’ll be more likely to meet and exceed your customers’ expectations with this proactive approach to supply chain resiliency.

 



Is Apple Moving Design In-House?

December 15th, 2017

According to an Industry Week article, Apple is considering designing chips in-house.  The Japanese Nikkei said that Apple could replace as much as 50% of the power management chips that go into iPhones with its own design.  That could be a dramatic change!

Supply Chain Impact to Component Vendors
Apple has developed its own processors for years but has recently increased its focus on the in-house design of components. There have been recent changes in supply chain (recent acquisitions have reduced the number of chipmakers).  Could this be a change in strategic direction or a response to a changing supply chain or something else?  No matter the reason and whether it will come true, the question is whether you would be aware of this change if you were in a related industry or dependent on suppliers related to this potential change.

What Should We Consider and/or What Impacts Could Arise?
Of course, if Apple moves design in-house, it will impact the current supplier (Dialog); however, it doesn’t stop there.  The suppliers who supply Dialog should be thinking about the impacts and how they can redeploy resources.  It begs the question of the level of diversification of your customer base.  Has this been a priority?  Is there a way you could turn part of this situation into a positive, whether you are Dialog or a related company?

Think About Potential Changes in Your Industry
Even if you are unrelated to any of these companies and impacted parties, it pays to be thinking about potential changes in your industry.

  • Are you in lock step with your customers and suppliers?
  • Do you know what is on their minds?
  • Do they know what you are thinking?
  • Could it be of benefit to brainstorm markets, products, and more with supply chain partners?
  • Do you have relationships within your industry that could alert you to key trends or do you attend important trade events?
  • At a minimum, what are you doing to ensure you are not surprised?

If your strategy includes keeping your eye on industry and customer change and your ear to the ground, you most likely will see the change coming so that you can steer the right course.  If not, now if the time to get started.