Most everyone is familiar with the old adage “You are what you eat” or perhaps you prefer “garbage in/garbage out”. Essentially both have the same meaning. Getting good results hinges upon what goes into it. When manufacturing a product the importance of supply chain is often overlooked. After all, what is your end product but a collection of different parts working together to complete a given function? Let’s take a closer look at the importance of making cost-effective material sourcing decisions and the impact they can have on manufacturing your product.
The first item you should take under consideration is the supplier screening process. That process should include a supplier scorecard that provides metrics for delivery, price, and quality. The evaluation process should be ongoing, enabling you to monitor suppliers over time, and should include regular audits for critical components. These audits can serve as checkpoints for discussions about issues you uncover during the audit process. As your project evolves, you should develop reports that include Key Performance Indicators (KPIs) and other relevant details. This level of transparency not only helps ensure greater speed to market, it also helps prevent surprises late in the process — especially if and when the time comes for design changes.
Another key factor to consider is the geographic footprint. Some manufacturers prefer working with partners in domestic locations. They resist dealing with international suppliers because of the potential risks to their intellectual property and their need to communicate during the same business hours.
Other manufacturers may seek a supplier that is located near their production facilities and end customers. For some, the selection of a supplier comes down to practical issues like the ability to visit and audit the provider’s facilities or to save on shipping parts to the manufacturing location.
Once the supplier has been fully vetted and you are assured that the potential partner can meet the desired quality, production and logistics needs, a thorough cost analysis should be conducted. Pertinent information about the costs of parts and their profit margins will enable you to make informed decisions about your manufacturing process and production runs. This also has a major impact on the profitability of the end product.
In the recent article, “What You Can Do This Month To Reduce Supply Chain Costs” posted on manufacturing.net, the author, Aleksejs Volcenkovs states “It is a fair estimation to say that your supply chain and logistics activities take up 50 % to 70 % of your costs so reducing costs even by a small amount can easily make a huge difference in your expenses.” He goes on to say “Ideally sales would increase so that profits go up but the reality is typically not that simple. You can increase your profits by cost-reduction tactics. Making simple changes can really pay off.”
Whether you are launching a new product or looking to extend the life of an existing one it’s important to remember those lessons that you learned as a child. Your end result is only as good as what you put into it. So, when assessing the viability of a components supplier think of it as a child eating their vegetables. It may be a bit distasteful to them, but you know it’s vital to their overall health.
Smoothing the Transition whitepaper
Supply Chain whitepaper
Vendor Health webinar