Supply Chain Management and Point-of-Use Logistics

 

If business leaders talk about supplier value-added partnerships, but treat suppliers as enemies, companies will not be able to grow and profit fully. Materials handling and inventory storage are non-value-added, high-cost activities in manufacturing. All manufacturers should make eliminating the stock room a priority. It is not new to move materials from their point of use. The auto industry has done this since its inception. All industries have experienced success with low-cost Supply Chain Management, point-of–use hardware.

 

The key to improving supplier contribution to gross profit is supply chain development. It's time for us to recognize that it is more than just placing orders with the lowest-priced bidder. "Strategic outsourcing" which focuses on getting the right material, in the correct quantity, to the right location at the lowest "total costs", must replace "beating up" on suppliers to reduce their prices.

 

In response to a need to expand its factory floor to build a multi-function tester, a manufacturer of electronic component testing equipment decided to make the stockroom into a production area. The agreement was reached that no new parts of electronic component test equipment would enter the stockroom. All common parts would be moved to their production areas and designated "point-of use" inventory. This project was made possible by the establishment of a strong supplier support network, which provided prompt and innovative "points-of-use" logistical support. High communications integrity, scheduling flexibility/responsiveness, superior quality, special materials transportation/storage racks and a positive "continuous improvement" mindset were some of the characteristics of the developed relationship. This manufacturer became a market leader three years after the project began. Most of the credit for this achievement goes to the supplier development team and the strong supplier support network it created.

 

Many manufacturing companies today are looking to partner with value-added suppliers to improve their material availability and enable them to be successful in point-of-use logistics. Both the company and the partner will benefit from each other's success when they form a partnership to perform one of the links in the supply chain. It is clear that supplier partnerships are powerful. They have the best of both the worlds, the scale and coordination that large companies can offer, as well as the creativity, flexibility, and low overhead that small companies often enjoy.

 

Suppliers are able to draw on their knowledge and insights, but they don't have to follow the guidelines of distant headquarters. They don't need to complete lengthy forms or send weekly reports. Instead, they can quickly act without the need to refer to a detailed manual. Value-added suppliers have been proving to be extremely competitive in a growing number of industries. They deliver high-quality, competitively-priced materials to exact buyer requirements.

It is a great way to establish a partnership relationship. Treat each other like an extension of your business. Value-added suppliers should seek out their partner for assistance in areas such as special procurement, training and process engineering. On the other side, the buying partner should look to the supplier partner to get product development input, cost containment strategies, high-quality parts/components/assemblages delivered at the correct time, in the proper quantity, and at a low "total cost".

 

Many business leaders underestimate how many business skills are needed to create and sustain a successful supply chain program. These leaders tend to hold suppliers in check and try to keep economic gains to their own. Organizations often attempt to weaken suppliers to protect their profits. This is absurd and must be avoided if point-of use logistics is to succeed. Without a strong supplier network, there is no point-of–use logistics.