Six ways to reduce supply chain risk in manufacturing

By Adam Cherry May 1, 2024

Collected at: https://www.plantengineering.com/articles/six-ways-to-reduce-supply-chain-risk-in-manufacturing/

With the supply chain challenges facing manufacturing executives over the past few years, among the many things occupying their thoughts are questions about their own supply chain, particularly when it comes to fastener solutions. Minimizing risk and ensuring part availability, quality and inventory management factor heavily into their supply chain teams’ short and long-term plans.

Optimas has had the opportunity to have many conversations with industrial manufacturers about supply chain risk and how to reduce it. From those conversations and the firm’s 130 years of experience in the fastener industry, here are six areas forward-thinking supply chain leaders should be thinking about, along with questions they should be asking.

Supply chain sourcing

How can one enhance bench strength with other vetted providers for times of higher demand and when customary sources cannot deliver?

Having the right fastener partnerships requires a periodic assessment of current and available resources, contributing business conditions, partner performance scores and a better understanding of the best strategies in delivering fastener solutions. As a manufacturer evaluates fastener partners, consider areas that will help build confidence.

• What are the regional and/or global sourcing and availability capabilities?
• How has the fastener supplier embraced digital transformation and has built its capabilities in Inventory management, digital automation tools, engineering and 3D modeling and other areas that have positively affected its overall operational effectiveness?
• What types of in-house manufacturing does the supplier offer, such as cold heading manufacturing?
• How extensive is its centralized quality protocols and culture of reducing defects?
• How financially stable is the supplier — will they be there to support you down the road?

Planning and ensuring that you know your strategy from a supply continuity and risk mitigation perspective and which parts and suppliers are critical from a production perspective. In the end, it comes down to effective communication with key suppliers.

Figure 1: Optimas Solutions manufacturing and distribution headquarters in Wood Dale, Illinois. Courtesy: Optimas Solutions

Availability and consistency

How can a manufacturer increase its visibility into the inventory available from current service providers?

As the manufacturing industry has further embraced the use of data analytics in operations and overall digital transformation in all aspects of business, greater visibility into inventory is no longer a wish list item but a requirement. A fastener supplier should offer real-time inventory management solutions that provide real-time data for on-hand and upstream SKU quantities so manufacturers can confidently oversee operations wisely.

The benefits include keeping production lines properly stocked, better support of material resource planning, lowering cost of goods sold, increasing operating profitability and ensuring quality and consistency of product. That’s why having access to a service provider’s information and details on inventory that’s available through digital transformation can help dramatically. There is a mix of digital analytical, communications and reporting tools that can give a good, rounded view of what’s available.

Manufacturing solutions

When is it best to manufacture rather than source a fastener?

There are many fastener distributors out there, but often part acquisition goes beyond standard offerings or just might need the ability to supply certain “unique” fasteners in larger quantities than what some suppliers can deliver.

So, when looking for the right supplier consider manufacturing capabilities a plus if the manufacturer requires the unique capabilities of design engineering for manufacturers seeking part acquisition options. The questions to ask are: Does the manufacturer have high volume and low diversity requirements, highly engineered parts that aren’t commonly available or does the need for reduced lead time for parts that are needed sooner than the current supplier can achieve exist?

This is exacerbated by the question before many manufacturers — make or buy? This question calls into account a whole host of considerations that go beyond basic manufacturing facilities and capabilities, but the ability to offer custom services such as in-house engineering, tool and die makers, 3D prototyping and more to ensure the suppliers offer a complete solution.

Look for unique combination of resources, including quality governance, which enables the right supplier to serve customers where manufacturing a part is a better solution than sourcing it.

Ultimately, supply continuity is undoubtedly a big part of it. Understanding your supply base’s ability and potential risk to the operation is an advantage in having control and visibility by manufacturing a part yourself.

How can I tell if my current suppliers can introduce manufacturing for custom or hot parts?

Often manufacturers require urgent or customer work parts. To gauge a suppliers’ ability to keep up with urgent or custom work requests, ask if they have the following in-house services available:

• Application and manufacturing engineering services.
• Rapid prototyping and additive manufacturing capabilities.
• Advanced product quality planning (APQP) and centralized production part approval process (PPAP) processes.
• The latest manufacturing and quality lab certifications.

Even if a business doesn’t have these urgent or custom part demands, knowing the supplier has the capability that can be turned on in a moment’s notice is reassuring and reduces risk.

Figure 2: Fasteners produced by Optimas Solutions. Courtesy: Optimas Solutions

How can I identify the difference between a zero-defect culture and a new provider who may get the first order correct?

Many different processes make up a “zero defect culture,” a phrase first made popular by quality guru Philip Crosby. The most obvious is to look for signs that the supplier possesses ISO and International Automotive Task Force certifications and regularly uses these protocols practically in operations. Then ask the following questions:

• Can you share a written quality policy?
• What are the pillars that make up your zero-defect culture?
• Does your organization possess certifications specific to your industry?
• How often does your team perform internal process audits?
• Do part inspections take place in your own quality lab?
• Can you describe your quality lab equipment and team?
• What’s your parts per million trend for the two years?
• What do your APQP and PPAP processes look like?
• How do you measure and improve partner performance?

Design and engineering

Can my current service provider offer 3D print or develop computer-aided design drawings for potential new or prototype parts?

These services are the backbone of additive manufacturing processes that streamline development and reduce lead-time and costs. Always look for a supplier who can help as early in the development process as possible and who can provide value-added engineering solutions that may save time and money.

When should my company outsource the application design of an individual fastener or component system?

When it comes to outsourcing application design of a fastener or component system, consider it when you see an opportunity to reduce cost and/or improve product quality, particularly when your organization does not have the time or engineering resources available. Another good reason to outsource is to have new eyes look at the problem and present solutions that might not surface from an in-house team that’s already familiar with the product.

Inventory management of the supply chain

How can we automate day-to-day parts ordering, receiving and stocking?

Suppliers with proven inventory management expertise can quickly implement programs that automate replenishment, storage and distribution. Full- and self-service programs, supported by radio frequency identification and demand planning technology, provide insight into on-hand inventory and consumption patterns for production planning. That’s why it is important to make sure there’s that upstream understanding of what information is needed when automating this type of data flow.

These programs can start small and become as complex as needed to improve reorder accuracy, reduce excess and obsolete inventory, free up valuable space and reallocate valuable resources to higher value activities.

Is there a way to more reliably obtain fastener parts required to match production levels?

This is one of the questions that indicate whether your supply chain is serving the business effectively . Here are several signs it’s time to find a new fastener supplier when it comes to inventory management:

• Breadth of parts offered.
• Sourcing relationships and buying power.
• Sourcing alternatives, i.e., onshore manufacturing.
• Geographic considerations.
• Quality certifications.
• Demand planning resources.
• Localized distribution network.
• Financial strength.
• Executive leadership.

Laying a foundation around the expectations when production volumes change with vendors is essential. Proactively building those relationships with strategic vendors is good, so when something does happen, which undoubtedly will, you’re ready and prepared for that.

Technology and automation

What technology can I incorporate into my operation that automates manual tasks and provides data for planning?

When thinking about automation specifically from a process perspective, there are a lot of emerging technologies and various established technologies out there. You hear a lot about artificial intelligence as many companies are trying to become more comfortable with it. Machine learning is a great tool that’s used a great deal in inventory management and demand modeling solutions. It could also be about ensuring you get the most out of your current systems.

So, when you think about material requirements planning MRP systems, do you have the confidence in your data and systems to allow for more system automation when it comes to repetitive tasks such as purchase order placements, acknowledgments, past-due management activities and such?

One key technology to incorporate is a secure, cloud, just-in-time inventory management solution that offers robust technology — including predictive analytics and secure communications — to ensure the right parts and quantities are in the right place at the right time. There are a variety of tools — from hand-held scanners to weighted scales, chip-embedded bins to “hot” zones — that read labels, transmit orders manually and automatically, create transparency and elevate productivity.

However, it is important to understand that whatever the technology is it must come together as a solution that solves challenges in the business.

Financial impact on the supply chain

How can my sourcing partner(s) impact my company’s cash on hand, and manufacturing efficiency?

One way to increase cash on hand is through better management of on-hand inventory. A quality solution uses proven technology to replenish parts using demand forecasts and consumption data. Usage can begin with manual order approvals and migrate to automated over time. Receiving optimized quantities — regardless of requirements — keeps lines moving, morale up and facility free of preventable negative influences.

Automation of these processes saves time, facilitates the reallocation to more productive and rewarding tasks and improvises efficiency. More precise control over inventory reduces excess and obsolete payments, which frees capital and floor space for revenue and efficiency enhancing initiatives. All of these outcomes from a quality inventory management solution increases throughput, ultimately impacts cash on hand and creates efficiency in a positive way.

It’s excellent to also think about what’s outside the contract, the pricing terms and things like that. Bringing it back to supply continuity and how important that can be from an operation perspective is about keeping the operation running to avoid unnecessary expense. Focus on communication and the partnership and be sure to foster vendor relationships; the goal is to avoid waste.

There are indirect and direct forms of that waste. Indirect could be the cost of resourcing or finding a new vendor. Indirect is inherent efficiencies. This is to ensure supply continuity and then have ways to expedite material while the process is running as a last resort.

Many supply chain risks can be minimized through a thoughtful blend of dual sourcing, manufacturing expertise, design/engineering solutions and automated inventory management. It just takes the right fastener supplier and a willingness to rethink and activate changes in all aspects of the supply chain in a fashion that reduces risk.