“The supply chain is a disaster.” These words, expressed by a manufacturing executive during a prep call for a recent Operations Executive Roundtable, sum up the current sentiments of many business leaders. Some are at the point of throwing up their hands. But, even though the hits seem to keep on coming, there are things you can do to ease the pain and gain greater visibility and insight into what’s happening on both the inbound and outbound sides of your supply chain.
As one leader put it, even if the news is bad, seeing it sooner and more clearly makes a big difference. Enabling this line of sight requires the right data and technology. It takes the right mindset, too.
A Lean 4.0 approach, when applied to current supply chain challenges, can help you move past the gridlock and take steps that will improve your ability to operate efficiently today and down the road.
Lean 4.0 is one of the newest buzzwords in the industry, and when people hear it, they automatically think about connected machines. In TBM’s view, Lean 4.0 means connected everything, your supply chain included.
Just like you’d put sensors on machines to draw out performance data, you can put sensors on shipping cartons to gather information about where they are in the world. However, that’s just one part of a much larger equation. Lean 4.0 is about getting the holistic view of everything impacting the availability, cost, and flow of materials and finished goods, and using actionable data and advanced technologies to make the best possible decisions, reduce lead times, cut costs, and ultimately improve business performance.
One participant in a recent TBM Operations Executive Roundtable discussion, tired of operating in survival mode, has made the effort to proactively engage with every supplier, whether they are currently experiencing issues or not. “Even if something’s not broken, we’re still reaching out to key suppliers to ensure they remain non-problematic. We thought due to everything being so tight, we’d be talking to a lot of hands. But we’re actually getting good engagement from current and potential new suppliers that we didn’t expect.
If there’s ever been a time to think outside the box and try new things, this is it. If nothing else, opening up the channels of communication can lead to additional information and insight beyond just knowing that your order is still delayed.
For example, you may have similar items with different part numbers, such as screws, bolts, or other common components. Or maybe you are using multiple suppliers for the same item. If this is the case, you could be missing opportunities to leverage volume and spend to get preferential treatment and pricing and potentially receive your materials sooner at a lower cost. Given that some organizations are facing up to 500% increases in shipping costs, it’s worth looking for consolidation opportunities that can help you save wherever you can.
On the other hand, if you are working with just one supplier for a specific part, and that part is a bottleneck, then you may need to look for additional suppliers to help meet this need. Several executives in our Roundtable expressed that, right now, customers are much more willing to look at and accept alternative sources for components such as microchips that have been particularly difficult to come by. They are also more willing to review and quickly approve alternative designs that work around constrained components, especially for high-stakes or critical parts. While substitutes and stand-ins may have been met with resistance in the past, times have changed. Customers are more readily accepting plan B if it means they can get what they need to keep their own operations moving.
In any case, investing in a spend analysis will help you understand you true costs right now and may open the door to possibilities you haven’t considered in the past. Many manufacturers tell us they are looking at the possibility of flying parts to help circumvent port delays and surging freight costs. A spend analysis can tell you if such an option makes sense or if there are other cost-effective avenues you haven’t explored. We recently worked with a client to analyze its indirect spend (i.e. expenses not related to critical parts.) We identified several opportunities, including more aggressively considering alternate suppliers, offering more significant supplier incentives, consolidating suppliers where possible, and fully leveraging category management techniques. With these strategies and tactics, the customer is positioned to take full advantage of cost reduction opportunities in the supply markets.
This is where a good supply chain control tower is invaluable. Such a solution gives a singular view into all your real-time shipment-related data. It lets you see in advance when and where issues may arise and enables you to respond in a timely manner and make decisions that can help prevent delays. While most mid-sized manufacturers lack a fully built-out supply chain control tower, many have elements of such a solution already in place, such as a way to get alerts from suppliers and shipping companies. Taking that data and marrying it with analytics and visualization capabilities can be a relatively easy next step when you leverage existing digital manufacturing software solutions. For example, with Dploy Solutions, you can quickly create dashboards that let you visualize and manage critical supply chain KPIs, all in one place, enabling you to identify, investigate, and quickly respond to delays and issues.
For example, another Roundtable participant shared how his company is keeping transportation and warehousing costs low by tapping into a digital fulfillment provider’s warehouse management and transportation management control modules. The company receives real-time information on the location of inventory in the supply chain including alerts at critical milestones, such as loaded onto ship. “Before we had too much inventory, too much cost, and then everything was affected by COVID. Now we have a better handle on the supply chain across the board.
Lean 4.0 cannot solve for all the supply chain issues that manufacturers are contending with right now. But it can make it easier to see all your options and make the best decisions that impact availability, cost, and flow of materials and finished goods. At a time when organizations need every advantage they can get, leveraging data and technology will help you respond to today’s challenges better while guiding longer-term decisions for restructuring the supply chain for optimal efficiency.
Key Takeaways
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