If there’s one thing we’ve learned over the past two years, it’s to not take our supply chains for granted. The pressures on manufacturers are significant and growing: a shrinking labor pool, higher turnover, severe material shortages, increased global competition and more.
Whether you manufacture food, pharmaceuticals or automobiles, the long tail of the supply chain is becoming increasingly complex, with the potential to introduce significant risk to the organization. This is especially true with a large base of suppliers. Supply chain executives are increasingly investing in resilience measures, although many manufacturers report that balancing operational efficiency, costs and resilience is like walking a tightrope.
A resilient supply chain is one that involves strong communication and collaboration; flexibility to rapidly adjust and onboard new suppliers as needed; digital solutions to anticipate changing material and component needs; and a high level of visibility across the entire supply chain. These enable organizations to adapt to unexpected or disruptive events — and recover quickly without sacrificing cost or quality.
Supply chain resilience can be strengthened by increasing inventory levels of raw material, adding manufacturing and storage capacity to improve surge capability, and increasing the number of suppliers of vital components and materials to prepare for potential supplier disruption. With each of these risk mitigation strategies comes potential downsides as well, such as higher inventory costs or unused capacity — especially if there is a market downturn. The goal is to find a balance between resilience, cost-efficiency and customer satisfaction.
Communication, Collaboration
Strategic supplier engagement requires strong two-way communication and collaboration. This means that companies must give suppliers greater ownership over shared risks and clear feedback on where they are excelling and where they need to improve product quality. It includes providing direct feedback on quality levels and defining new strategies for suppliers and manufacturers to capitalize on the information each must share to mitigate supply chain risk, such as real-time information on port bottlenecks or regional COVID outbreaks that are impacting manufacturing sites. A collaborative model ensures that expectations are clear, issues are immediately addressed and any changes to requirements are communicated and understood.
Further, companies need to be in a position to work with suppliers to improve quality and availability of materials or be willing to shift suppliers in the event of shortages or poor quality. Hoping the situation improves is not a good business approach. Customer satisfaction and company success are relying on an effective supplier strategy.
Effective risk mitigation not only requires communication and collaboration externally with suppliers, but also internally through the integration of key enterprise systems. Tight integration of a company’s quality management systems (QMS), enterprise resource planning (ERP), customer relationship management (CRM) and other automated solutions allows for seamless collaboration when stakeholders need to identify new requirements, anticipate demand, resolve incidents, reduce waste, track supplier compliance and drive overall improvements to the bottom line.
Suppliers should be part of any corrective actions. To enable customers and suppliers to work as closely as possible, suppliers should have access to the QMS. This way, supplier corrective actions (SCARs) are handled in the most efficient manner with full documentation and disclosure at every step of the process.
Supplier Visibility
Visibility across your supply chain enables you to track individual components, sub-assemblies and final products as they travel from supplier to manufacturer to consumer. This clarity translates to fewer disruptions due to the receipt of low-quality, defective or unreliable products, lowering costs and reducing the risk of product recalls. It should come as no surprise that manufacturers with poor visibility into supplier performance have a reportedly higher defect rate than those with strong visibility. Being able to trace components from supplier to customer allows you to respond more quickly when issues arise and make more effective supply chain decisions.
Quality Audits
For many manufacturers, one way to increase supplier visibility is through a supplier audit. This can be the cornerstone of an effective supplier risk mitigation and quality management strategy. It becomes even more important considering the ever-increasing number of compliance and reporting requirements for manufacturers globally, including health and safety and quality guidelines. These audits should focus on identifying, eliminating and preventing product quality problems. Product, process and quality systems audits are vital sources of knowledge, and fluctuating supplier defect rates are often predictive risk indicators.
Ensuring a resilient supply chain is essential not only during times of supply chain disruption but in every climate. The key to mitigating the risks that can impact the efficient flow of goods or the quality of a manufacturer’s products requires a sound strategy built upon ongoing communication and collaboration between buyer and supplier, as well as the seamless integration of quality management systems that can keep quality on track and goods flowing effortlessly.
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