The past thirty years have brought a lot of changes in the manufacturing process for many companies. One of the most significant changes is in inventory control. Companies used to try and keep a supply of all the parts they needed to manufacture a product on hand. The inventory served as a buffer in case there were any interruptions in the flow of supplies that would allow them to continue manufacturing for a little while.
The old process changed with the advent of "on-time" delivery that has lowered inventory costs, but has also necessitated that companies work closer with their suppliers to operate efficiently. Instituting supplier collaboration methods can prove beneficial to both the purchaser of supplies and the manufacturer of those supplies.
Supplier collaboration entails working together to establish good practices up and down the supply chain. The first step is to create avenues of effective communication. A supplier should understand the exact requirements they are to fulfill for a customer. A purchaser should be willing to share intimate details with the supplier on how their products will be used and what quality levels need to be sustained.
Supplier collaboration models also help to locate where and when interruptions might cause a delay in the flow of supplies. This knowledge can help to create processes to avoid foreseeable problems. When a supplier has a good understand of what a purchaser will need in the future, they will be better able to prepare for upcoming orders.
In many supplier collaboration models a supplier can also communicate more effectively with their customers. Problems can develop at both ends of the supply line and the ability to communicate effectively can help to eliminate problems as they arise. This is much different from simply placing an order and waiting for the materials to arrive.
A supplier can develop a reasonable financial plan to address cash flow issues. Cash flow is a normal concern for most businesses. A supplier who has developed a good relationship with their customers might be able to better plan for what their revenues and expenses will be for a period of time. The supplier collaboration model allows a purchaser to engage in planning with their suppliers to meet market needs and ascertain how the ups and downs in the economy will affect the supply chain.
Controlling costs is beneficial to the financial health of every company. A supplier who knows when their customer will be going into a slow period can adjust their purchasing requirements to save money. Conversely, when the supplier is aware that their customers will need more products, they can prepare beforehand by stockpiling necessary supplies to meet demand before the orders even arrive.
The supplier collaboration model involves companies working together to meet each other needs. The supplier and purchaser becomes almost like an extension of each other to achieve the same goals. The companies become closely connected and committed to each other throughout the manufacturing process and cannot be easily replaced.
Posted by LeanCor Supply Chain Group
LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.Facebook LinkedIn Twitter Google+