Supplier Collaboration

Turning Wastes into Efficiencies:

By: John Szoke - Manager, Lean Supply Chain Operations

As a Lean Supply Chain Manager with LeanCor, I’ve found that working with legacy large scale manufacturing facilities in the 21st century carries with it a certain set of benefits as well as challenges. Organizational positives can include possessing a well established supply base, a certain reputation in the industry, as well as an enthusiasm for manufacturing process expertise honed over a period of decades. These traits alone can be difficult to put a dollar figure on as aggregate efficiencies can be hard to measure (although all processes should be measured in isolation as Supplier Collaborationwell as in aggregate!). But going forward with a business plan based on historical advantages can lull managers into a false sense of security, even when there are a wide variety of internal and external factors that can impede on the financial standing and reputation of an organization.

These potential negative forces are easy to ignore, as in many cases the problem can occur slowly over the course of many years. The prime indicator that I use to determine if a problem exists that has manifested itself as part of the customer culture is hearing the simple phrase, “That’s how it’s always been done!” A significant portion of these historical inefficiencies are in the area of supplier collaboration (or lack thereof) – the suppliers in most of my experiences being more on the carrier side, but they can range from a parts producer to your sister plant, to the guy upstream on a manufacturing line – and anyone in between that provides a product or a service that supports a business.

The Importance of Supplier Collaboration

It needs to be recognized by all individuals in a value stream the importance of supplier collaboration, as ultimately a problem at any space in the supply chain will affect the group as a whole, regardless of their position. If a 2nd or 3rd tier parts producer fails to manufacture a gear to specification, even if that final product can still be made and sold to a final customer, there is a cost that’s paid either in lost future revenue tied to your reputation, or a repair/replacement that needs to be made at an (ultimately) shared expense.

What Happens When There Isn’t Supplier Collaboration?

While working on a three-year lean logistics implementation on-site at a Fortune 500 manufacturing organization, myself and other colleagues (at various sister plant locations) faced a problem. There was a lack of understanding of how inbound shipments could be consolidated – or even individually routed – due to an absence of a solid Plan For Every Part (PFEP) plan. Classic silo planning led the organization’s product engineers to develop a part with no consideration of packaging requirements. Packaging purchasers would anticipate this and buy an excessive amount of generic containers not suited for the purpose of carrying that part. Due to lack of supplier collaboration on what was required, the manufacturer of that part would use whatever was most available and inexpensive to get the product out the door - and into the ownership of my customer. Possession was taken upon the truck leaving the supplier location with the material. From a transportation planning perspective, it was definitely a challenge as we were looking at literally thousands of part numbers and routing combinations. Our customer was understandably frustrated as we would routinely see trucks showing up in the bay doors that had a 100% fill rate and were supposed to be at 90-95% of max capacity. But due to insufficient, obsolete, and incorrect data, we may have had one or two pallet worth of material in the cargo area.

Ultimately we shipped in significant quantities of very expensive air.

What’s the Best Solution?

Clearly, the best solution for this problem would have been an extensive quality-at-the-source campaign in place for a number of years prior to our arrival. This is where engineers, suppliers, assemblers, and supply chain managers would collaborate and co-develop a methodology for building not only the new part, but also the sustainability of that part packaging over time across multiple processes. Since that was not an option in the short time frame that existed for us to get this inbound management implementation completed, we designed a PDCA governed crash course in PFEP collection:

PDCA (Plan Do Check Act) Crash Course Process:

  • Establish a master list of a all available part numbers- past and present
  • Cross reference the master list to determine which items for which we likely had good packaging data
  • Contact several hundred suppliers to gather additional PFEP data
  • Revise part list to highlight parts remaining with no available PFEP data
  • Make logical assumptions (where available) to update parts data - based on known packaging for similar products
  • Establish and train carrier drivers on material inspection and sign off process, establishing that the material picked up was exactly what was supposed to be received
  • Establish and train receiving staff on a trailer audit process at the point of material receipt, manually taking packaging measurements and completing a worksheet outlining expectations vs reality
  • Update PFEP database

What the Enhanced Communication Process Brought to the Table

In the end, while the size and magnitude of the initiative to collect part information continues to need management – and new processes have to be followed to capture and collaborate on packaging at the outset of new part assignment – extensive rewards were reaped from the effort. Actual audited packaging for parts increased across the enterprise from 28% to 62%. While this may seem to be far away from our desired state of 90+% of all parts, keep in mind that this became a manual process where literally hundreds of different part numbers were measured and recorded on an individual basis, and where the vast majority (90%+) of Class A part information was captured. A resultant increase in utilization of the trailers arriving occurred soon after packaging improvements were recognized, driving down our overall transportation cost per part by several percentages.

So, while this may be just a small example of the total efforts required to revamp facilities trenched in age old “wisdom,” the supplier collaboration principles can be applied wherever multi organization interaction occurs. It’s not easy, but applying these enhanced communication efforts (and plenty of feedback loops) in any segment of an organization will ensure that all the relevant data is at a minimum considered. It will at maximum have a profound impact on the negative processes, measurably turning wastes into efficiencies.

 

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.

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