Managing your suppliers to meet your time-to-market goals

On a daily basis, manufacturers face a double-edged sword with their best and most mission-critical suppliers: 1) they know that they can depend on these suppliers for the high-quality components that they need for product builds; but 2) what if demand for products increases and suppliers can’t keep up?

In the case of a single-source supplier relationship, an inability to provide the capacity needed to meet demand can present immediate production delays. These delays can threaten the ability of manufacturers to hit market windows that only stay open for a limited amount of time.

From a supply chain manager’s vantage point, the goal is to always have very high quality suppliers standing by so you can spread your order demands across a broad supplier base and assure that components arrive at your plants in time to meet production schedules.

Qualifying multiple suppliers at the level of quality that you expect is one challenge. A second challenge is getting these suppliers through the expense and tedium of an EDI (electronic data interchange) system integration process so they can securely interface with your procurement and ordering systems.

The first challenge of finding multiple reputable suppliers for mission-critical components is anything but a “slam dunk.”

In August, 2017, Wally Johnson, vice president of finance at Firstronic, a contract manufacturer that produces electronic modules for automakers and Tier 1 suppliers, wrote about the risks of trying to meet demand when you only have a limited number of suppliers that can provide you with the subcomponents that you need to build your products.

“Industry professionals are seeing lead times on “passives” — electronic components such as resistors, capacitors, inductors and transformers — stretch out to one year or more in some cases,” said Johnson.

For the automotive, electronics, and other manufacturing sectors—lead times like this are unacceptable.

When you add to this the resource cost of iteratively testing EDI data transfers with new suppliers until they succeed in interfacing with your internal systems, these lead times grow even longer.

Taking the pain out of doing business with supplier

A major automotive company grew tired of its cumbersome EDI system and the burdens that this system placed on suppliers.

The company’s idea was to build a web portal that suppliers could log onto, thereby eliminating for suppliers the cost of systems integration or of leasing dedicated communication lines that were needed in order to exchange EDI documents.

For the automotive manufacturer, the goal was to build an ordering system that would automatically clean, process and format data into transactions that were compatible and directly transferable into and out of the backend of its SAP ERP system.

“Based on the data retrieved from the backend SAP system, the ordering system automatically processes purchase orders of raw material and parts for suppliers,” said the company’s head of Planning and Management for Industrial Products.

The number of transactions is about 3,000 per week, and the number of items ordered is around 20,000 types per year.  By digitizing the processing of large volumes of orders, the automotive manufacturer achieved improved accuracy, and faster transaction processing

The manufacturer also wanted to ease the pain of doing business for its suppliers, whose cooperation was vital. It created a new online ordering system that was accessible to suppliers via a simple web portal. The system could automatically translate data into acceptable records for the corporate internal ERP system.

The system also translated ERP-and order system information into acceptable outgoing data formats for suppliers. In this way the automotive manufacturer helped its suppliers eliminate the need to subscribe to expensive dedicated telecommunications lines, which they had needed for EDI. Suppliers’ cost of doing business with the manufacturer dropped—and so did the manufacturer’s own operational expense, which fell by 45%.

Integration without EDI

The automotive manufacturer’s approach to seamless system integration with its supplier network was to use HULFT Integrate, which provides a high-speed data integration architecture that preps and cleanses data and is securely compatible with all major destinations; and Hulft Transfer, which gave suppliers access to the online ordering system. Together, HULFT shuttled transactions and data between manufacturer and supplier data systems automatically, with no need for corporate IT to intervene.

Lessons learned

In the next five years, initiatives like Manufacturing 4.0 will continue to grow with its emphasis on connectivity between companies, plants, the Internet of Things and factory automation.

For manufacturers that need to hit critical time to market windows with quality products manufactured from the most reliable components, nothing will be more important than digitalized and fully integrated supply chains that ensure that high quality suppliers can meet manufacturing demands.

In a global economy, supplier IT capabilities can vary from highly automated systems to doing business by fax machine. A universal integration platform that can fast track suppliers into your systems and deal with any supplier IT scenario is central to that effort.

This blog was originally published in Smart Industry.

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