It is popular these days to talk about assurance of supply. More often than not, manufacturers rely on components and services from all around the world for the continuing smooth supply of their products and services. A company’s reputation hangs on its reliable delivery to customers, but assuring this ongoing supply is not a straightforward task.
The most effective mitigation against all supply chain risk is to have a supply chain management system and processes that allow manufacturers to be agile, transparent and collaborative when working with trading partners and service providers. Manufacturers need to understand not only the processes in their own plants, but also all the processes that their outsourced manufacturers and suppliers go through if they are to have a predictable outcome of supply
Seven questions manufacturers can ask themselves to assess their assurance of supply score:
1. How early and often are we collaborating with suppliers? Are we sharing forecasts?
2. How are we placing and managing our purchase orders (PO)? Do we change quantities and deliveries after we have given our supplier a firm PO?
3. Do we have true visibility of key events in the production lifecycle, into work in progress (WIP)?
4. Do we have accurate information regarding vendor-managed inventory, n-tier supplied component parts or even parts supplied as subcontract material?
5. Do we have granular visibility into shipments to know exactly what is packed where and the exact date it will arrive? What about the exact location as the shipment crosses borders or switches transportation modes?
6. How are we handling invoices and settlements? Is handling supplier email and phone calls still part of the common workflow?
7. Do our suppliers have access to capital? At what rates are they borrowing? Are they leveraging our credit strength to eliminate capital costs? Are we aware of our suppliers’ financial health?
From Diane Palmquist’s Assurance of supply in manufacturing