In 1914, Henry Ford famously declared that customers could have the Model T in any color they wanted, as long as it was black. Over 100 years later, automobile purchasers have a myriad of paint colors to choose from that they can apply to hundreds of different car designs with many options.
Managing the value stream for providing black paint to The Ford Motor Company in 1914 was relatively simple. However, this isn’t the case today. Of course, as the number of options has increased, the tools to manage this variety have also changed.
Three important focus areas for mid-cap manufacturers to manage their supply chains successfully today are truly understanding the customer and their requirements, integrating, and harmonizing their value stream, and measuring and managing performance.
Understanding your customer and their requirements
We frequently hear mid-cap manufacturers express frustration when customer requirements change, especially when these changes conflict with the customer’s stated scheduling guidelines. It’s important to remember that your customers have customers, too. They manage all the problems you must deal with, possibly more. Manufacturing planning is not a perfect science. The most successful mid-cap manufacturers understand customers’ schedules but also move beyond them to understand their customer’s business and challenges.
Sometimes, the solution is quite simple. An executive who manages a facility manufacturing complex components supplied to electric vehicle (EV) battery producers. His company relied on the schedules and planning forecasts provided daily by one customer. But the actual shipment requests from the customer were frequently different than the schedules. He found himself constantly juggling either too much inventory or expedited shipments, so he landed on a simple solution. “I called the customer’s plant manager and asked if we could talk briefly each week after his production planning meeting. The plant manager shared their build plan for the coming week and the expected plan for the following two weeks.” This executive was able to plan their production with this information and used the schedules and forecasts for material and workforce planning. Now, their on-time delivery is 100%, and they are meeting inventory targets.”
Integrating and harmonizing your value streams
A constant source of concern for manufacturers are perceived ever increasing supplier lead times. Typical responses include pushing longer lead times at customers and increasing inventory safety factors.
Rather than taking one of these “arms-length” approaches, invite your suppliers to optimize your value stream. Share your understanding of your customer requirements and how you manage these in your manufacturing processes. Strive to understand your suppliers’ processing requirements and challenges. Collaborate with them on mutually beneficial solutions. Agree on a scheduling communication methodology that works for both of you. Then, measure your results together.
Establish a robust and visible Performance Management System
Most mid-cap manufacturers have customers who provide a supplier performance scorecard. These same mid-caps have one or two managers who review the scorecards and then file them away. This is tremendously important information for your entire company, not just to review and understand but to act on. While the customer scorecards are important, personal communication and feedback are critical.
In parallel, you should have an internal system for measuring performance. Key metrics to focus on are inventory levels, premium freight, and labor over time. If you are achieving high levels of customer satisfaction and meeting your internal objectives, you are succeeding.
Written by Charles Clevenger. Originally published by Industry Today.
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