At APS we are extremely passionate about the success of UK Manufacturing SME’s. We believe that there is a really opportunity for this sector to tap into the hidden potential of improving supplier relationships to deliver increased profitability, productivity and reduce risks.
Typical supplier interfaces
Many SME’s interface with their suppliers on an operational basis, ie, they focus purely on price, delivery performance and quality.
Whilst 3 quoting, (if that happens at all), helps to benchmark prices it does not control costs. You may have engineers and machinists trying to trial new tools but are faced with the pressures of meeting customer demand and can’t free machine tools to conduct trials.
You will be happy because a supplier is 5 minutes down the road and delivers on time, or have suppliers who hold large amounts of inventory for you and are never late, without realising the liability exposure you have of that stock.
The products perform ok, quality is good, and if there is a problem it gets sorted but, you might not do a root cause investigation.
So why should you change or challenge what you currently do?
This operational approach to supplier relationships has served a purpose for many years and has served well, but for those SME’s that wish to become more competitive just remain still, never mind grow, it prohibits the ability to engage with suppliers on a strategic level.
The result of the above also means that it is highly likely you are placing orders on your suppliers 2-3 times per week, which places a significant burden on your purchasing teams and limits their ability to add value.
How are you using your suppliers to benchmark current products, methods and processes?
Do you have a plan in place with your suppliers which drives your business agenda, be it productivity improvement, spend reduction, or quality improvement plans?
In addition, very little attention is given to the relationship, or, if needed, technology or innovation. And in a lot of cases there is no criteria in place for supplier selection.
When did you last speak with your suppliers about how you can become their best customer?
When did you last speak to them about their latest product/service developments?
Are your suppliers financially sound?
Do your suppliers have the appropriate accreditations in place?
Do your suppliers fit with your company values?
What can you do?
Focus beyond material supply, the traditional “direct products”, but on products supplied to you like tooling, grinding wheels, manufacturing consumable items such as PPE, and the low value manufacturing products/consumables. And do not forget about machine tool spares and service/maintenance.
Once you have understood what your key spend categories are and the impact it has on your business, then you can start to plan. Note, impact on business should NOT be driven by spend, but assessed in terms of supply chain failure risk and understanding the hours those products generate within the business.
The high risk and high impact categories need to have a solid foundation to secure your relationships with the right suppliers. This means Long Term Agreements (LTA’s) which outline expectations and provide the framework for which the relationship is managed, and not just T&C’s which provide the legal basis.
Suppliers should be selected based on those which meet with your wider expectation on business support, cost reduction targets, productivity improvements, reporting, accreditations, financially sound and meet your company values.
And whilst you are doing this consider your current buying process, source to pay, and ask if you are doing this as efficiently as possible.
More value created in your supply chain through:-
APS is a strategic procurement services business that supports manufacturing SME’s to create value within their supply chains. We specialise in manufacturing operational costs and understand the impact decisions can have on your business.
We provide consultancy support, or, a fully managed service if you do not feel that you have the capability to implement any of the above. Or if you feel that you do have the capability, we also provide workshops and training to help provide the toolkits for your teams to use.
Get in touch now for a free, no obligation conversation, to see how we can help your business.