A Contract Electronics Manufacturing Solutions (CEM) provider based in Derbyshire, have dual sourced a key element of their supply chain to reduce a single source risk with the expert help of Alliance Procurement Solutions.
The CEM worked with their largest customer to identify a key supplier risk within their supply chain. A simple what if scenario was used to identify the risk, “What would we do if that supplier could no longer supply us with these critical components?” In other words, what if that supplier ceased trading, and what effect would that have on the business?
This led the CEM to create a simple work package; “How could we source these products and who from?”. The primary objective was not about improving costs but establishing credible alternative suppliers who could take over the production of a group of components. In fact, it was accepted that costs would probably increase by as much as 20%.
The CEM established that they needed additional expert resource to help them find a solution, recognising that their own processes and systems were not geared to supporting such a task.
Alliance Procurement Solutions (APS), was engaged to help the CEM with this large and significant project. APS established that the process of strategically approaching this work package, would require supporting them with the development of Request for Proposal (RFP) documents, Supplier Capability Assessments, and how to assess the proposals received from suppliers, which supplemented their existing quoting processes.
A key deliverable was to work closely with the Head of Procurement and Supply Chain to support the development of the team, embed strategic procurement processes as well as managing key communications with the business owner, Operations Director and their customer.
APS used its extensive knowledge of the manufacturing supply chain to identify suppliers who could support the CEM’s requirements. Our experts also worked closely with key internal stakeholders such as engineering and customer account managers to understand their requirements, and then gain their buy-in to the strategy.
Once suppliers were engaged in the process using the tools above, we facilitated two Supplier Days. These were crucial in enabling potential suppliers to discuss the project requirements further, and to physically see some representative components.
A key element of the Supplier Capability Assessment is to understand some of the key factors in the decision making process. It is important to recognise that was not about sourcing just on price. Instead, we looked at other factors including delivery performance, quality performance, customer returns process, contract review processes, evidence of supplier capacity planning and ability to deliver. It was also important to understand the suppliers’ values and policies and how these were aligned with Kingfield’s.
Supplier visits were led by APS, with the CEM in attendance. Once proposals were received to establish a supplier’s manufacturing capability, assess their operations practices, we could then move to start the process of addressing any gaps in their capability assessment scoring.
Naturally this led to detailed negotiations with all suppliers to ensure Win-Win scenarios were explored at all times.
After three months, a final supplier recommendation was proposed to all key stakeholders which was based on a balanced and unbiased assessment of each suppliers scoring.
The new sources have greater all-round capability, improving delivery performance and with the added bonus of achieving a cost neutral position for the CEM and their major customer. Based on expectations, this is the equivalent of 20% cost avoidance!
All this was underpinned with a clear implementation plan which detailed a plan for every part, ensuring that the risk of no inventory is negligible.
This strategy of spreading components across a few suppliers means another single source risk is not created, work is spread evenly so as to not overload a supplier, enabling a greater chance of success for them, and will enable greater supplier collaboration as longer term relationships are established. In simple terms, the risk of supply chain failure is greatly reduced and opportunities to reduce costs on other components greatly enhanced!
“APS really worked very closely with me and embedded themselves as part of the team to deliver this project. Their expert knowledge of the manufacturing supply chain, and the ability to support us in improving our procurement process capability has been invaluable. They have worked with me to help develop my team, and ultimately deliver an outstanding result for the project. Our company owner and largest customer are delighted with the work APS have delivered”