Three Ways to Cut Down on Material Shortages — Today
May 11, 2017
It’s the end of the month at your manufacturing business. You’re trying desperately to ship everything so you can hit your numbers.
Why do you keep falling into this cycle of stress? The answer is often down to material shortages — a known epidemic in the manufacturing world.
Let’s cut down that stress by looking at 3 actions your manufacturing business can take to reduce materials shortages.
1. Balance sales planning with operations planning
The best-performing supply chains in the world use some form of sales and operations planning (S&OP). Entire books have been written on S&OP, so this article won’t attempt to cover the entire system. Instead, we’ll focus on a part that is frequently missed: the balance between the “S” and the “OP.”
Most organizations focus heavily on operations planning by looking at usage history, operational scheduling, procurement practices and more. But they don’t put the same effort into sales planning.
To improve service rate and reduce shortages, you have to start improving your planning right now.
Measure your forecasts and begin creating the expectation of accuracy. To quote Peter Drucker, “If you can’t measure it, you can’t measure it.” Even if your current forecast accuracy is terrible, it will improve with consistent measurement.
The more balanced your “S” can become with your “OP,” the fewer material shortages you’ll have.
2. Make your supplier feel part of your team
Great suppliers are hard to find, which makes an effective supplier management strategy extremely critical. Too many manufacturers talk to their suppliers only when they place an order or when something goes wrong.
The better you inform your supplier, the better they will perform.
Do the following when getting started with your supplier:
- Share your strategy.
- Develop and share performance metrics.
- Host regular, face-to-face business reviews.
- Communicate often via a medium that suits you both.
The more your supplier feels a part of your team, the more they’ll be able to help in your efforts to eliminate material shortages.
3. Don’t be blinded by costs
Cost, cost and cost — these are the top 3 priorities of most supply chains.
But here’s the problem: focusing only on cost can lead to increased lead times, lower-quality products, less responsive suppliers, increased labor costs and more.
That’s why many world-class manufacturers are moving from low-cost country sourcing to best-value sourcing. The latter looks at the total cost of ownership (TCO) and the value brought from the relationship.
While sale price will always be a dominant factor in the equation, today’s best practices suggest you should look at other factors. These can include landed cost, lead times, supplier flexibility, risk management and the supplier’s ability to improve.
Taking all these factors into your supply chain design will create the flexibility to prevent shortages and increase margins. Shortages will never completely go away, but the ability to reduce them can give you an advantage over your competitors.
Material shortages are a fact of life in manufacturing businesses, but these tips should help you stand a better chance of hitting your numbers each month.
So, remember, find a better balance with your sales planning, get your supplier to feel part of your team and don’t focus solely on costs.
Need a hand with supply chain or other manufacturing and distribution challenges? Reach out to Adam Beckerman. His team services over 600 clients in the US and around the world. He would be delighted to help you.