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Trends in Supplier Management: Mobile expert teams assure the supply chain

Trends in Supplier Management

Operative support of suppliers by OEMs

Author: Sebastian Dogunke, Managing Consultant, Wassermann AG
The German-language article was released in: Beschaffung aktuell 08/2016

Supply chains are becoming ever more complex and thus more vulnerable. OEMs in the automotive industry and in mechanical engineering are therefore no longer satisfied with the usual methods of selection and management of suppliers. They send out expert teams as mobile task forces, who quickly restore the supply reliability on site with practical assistance and also encourage sustainable improvements at suppliers.

OEMs in the automotive and mechanical engineering industry are increasingly focusing on their own core competences which increases the number and dependency on suppliers. Many suppliers cannot be replaced, at least at short notice – technical or logistical unique selling points prevent the change. What's more: With the shortening of product cycles, the number of product ramp-ups increases – and there are often capacity problems, especially in the startup phases. The OEM can optimize its own processes as it wants. If it is not possible to include all relevant processes for order fulfillment by the suppliers, blind spots remain and the security of supply is jeopardized. More and more companies are looking for answers to these challenges.

Strongly focused on selection and monitoring processes as well as on sanctioned escalation systems until now, current practical, operative support is given priority in supplier management. This is based on the notion that problems with a known supplier can be resolved more quickly and reliably with partnership support than would be possible with a change of supplier. The prerequisite for this is keeping ready teams of SCM and production experts who are familiar with the demands and processes in the supply chain of the OEM, and can be on site quickly when required. To put it crudely: A mobile task group for securing the supply chain.

One provider in this market is Wassermann AG from Munich, a process and IT consultancy firm specialized in supply chain topics. Its SCM experts not only advise OEMs on the classic topics in the area of supplier management, but also provide teams who can be deployed at the supplier whenever required – worldwide.

Creating transparency

These deployments have shown: The greatest successes can be achieved by a two-part procedure of immediate measures for troubleshooting and support for sustainable process improvements. Further areas of activity are the establishment of systems of early-warning indicators and measures that provide the OEM with a permanently better insight into the relevant production processes at the supplier.

Phase 1: Firefighting operations

If there are impending and existing material bottlenecks on the lines of the OEM, the deployments of the Wassermann teams are agreed with the suppliers and they are sent on their way at short notice. The first OEMs are already anchoring these operations in their supplier contracts and thus establishing an emergency system to minimize risks in the supply.

The teams generally consist of two consultants and, just like firefighting operations, their first task is a quick situation analysis and immediate measures for "fighting the fire" and limiting the damage. The most important goal is to restore the security of supply. The mobile consulting teams provide the supplier with additional resources, IT and process know-how for analyzing the causes of delivery bottlenecks together and for developing effective countermeasures. At the same time, close communication with the OEM is established by the team.

Experience gained during these deployments shows: Just the communication with a consulting team as mediator, and the transparency about the position on site gained by this have already helped forge a constructive, solution-oriented atmosphere between the OEM and supplier. The countermeasures are then agreed and implemented depending on the situation. Generally, there are whole bundles of immediate measures and their resolute implementation in planning, production and quality assurance that lead to success here.

Phase 2: Medium-term and long-term operative measures

If the situation eases after implementation of the immediate measures, the transition to the second phase takes place. In practice, the previously recognized problem fields are investigated in order to identify, to analyze and to document process weak points, and then they are made measurable and controllable. The "as is" analysis (analysis of the current situation) of the processes progresses into an FMEA (Failure Mode and Effects Analysis). Material flow analyses, organizational changes in the supply chain planning, the consideration of quality assurance or improvements in the IT support of processes help with the solution. In essence, the firefighting operations migrate into the area of supplier development, with the difference that here the OEM is closely integrated in the implementation via the consulting team. Thus, "lean" principles or more extensive resource planning are/is often realized as part of follow-on projects. The task can therefore be to increase the flexibility of production to better adapt it to customer requirements, to better utilize systems, to improve quality assurance or to reduce rejects. Other frequently occurring errors are discrepancies between theoretical and actual throughput times, the over- and underestimation of the flexibility of employees and machines, or incomplete stock postings. Last but not least, the fact that the supplier himself depends on suppliers must not be overlooked. And, ultimately, this leads to the consultants who were sent to the supplier as part of the supplier management supporting him, in turn, in his supplier management.

Flanking measures: Key performance indicators as early indicators

The earlier the ordering OEM discovers potential supply bottlenecks, makes more detailed inquiries at suppliers and sends his expert teams on the way if necessary, the greater the probability of success and the lower the costs for the OEM. This applies both to costs due to supply uncertainties (e.g. special trips or downtime costs) as well as the project costs (e.g. expenses for advisory, supportive measures). The experience of the Wassermann teams has shown that valid early indicators – and thus early warning systems for problems in the reliability of supply – can be developed here. Consequently, the first automotive OEMs have had positive experience with the monitoring of express deliveries or abruptly deteriorating quality key performance indicators. In addition, inventory range monitoring, which integrates upstream steps in the supply chain, provides an early warning system: Supply bottlenecks are actively tackled before they occur. These key performance indicators indicate process problems at the supplier, even before the supply chain breaks. The task is to establish the IT-supported monitoring of these key performance indicators for responsible parties in the area of supply reliability and clear instructions in the event of fluctuations.

For strategically especially important suppliers, greater integration in the IT and planning systems of the OEM is also recommended. This greatly increases the transparency for the OEM. Technically, such interfaces between modern IT systems are far less complex than before. However, the prerequisite is a joint comprehension of strategic partnerships in supply chain management and greater openness between both partners. The term 'supplier management' may also be misleading and must be replaced by new terms such as 'supply chain cooperation'.

Supplier management – practical experience Two examples from the consulting practice of Wassermann AG:

1. Car seat manufacturer

  • Challenge: A 'First Tier' supplier for automotive interiors had delivery problems in connection with several product startups.
  • Course of action: Inventory data on critical material numbers at defined measurement points were collected. An inventory overview of the subcontractors up to 'Third Tier' was necessary in order to react early to imminent bottlenecks in upstream steps. The implementation of a tool for monitoring the inventory chain enabled customer-related inventory ranges to be quickly deduced by virtue of the inventory information. Result:
  • Transparency across the entire value chain enabled outline prognoses for timely intervention. Communication between the OEM and supplier was improved, supplier bottlenecks were reduced, and the ability to deliver was restored.

2. Specialist company for surface finishing

  • Challenge: A workshop develops into an automotive supplier, but can no longer cope with the volume demand with his structures and processes in place. Start-ups of new vehicle projects had to be postponed for capacitative reasons.
  • Course of action: The production processes were analyzed, a management information system and a concept for production planning created.
  • Result: With transparency across the value chain and a new planning organization, backlogs for the customer could be eliminated as well as achieving 100 % on-time delivery. The employees of the supplier were trained in the topics of ERP processes and 'lean' methods. The improved efficiency led to an increase in output of 40 % in just 5 months.
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