The best winning strategy for the future does not stop at our plant walls. Even if we are the most efficient manufacturer in our industry with the hottest products, our business will fail if we have a weak supply chain. We must extend our improvement efforts to include our supply chain.
Just look at the recently reported problems at Dell with their supply chain problems namely part shortages. Or just look at all the recent quality issues with products coming from China.
As labor costs decline as a percentage of product costs, we naturally start to focus on material costs for opportunities for improvement. Most companies up to now, play the games of “Beat up our Supplier” and “Chase the Globe for Lower Labor Cost” along with “Outsource it All”. Many companies have rightly earned a bad reputation with these strategies that aim solely at cost reductions at the expense of building a stronger supply chain. These companies will drop any of their suppliers to save a dime or less on piece part costs.
This method certainly has proven successful at pocketing some financial gains in the short run but will quickly cause deterioration in the supply chain. If we start to calculate the true cost of these methods over time, we may find out that our actual savings is much smaller than reported or even non-existent.
A better approach begins with completely changing our thinking of our supply chain. Our supply chain is the backbone of our value stream and everyone in the supply chain is linked together as partners. We are stronger when our suppliers are stronger. Toyota knows this lesson well.
As a valued partner, we should open our doors to our suppliers. We must share best practices, teach lean principles, coach and encourage continuous improvements. How many of our suppliers visit our facility? (I am not talking about sales reps) How about production, quality, engineering and even shop floor associates?
Do we invite our suppliers to join a kaizen event? Do we send our people to a supplier kaizen event? Do we communicate problems on a daily basis? Do we team together to solve problems or do we just send out formal corrective action requests? Do we listen to our suppliers?
It’s no longer good enough to just improve our internal processes. Our future success will not be based on how good we perform rather on how well our supply chain performs.