Getting products to the market faster has never been so important. Receiving accurate information from the suppliers faster is the first step to achieving that objective. Supplier integration is a model for improving the link of the supply chain between manufacturers and their tier of suppliers of materials for their products. Cooperating together, both parties sharing information are able to exercise judgment on costs, quantities and timing of deliveries in order to rationalize the product flow and to move to a collaborative relationship.
Establishing an integrated supplier relationship can be complex with many factors to consider. The supplier must adhere to agreed lead times and costs, otherwise it will have a negative effect on lead times and profit margins and ultimately the relationship. The quality of materials supplied will have to be near to perfection when stock levels and safety buffers are minimized. Supplier flexibility has to increase to quickly be able to amend order quantities to suit the manufacturing plan as end-customer demand fluctuates. The relationship has to be more open and transparent than before with both parties willing to share unexpected issues and other important information.
The main challenge in supplier integration is changing the mindset of both the manufacturer and the supplier from the “us versus them” to a mindset where both parties see themselves as part of the same process, with the aim of serving the end-customer in the best way possible.
Waste associated with an inefficient supplier relationship can be identified, classified and minimized as well as create tremendous savings potential. Lean principles, kaizen methods, and reengineering approaches can be applied when taking a holistic approach with all suppliers focusing on eliminating waste. Working together and involving all suppliers with a joint goal of reducing waste can produce and sustain long-term improvements.
Customers collaborating with their suppliers, sharing information to integrate their businesses, can gain a competitive advantage. Moving away from functional or silo mentality to improve material and information flow can reduce lead-times and stock levels, resulting in reduced working capital for both parties.
We implement Lean Solutions to supplier integration in a similar way to other functions. The solutions must fit the challenges.
|Lean supplier integration project between food manufacturer and packaging company resulted in packaging order delivery lead time reduction by 60%|
|Joint Lean workshop between equipment supplier and capital goods manufacturer improved supplier response time to equipment breakdown by 48%|
|Joint Lean supplier program resulted in FMCG order replenishment to modern grocery lead time optimization by 29% and additional sales of 34%|
|Raw material supplier integration into capital goods manufacturer resulted in over 70% reduction in goods receiving rejections|
|On-time deliveries increased by 76% between design agencies to printing & packaging plant|
|Lean solution between supplier and medical equipment manufacturer reduced inventory on stock by 30% worth ~1,250.000 USD|
|Linking car accessory supplier processes to automotive distributor’s forecasting and ordering processes resulted in out-of-stock rates reduction by 900%|
|Lean supplier integration between retailer and suppliers reduced retailer’s internal logistics costs reduced by 80%|
To learn more about Lean supplier integration, contact Four Principles today.