By Dave Corbin, CEO of HULFT
On a daily basis, manufacturers face a double-edged sword with their mission-critical suppliers: 1) they know that they can depend on these suppliers for the high-quality components that they need for product builds; but 2) what if demand for products increases and suppliers can't keep up?
In the case of a single-source supplier relationship, an inability to provide the capacity needed to meet demand can present immediate production delays, which can threaten the ability of manufacturers to hit market windows that only stay open for a limited amount of time.
From a supply chain-manager’s vantage, the goal is to always have high-quality suppliers standing by so you can spread your order demands across a broad supplier base and be sure that components arrive at your plants in time to meet production schedules.
Qualifying multiple suppliers at the level of quality that you expect, however, is often a challenge. As is getting these suppliers through the expense and tedium of an electronic data interchange (EDI) system -integration process so they can securely interface with your procurement and ordering systems.
Finding multiple reputable suppliers for mission-critical components is anything but a “slam dunk.”
Last year, Wally Johnson, vice president of finance at Firstronic, a contract manufacturer that produces electronic modules for automakers and Tier 1 suppliers, wrote about the risks of trying to meet demand when you only have a limited number of suppliers that can provide you with the subcomponents you need to build your products. “Industry professionals are seeing lead times on ‘passives’—electronic components such as resistors, capacitors, inductors and transformers—stretch out to one year or more in some cases,” said Johnson.
For the automotive, electronics, and other manufacturing sectors—lead times like this are unacceptable. And when you add to this the resource cost of iteratively testing EDI data transfers with new suppliers until they succeed in interfacing with your internal systems, these lead times grow even longer.
Taking the pain out of working with suppliers
A major automotive company grew tired of its cumbersome EDI system and the burdens that this system placed on suppliers. The company’s idea was to build a web portal that suppliers could log onto, thereby eliminating for suppliers the cost of systems integration, or of leasing dedicated communication lines that were needed in order to exchange EDI documents.
For the automotive manufacturer, the goal was to build an ordering system that would automatically clean, process and format data into transactions that were compatible and directly transferable into and out of the backend of its SAP ERP system.
“Based on the data retrieved from the backend SAP system, the ordering system automatically processes purchase orders of raw material and parts for suppliers,” said the company’s head of planning and management for industrial products.
The number of transactions with this enterprise is about 3,000 per week, and the number of items ordered is around 20,000 types per year. By digitizing the processing of these large orders, the automotive manufacturer achieved improved accuracy along with faster transaction processing.
The manufacturer also wanted to ease the pain of doing business for its suppliers, whose cooperation was vital. It created a new online ordering system that was accessible to suppliers via a simple web portal. The system could automatically translate data into acceptable records for the corporate internal ERP system.
The system also translated ERP-and order system information into acceptable outgoing data formats for suppliers, enabling the automotive manufacturer to help its suppliers eliminate the need to subscribe to expensive, dedicated telecommunications lines that they had needed for EDI. Suppliers’ cost of doing business with the manufacturer dropped—and so did the manufacturer’s own operational expense, which fell by 45%.
We were happy to provide our HULFT Integrate offering to enable this seamless system integration with the supplier network.
In the next five years, initiatives like Manufacturing 4.0 will continue to grow with an emphasis on connectivity between companies, plants, the Internet of Things and factory automation. For manufacturers that need to hit critical time-to-market windows with quality products manufactured from the most reliable components, nothing will be more important than digitalized and fully integrated supply chains that ensure that high-quality suppliers can meet manufacturing demands.
In a global economy, supplier IT capabilities can vary from highly automated systems to doing business by fax machine. A universal integration platform that can fast-track suppliers into your systems and deal with any supplier IT scenario is central to that effort.
Connect with Dave at the 2018 Smart Industry Conference, where HULFT is exhibiting. Click here to learn more.