Steps, Stronger Supply Chain, part 1 of 8
Most businesses can name their main suppliers. Far fewer can say, quickly, which of them they could not replace this month. The gap between those two answers is where supply chain problems tend to start, and closing it takes less time than you might expect.
A scenario
Picture a precision engineering business with 35 staff. The operations manager writes her top ten suppliers on a whiteboard and, beside each, what it actually supplies. Within half an hour she sees three things she had never put side by side. Two suppliers she thought of as separate both buy their raw bar from the same mill. One supplier is the only approved source for a part a major customer’s product cannot ship without. And one critical supplier relationship lives in a single colleague’s mobile phone.
Nothing had gone wrong. But she now knew where it would, which is the point of the exercise. (This is an illustrative example, not a real business.)
Here is how to do the same in half an hour.
1. List your top ten by spend, then your top ten by importance
Make two lists, because they are rarely the same. Your biggest invoice is not always the supplier you would miss most. Merge them and you will usually have 12 to 15 names. A spreadsheet or a sheet of paper is enough.
2. Write what each one supplies, and what happens without it
One line each. “Stainless bar, three week lead time, no other approved source” is the kind of line to aim for. Where you cannot write the line, note that down, because not knowing is information too.
3. Mark how replaceable each one is
Use three words: easy, hard, or impossible this quarter. Be honest. A supplier is only replaceable if the alternative is already known, approved and has quoted you before.
4. Look one step back
For the three hardest to replace, ask the supplier where their key material or component comes from. Many will tell you. If several of your suppliers rely on the same place, you have a concentration you did not know about. Concentration simply means depending heavily on one source, one site or one route.
5. Set your line, and note who crosses it
Decide how much dependence on a single supplier you are comfortable with, and write down which suppliers go over that line. Do not try to fix them all. Pick one to act on next month.
How SupplyChain+ helps
Businesses on SupplyChain+ start with an assessment of where they are today and build an improvement plan around their own priorities, with a mentor to help work through it. A clear map of who supplies you is a practical starting point for that, and it is worth doing whether or not you apply.
Take the next step
Want to understand where your business could strengthen its supply chain? Find out more about InterTradeIreland’s SupplyChain+ programme and check eligibility, or email Aidan Farnan at [email protected] to discuss how the programme could support your business.
Next in the series: What happens if your biggest supplier stops tomorrow?