Reducing Lead Times is Always Smart

It's true that lead times always play a role in the manufacturing of any product. This gains visibility quickly when the supply chain faces unplanned disruptions.

There are many different methods to help reduce lead times for components, and they can vary based on the product type, complexity and demand. Often during times of increased uncertainty - like during the pandemic - a simple part may cause the largest issues. Common fasteners, for example, can become problematic when there are many businesses looking for that same item. Strategies for custom components present very different issues.  

Capital equipment manufacturers tend to have components of all categories at risk, including custom mechanical and electronic components, off-the-shelf components, raw materials, consumables and possibly even tools needed for product manufacturing and test.

During unpredicted supply chain turbulence, another thing that may be in short supply is the human resources needed to solve these issues. It's true that when there are issues, the time required to manage parts - especially in a JIT environment, increase exponentially. It can benefit a capital equipment OEM greatly to tap the resources that might be available at a trusted contract manufacturing firm.

Here are a few options to consider to alleviate some of the supply side issues:

Leverage multiple sources

Tapping multiple distribution options can help (and should be used to keep things competitive), common components in short supply will likely disappear at all distributors in a condensed period. Often other consumers of that part are already using multiple sources to find and buy what they can, so speed is often the best mitigation.

If you are working with a contract manufacturer, try to help them help you by finding a way to pre-purchase the at-risk components where possible. This may require some sort of special commitment from you to cover the possible waste - but remember the contract manufacturer is likely working with all of their customers on similar issues.

Use alternate items

An natural extension of leveraging multiple distributors is offering multiple options wherever possible. Going back to the fastener example cited above, adding several options for both source and multiple manufacturer options can increase the odds of finding a suitable part exponentially.

Clearly this is only an option for off-the-shelf parts; for the custom parts you need, alternates are generally not possible. Custom parts will suffer more from raw materials shortages or delays than from the fabrication process. That's not to say fabrication shops aren't extremely busy during supply chain turbulence - many are in fact short on both machine availability and human resources as well. 

Use your supply chain's global reach

This can bring two distinct benefits - sourcing internationally can offer better timelines and sometimes items are available in one region but not another. If you do not have a global supply chain, you can leverage your suppliers' international supply chain if they have it. Longer term, if your direct supplier does not offer the option, you might consider setting up your own during less chaotic times. 

Stocking programs

Stocking programs can represent a significant way to protect from issues in the supply chain - especially extended lead times. Consider stocking subassemblies or allowing your suppliers to manage a logical budget to keep parts, assemblies or complete products in stock to offer a cushion. Most contract manufacturers have some sort of option for this - it's in their best interest as well. They want to keep your product coming, since that's what they do to stay in business. 

Pick the right contract manufacturer

Some contract manufacturers offer sub-tier component management services. They can also help you discern which parts of your BOM should be considered for special emphasis. CMs that work with OEMs regularly generally have boilerplate agreements that can be used as a baseline to get started. As mentioned above, you should also consider access to a global supply chain a real benefit when choosing where to go for manufacturing support. 

Blanket POs offer risk mitigation

If your supplier has a longer-term commitment from you, they will have more flexibility to adhere to EOQs and order parts as they see the need arise. This is very different than presenting forecasts or uncommitted orders - because they do not offer coverage for the supplier and thus the opportunity to order risk parts. Without firm commitments from you, the supplier cannot simply buy custom parts on an assumption of eventual usage.

Robust relationships with suppliers at all levels

The better the relationship is, the more information you will be armed with. It is important to consider your suppliers as partners in your lead time reduction efforts. While it is possible to call a supplier and simply demand a shorter lead time, it may not help in the case of custom products. If you do not have the resources to create and maintain these critical partnerships, let your supplier help you manage them. At a minimum, they can help with sub-suppliers that your product relies on and involve you as needed.

Summary

As a contract manufacturer for tier-one, multi-billion-dollar global companies, GMI understands the issues that can arise when trying to balance a consistent supply of product during uncertain times. 2020 represented a whole new level of disruption and the upswing in demand in 2021 holds the promise of keeping the instability for quite some time. It's critical to work with a contract manufacturer that has a long history of working with OEM capital equipment manufacturers - there is no better teacher than experience. 

We realize that our OEM partners value our logistics management, and we plan to continue our vigilance through 2021 and beyond. It is critical that forecasts are updated and orders are placed as early as possible, with as much coverage as possible. Let us know how we might help protect you!

The GMI Solutions Team