Securing the supply chains against uncontrollable events demands trust and cooperation.
International trade is facing some significant uncertainties right now. Decisions about Brexit hang in the balance. Tensions over tariffs and subsidies are ongoing between the US and China. And there is potential for disagreement between the US and EU over approaches to trade and development.
These are, of course, only the latest in the never-ending stream of events within the continuing drama that characterizes international relations, many of which are potentially disruptive for those of us in the commercial world. We need to be aware of what’s happening and do what we can to protect ourselves against possible threats. As we say, hope for the best and prepare for the worst.
Ignoring events that are happening far away, or keeping everything close to home, is not an option for many electronics businesses. The industry we work in has become truly global. There is no going back. Taking the printed circuit fabrication business as just one example, some critical materials are produced in one or just a handful of locations worldwide. There are strong economic and technical reasons for this, and new local suppliers are extremely unlikely to spring up. A domestic supply chain is simply not possible for fabricators in most parts of the world, including North America, Europe and much of Asia.
Instead, we must do everything we can to ensure the security and integrity of our supply chains, building in agility both to work around international situations that may arise and to handle customers’ changing demands efficiently and cost-effectively. The key to this is to find out as much as we can about our customers’ manufacturing plans, recognizing that some confidential information may not be readily shared. It can be less sensitive to use historical data to drive predictive models.
Overall, the more we know the better we can balance supply against demand, prevent delays and save avoidable logistical expenses such as emergency or overnight deliveries. I once worked with a company that would routinely place orders for next-day delivery. One day the sales director casually let me know the company’s order book was almost always full for the forthcoming three months! Sharing that kind of information makes it possible to set up an efficient schedule that ensures the required components are delivered at the time they are needed, minimizing the potential for mistakes and avoiding expensive express deliveries.
The ideal would be for the planning and purchasing systems on both sides of the customer-supplier relationship to communicate the necessary information automatically on a machine-to-machine basis, by letting the customer’s ERP inform the supplier’s systems of upcoming orders and activities that will affect volume demand and delivery timing. Alternatively, we can make human communication networks as efficient as possible, beginning by ensuring the right people talk to each other. On the customer side it may be the planning team, rather than purchasing, that has the clearest understanding of forthcoming requirements.
Vendor-managed inventory (VMI) is an approach that has worked well in the automotive industry. Lean practices like this are well-suited to automotive, where demand patterns are well-communicated and quality requirements and volume demand are high, although others can benefit, especially with a few tweaks to suit their own business model.
The global nature of today’s supply chains means they can be somewhat long, so we need to move away from solely efficiency-driven transactional models if we are to make our supply chains agile enough to adapt to events outside our control. Focusing instead on meeting the needs of individual customers is a more effective approach, although discovering exactly what those needs are may not be easy. Even customers themselves sometimes do not fully understand their own needs.
It takes trust and close collaboration, involving studying the requirements and capabilities on both sides of the partnership. Success can mean the supplier benefits from long-term revenue, which also should grow with the customer’s business, while the customer benefits from being able to trust their supplier to deliver the right materials in the right place at the right time, avoiding mistakes that can lose production. It’s harder for either to walk away from such a carefully set up and effective partnership.
Looking at Ventec briefly, as an example, we own the complete supply chain of PCB materials, including laminates and prepregs, end to end, which enables us to keep lines of communication short and eliminates clashes that can occur when different businesses have competing interests. It’s also possible to maintain carefully managed inventory in various locations worldwide, which gives the flexibility to adapt in the event of trade disputes or other events outside normal control, such as natural disasters.
Building a supply chain capable of handling the challenges we all encounter – those we can control and those we cannot – is dependent on the quality of dialogue between supplier and customer. The more we can share and understand each other, the better we can build an efficient and robust supply chain, and establish those close, strong and enduring relationships to the benefit of all parties involved.