Blind faith

I blame automotive sector OEMs and their reputation for, as one source put it, "screwing suppliers blind for every last penny of profit". He was talking about the old adage that echoed down the supply chain from the car factories for each successive annual contract to deliver the same component to meet the same or better quality threshold more cheaply than last year - typically 5% more cheaply - or else. A few lessons of that not altogether vanished era got learned when "or else" turned into valued and uniquely skilled suppliers going to the wall. Although the factory that Simon Waller manages could hardly be further away from the world of wheel, door and powertrain assembly, he knows how losing a supplier feels. Kent-based Silent Gliss is the leading global manufacturer of motorised and manual curtain and blind systems to the high end market, and Waller looks back as a factory manager who long ago saw the lean light but remembers the lessons learned on the journey. "One of our key suppliers was very, very good on quality," Waller recalls. "A one-man band who, while being very good, was totally disorganised. Eventually, he went under. It left us thinking that maybe we should have given him more help. Whether he would have taken it I don't know, because people can be very suspicious. They'll ask 'why do you want to help us? You want us to reduce our prices?' Actually, the answer is no, we want you to be here tomorrow because we need you." To which he adds a compelling: "We have been given some glasses that clarify things. If you put them on, you will see some opportunities, too." But he is still frustrated by some things he sees. "It's amazing how many [still surviving] factories you see where you ask, 'how can you run this business?' There are a couple of small engineering companies that work for us and you think 'why can't you do better?' There's no reason why the greasy garage down the road can't aspire to be an F1 garage." The magic specs that helped clarify things for Simon Waller were provided by the Manufacturing Advisory Service (MAS). Mark Knowlton, from MAS-South East picks up the story. MAS, he says, has established a group of eight or nine best practice networks with a total of 150 members who regularly and very successfully over the past several years have gathered together to exchange ideas. One such idea, put forward by Silent Gliss, recognised that the best practice network members were, not surprisingly, enlightened companies, but suggested that it was the whole supply chain - where awareness of lean manufacturing tools and techniques is lower, sometimes barely existent, and where suspicion about the motives for such initiatives is rife - that really needed to be developed. The upshot was that last month, four of the best practice network member companies - three of them in the fewer than 250 employees SME category and one larger - invited some of their suppliers to a first workshop to hear about lean. A commendable 19 supplier representatives turned up to hear about the opportunities that lean manufacturing could bring to their businesses. Silent Gliss invited two of its main suppliers. "If they had said it was of no interest to them, then at least we would have tried," says Waller. As it turned out, the feedback has been very positive; so much so that a second workshop this month will begin to do some value stream mapping and take a look at "how we, the customer are impacting on their business". The potential for improvement rarely lies entirely with the supplier. Some customers don't provide accurate specifications, reports Knowlton. "Information is not always all it should be and suppliers are often asked to work miracles on short lead times even though customers got orders much earlier." At this month's workshop, Knowlton expects that customers and suppliers working together will find all kinds of performance improvements and begin to generate a joint action plan. Low hanging fruit maybe but, as Waller puts it: "I always say, if it was complicated we wouldn't be able to do it." That sounds like false modesty from someone who is proud that his factory is recognised as the best in the group of which it is a part and competes successfully across the same product range with others in Switzerland, Germany and even China. For those who want a taste before signing up to anything, Knowlton recommends a glance at the online lean benchmarking tool www.leanbenchmark.org. Another MAS practitioner, the West Midlands arm's Peter Jones, is also familiar with the suspicion that exists whenever the words lean and supply chain are used in the same breath. He's worked with several supply chains in the last couple of years and confirms that the most popular sessions he runs involve host companies working on lean along with six or eight members of their supply chain. Attitudes to supply chain development in the West Midlands have been heavily influenced by the historical cost-down demands of the automotive sector. "There is a view that such initiatives are all one way, with the host taking all the benefits and the suppliers being raped and pillaged," Jones says. To overcome this, he tries to make sure that when customers and suppliers come together, there is "a lot of knowledge transfer, best practice transfer and a lot of networking between supply chain members to ensure that host and suppliers all benefit". Still in the West Midlands, close by Birmingham's old jewellery quarter, Tom Whelan is supply chain co-ordinator at Brandauer, a company that was founded as a pen nib manufacturer nearly 150 years ago and is now one of the largest contract precision presswork companies in Europe. He also recognises that hearts and minds have to be won over in the cause of an efficient supply chain. "Continuous improvement and process improvements are things that we are always trying to - I wouldn't say invoke - let's say encourage our supply base to do; working with suppliers and asking them to do certain things where they can see benefits, too, so it's not all about Brandauer and all in our favour. We look at supplier development initiatives that are of benefit to both parties. We will go to their plant to understand their processes where we may suggest one or two things that will make things better for them and for us. And they come to us." Both parties have to tap into areas of expertise that the other may not have, he suggests. That said, as a presswork specialist, with most of its suppliers being providers of raw materials, the scope for increasing supply chain efficiency is mostly limited to some important basics. Issues around stockholding and call-off are all important, but that is not the entirety of Brandauer's lean supply story. Whelan continues: "If we can do something to improve the quality of the product - maybe by changing a packaging specification so there's less potential for handling damage, or taking a process out of the equation that wouldn't be of detriment to the overall quality or performance of the metal but may give an improvement in the cost or the processing time - we would work with the supplier to do it." Suspicion again rears its ugly head in Tony Hague's analysis of the trickiest barriers to overcome when taking the exemplary lean and Six Sigma practices operating at the multi-award-winning PP Electrical Systems into its supply chain. Again, perhaps not entirely coincidentally in the automotive sector's traditional heartland of the West Midlands, Hague, who is managing director at the Cheslyn Hay-based electrical and electronic assemblies and systems manufacturer, says: "The biggest problem is that they immediately think it means profit erosion. They [suppliers] automatically think it's like an automotive sector model that looks for a 5% cost saving year on year irrespective. Being blunt, they don't believe you when you say you want to help and take out costs through product design or by looking at their integral manufacturing operations." They also need to be persuaded, he adds, that they might also benefit from working with their own supply chain, or that the efficiencies they make might strengthen their position with other customers. Hague believes transparency is the key. Asked to provide quotations to customers, PP quotes in intricate detail, including overheads, costs, margins, and so on. "To get that level of transparency out of your suppliers is like getting blood out of a stone," he complains. "They won't tell you what their margin is because they think you only want to know to be able to beat them up with it. But sometimes it's because they don't know, which is the really scary bit." Like MAS and Silent Gliss, PP believes in getting suppliers together and goes one step further by introducing them to its own customers a further link up the supply chain. "We call in suppliers in groups that are typically linked to [one of our] key customers," explains Hague. That customer may be under pressure from its own parent company. "But they are not just saying, 'we want your margin', they're saying 'help us take costs out through better design; through better choice of products'. We understand this and will get five to 15 suppliers in a room with the customer to outline the objectives." It's a policy that pays off if a supplier sees how the end customer uses, say, the wiring loom they've part supplied. The response, says Hague, might be: "Blimey, if I'd known you were doing that with it, I could have suggested this." Now running its own lean training school, PP's biggest bugbear is, "people who believe that big batch size means low unit cost. They don't look at the total cost of acquisition." Perhaps unsurprisingly, collaboration and transparency are also supply chain watchwords for Phil Burgess, solutions director at the software house Infor. Something of a fan of the automotive industry as a driver of supply chain improvement, he concedes that the cost-down pressure that was applied "wasn't always as collaborative as it should be but, without the shadow of a doubt, some of the processes whether it be fault analysis, measuring or monitoring absolutely did improve efficiency". Today, he believes that one of the supplier's biggest issues is the visibility and stability of the supply chain schedule - being able to map the requirements of customers. Some OEMs are still running old-fashioned MRP systems which, by their very nature, create lumpy demand, he says. And in an echo of Tony Hague's complaint, he observes: "Some companies are still running economic order quantities which if you're truly lean you shouldn't be doing. They buy monthly [whereas] in a truly JIT environment, I should be sending my supplier a signal as I need [inventory]." He urges: "Let your suppliers have full visibility of the supply chain because that makes their life so much easier. The more informed a supplier's decision, the better. Providing information around your demand triggers, and what's happening in your business, is invaluable to the supplier." However, there is still insufficient take-up of the technology that facilitates such visibility. Hague believes the role of technology - from sharing the metrics that measure KPIs to electronic portals, kanbans, self-billing or the simple transmission of design drawings - is as important in manufacturing as Google and the iPhone have become in the everyday consumer world.