Tipping point

Good supply chain management is incredibly difficult to achieve. Balancing customer expectations with your own capacity and that of your suppliers needs constant fine adjustment. A recent debate on this subject, staged by WM and DHL Supply Chain, saw a dozen manufacturers come together in London to share their thoughts on what it takes to build and sustain supply chain advantage. The subject was highly topical, they agreed, given the spotlight on manufacturing as it takes a lead in rebalancing the economy. "Supply chain is a key element of manufacturing's future. Very few people in government, whether ministers or civil servants, have any experience of manufacturing let alone the specifics of supply chains, so the result is a heady degree of unconscious incompetence," said Andrew Churchill, MD of precision engineering business JJ Churchill. And he should know – Churchill was a ministerial advisor for manufacturing under the previous government. "I can be the best at producing what I make with the best equipment and the best people, but if I don't get raw materials in on time and finished product out on time, then it is all frankly irrelevant," he added. The participants were asked to nominate their top supply chain issue. For Glynn Williams, supply chain manager at adhesives manufacturer Henkel, it was the problems associated with long-distance relationships. "I've been to China many times, not to source new suppliers but to pull the existing supplier into shape. It's a big issue bringing Asian suppliers up to the standards of those in the UK." For Andrew Churchill, the frustrations also lay with inbound supply, though closer to home. The rapid rebound from recession last year put extreme pressure on already stretched supply chains, he said, notably with the high horsepower diesel engine OEMs. "They'd emptied their supply lines worldwide and, at the same time as the rebound, they had a huge spares demand. We saw a 400% increase in demand in three months. We could cope with that – but our supply chain could not." Since the start of the recession, many of his suppliers in foundries and castings had gone to the wall. "Those that remained didn't have the skills or succession planning to be able to ramp up at the rate we needed. We saw that as a massive and fundamental brake on our ability – and our customers' ability – to make most of that opportunity. Twelve months later, we are still in same hole. The biggest barrier to my ability to grow is the supply chain into us – it's not on time and is not the right quality." Churchill added that a longstanding supplier of non-ferrous precision castings is located within half an hour of his factory, but despite the proximity it still represents a major concern. Why? "There's a constant risk that this business might go to India. When it does, it doesn't matter how good we are or that we are best in the world at the price point we need to be, the fact is the engineering will move with it." The lead times will be too great to bear, he added. "There's no point having three months' stock in the pipeline – a month at each end in customs and a month on the water." The group discussed the merits of adopting the processes found in automotive supply chains. DHL's Santosh Tiwari said there was nothing to stop other manufacturers aspiring to reach automotive supply chain standards. The group believed, however, that some are unable to grasp the intricacies of automotive supply chains, let alone be able to replicate them. Qualifying new suppliers can be a time-consuming and expensive process, the group agreed. It was an issue for everyone, and Julian Bond of Parafix said that the problems are often multiplied in the medical sector. "If one of our suppliers withdraws a material because they cannot make it any more, it can be hugely disruptive. The lead time for finding a replacement is significant – I would have to qualify another half a dozen materials to find one that is close." That, in turn, impacts his customers because in this highly regulated sector, the lines making the product, not just the materials themselves, often have to be qualified. Assessing a new supplier could be a daunting process, everyone agreed. Some acknowledged the risk of complacency and reliance on long-term suppliers. For others, corporate purchasing policy meant supplier selection was no longer aligned to practical business needs, but to price – so subsequent problems were not necessarily the supplier's fault if there was no clear agreement from the outset. The consensus was that price-dependent purchasing can drive inventory up and service levels down. Oxford Engineering's Karim Sekkat recommended holding supplier days to share improvement ideas. "We've done this and had a great response. It's not about managing them with a stick, but sharing the benefits between both parties," he said. This was a point picked up by DHL's Tiwari, who told the group about a supplier workshop programme that DHL had carried out for a manufacturing customer. "We arranged workshops with their suppliers and it was shocking to find out how few of them really understood each other's challenges." The programme extended globally and DHL was able to take a lead and carry out checks on quality, viability and processes. Fast fallout Rapid response is a luxury that those with lean supply chains are often unable to provide, said many of the roundtable participants. The Fukushima Daiichi nuclear disaster was a good case in point. Many politicians were surprised at how swiftly the lines stopped within British SME manufacturing facilities, believing this was an opportunity for British industry to step up to the plate. Few in Westminster understood how far the supply networks stretched and that even UK SMEs source many materials from that region. However, Karim Sekkat of Oxford Engineering said too much complexity was attached to the argument of factory location. "UK versus China is a simple equation. Either you can find product up to standard in China at a better cost, or you can't. If you can, then buy it in China and accept the implications of that in terms of management. If you can't, then buy or make it here in the UK." Sekkat believed, too, that many of the complaints about inbound supply chains stem from lack of clarity and communication. Often blame is attached to suppliers, he said, but manufacturers may find that their suppliers are not afforded the same openness and honesty that they, in turn, expect from their customers. "If you start delving into problems, you might find you have not told your suppliers what to expect, not given them the same visibility and forecasts that you expect from your customers... There is a ripple effect; clarity at the top leads to clarity at the bottom." Manufacturers need responsive, not systematic supply chains, he added. It's about ensuring your suppliers are tuned to your expectations, Sekkat said. He acknowledged his business model differed from many of those around the table, but insisted that frank, open discussions combined with long-term contracts could pay dividends for all parties. "If something is important to your customer, it should be important to your supplier, too. Whether the focus is on speed of delivery, traceability, cost or anything else, it should be the same right through the supply chain. " Size matters Clearly, supplier management was a thorny issue for many of those at the roundtable event. And managing those relationships – and expectations – is even trickier if the supplier happens to be a large blue-chip organisation, significantly larger than its manufacturing customer. At Parafix, for example, one of its primary suppliers is one of the largest manufacturers in the world: 3M. "You can't dictate to them," said Bond. No one argued with that. Sekkat said his business also worked with major blue chip suppliers, but while he agreed terms could not be dictated by either side, he disagreed that the balance of power always lay with the larger business: "We find a strategic agreement. If not, we part company. That's how we choose to do things. If you have absolute clarity with your customers, you can mirror that with your supply chain, giving them the parameters in which you need them to operate." Henkel's Helen Manley said the adhesives manufacturer has worked on a customer collaboration programme to obtain a better understanding of service expectations, now and in the future. "It's about defining that so we are better able to be part of that solution – and, in turn, better able to design our supply chain to match that," she said. Perfectly possible in a make-to-stock or kanban-driven environment, but not so easy elsewhere, Andrew Churchill pointed out: "We'd love to be able to do that. But we are a massively high mix, low volume business. We may produce one batch of 10-20 items and the next order for that may come in 24 or 36 months. We can make a variety of parts but those parts are on sequence for customers, so a diesel engine manufacturer may give me three days' notice of what they are sending a truck to collect from me. If I don't put the product on the truck, the line will stop." He described a situation last year, where another supplier to the diesel engine OEM suffered a fire at the factory. The effect was felt at many plants, here and overseas: "Everything had been leaned back so far to achieve lowest price that no one had the capacity to flex when one supplier dropped the ball." There are moves afoot, however, by some of the larger manufacturers to leave single sourcing – and its inherent risks – behind, with dual sourcing for key parts or commodities. Churchill said this could be a key opportunity for businesses located in Europe. The discussion concluded with some lively debate regarding supply chain activities or measures. Interestingly, as well as service, flexibility and agility, an important supply chain measure for all those present at the debate was health and safety performance. Churchill said he deployed best practice tactics learned from his larger customer like Rolls-Royce and Cummins in terms of safe goods-in/out operations – and, indeed, is measured on his safety record. He also said his business, in turn, analyses the methods and processes in place at its suppliers. Specac's Dave Payne said health and safety audits of suppliers was something his business was about to implement. Supplier audits throughout the network – whatever the sector and whatever the measure – will undoubtedly become a firm fixture if they are not already in place. value in the supply chain Complete end-to-end solutions and global presence, coupled with local knowledge and know-how, make DHL Supply Chain a formidable business partner for UK manufacturers. To better understand UK manufacturers' business priorities, DHL commissioned Works Management to conduct an in-depth survey to discover more detail on the challenges they are facing. Overall, the survey suggested manufacturing supply chains make relatively little use of outsourcing that could prove transformative: only 13% have outsourced warehousing operations, while 26% have outsourced end customer delivery and 44% transport logistics. Well over half (60%) said improving productivity through lean manufacturing was key to their operations. Yet many manufacturers are still to realise how the supply chain can help them achieve exactly that, according to Santosh Tiwari (pictured), business development manager for engineering and manufacturing at DHL Supply Chain. He commented: "We have a very strong relationship with the automotive sector and can leverage that know-how equally for manufacturing, such as in the areas of sequencing and just-in-time deliveries. Outsourcing and collaboration can help the supply chain become more agile, meaning companies have the ability to respond quickly to changes, which can help cut costs. It also frees up manufacturing companies to focus on their core competencies." Roundtable participants The attendees at the WM/DHL Supply Chain roundtable debate, held in July at the Milestone Hotel, London, included industry experts and a number of senior manufacturing representatives: Glynn Williams, supply chain manager at Solvite and Unibond manufacturer, Henkel Helen Manley, order fulfilment and logistics manager, Henkel Ian King, business director for engineering and manufacturing, DHL Supply Chain Andrew Churchill, managing director at JJ Churchill, supplier of precision engineered components and sub-assemblies to defence, aerospace and diesel engine OEMs Santosh Tiwari, business development manager for engineering and manufacturing, DHL Supply Chain Steve McManamon, managing director, Printing Press Services International, manufacturer of newspaper and commercial presses Dave Payne, works manager at spectrometry business Specac, part of Smiths Group Karim Sekkat, chairman, Oxford Engineering, precision engineer and contract manufacturer Julian Bond, engineering manager at Parafix Tapes & Conversions, convertor of self-adhesive materials for sectors including automotive, medical and defence