A leading global infant health company challenged its principal supplier to find new ways of working together synergistically to deliver financial benefits exceeding 3% of COGS. Utilising the principles of dynamic alignment, five priority work streams were identified and joint working teams ascertained improved ways for the two organisations to work together.
Demand forecast accuracy was improved, planning processes were aligned and stabilised, improved SKU management practices were adopted and order lead times reduced. With the adoption of multi-function governance structures and transparent reporting, the relationship between the two organisations moved from one of a tactical nature focused primarily on operational issues, to a strategic relationship with aligned business paths and high operational efficiencies.
A New Zealand-based manufacturing company sourced specific electronic components from multiple Asian vendors. Whilst multiple sourcing provided competitive price tension, it came at a cost to order lead times, working capital and the ability of the organisation to respond quickly to changing market demands. A strategic sourcing strategy was developed, incorporating a reliable and reputable Asian supplier along with a more expensive but local OEM for low volume orders.
As part of the strategy, the adoption of a Product Life Cycle management process was introduced, and Preferred Supplier Agreements formalised the ‘ways of working’ across the organisational boundaries.
Benefits to the manufacturing company included:
The manufacturer became a ‘Top 5’ account for the OEMs, and with the surety of the formal collaboration processes that were implemented, the OEMs were able to take advantage of their own procurement opportunities as well as production smoothing capabilities when gaps arose in their own manufacturing schedules.
In 2007 an increasing awareness that customers were dissatisfied with the ongoing level of damaged product being received in their warehouses led to an organisation undertaking a major review of their packing operations and supply chain throughout Australasia. The review focused on raising the awareness of the issues at the machine/operator level in the manufacturing units and getting these operators to adopt sustainable change practices. Within this ‘leading and managing change’ environment, the focus of the review was extended to cover not only the packing operations, but also the logistics and warehouse practices as well as a review of the packaging materials. The results of the initiative were significant – greater than 10-fold decrease in product defects off the packing lines, and a 3-fold decrease in the damage rates reported by customers. These results were achieved with negligible capital expenditure.
This focus on product out-turn also supported an improvement in the stability of finished goods stored in the warehouses. Through elimination of some of the manufacturing and packing-related issues, eg air in product, palletised product was more stable when stored in the warehouse. Adoption of in-bound checks for product and product stability, as well as product out-turn criteria (determined by the operators themselves) resulted in a significant improvement in the stability of the stored product, and the mitigation of high risk health & safety concerns within the operation.
The commodity boom of 2007/2008 resulted in a shortage of commodity supplies to satisfy global demand. Commodity prices soared, as did customer expectations of suppliers and their delivery performance. Global demand for dairy products resulted in an increasing need for commodities ex USA and Latin America, two regions that historically only featured occasionally on the global trading scene. This increased demand and service expectation stretched the existing supply chains and customers were often faced with lengthy delays in receiving their goods. A review of the supply chain in 2008/2009 resulted in new processes and infrastructure being deployed. Delivery performance moved from 25 – 40% DIFOT in 2008 to consistently greater than 95% DIFOT throughout 2010.