In the supply chain management for the manufacturing industry, two assets are crucial to the success of the operation — time and money. Though this may be an applicable statement for many other industries, as well, using your time and money wisely in the manufacturing industry is especially important. One mistake or setback can cost a company thousands or even millions of dollars, depending on the scale of the operation and the severity of the error.
To avoid these costly or time-consuming mistakes, manufacturers need to streamline their supply chain management (SCM) — or the processes that help manufacturers make their supply chains as efficient as they can be. SCM solutions can also help manufacturers coordinate with the engineers who design their products to allow for streamlined communication and production. One way to simplify your supply chain management for manufacturing is by hiring a contract company like PBZ to handle most if not all stages of the supply chain.
How Is Supply Chain Management Different for the Manufacturing Industry?
Having an efficient supply chain is a key factor of any well-functioning business, but supply chain management in the manufacturing industry is even more critical. In general, there are three reasons for the importance of supply chain management in the manufacturing industry.
1. Products Are More Complicated Than Ever Before
Over the years, consumers have become more and more demanding in terms of the features they expect from the products they purchase. Because of these increasingly specific requests and expectations, the manufacturing industry has seen a shift in the way certain products are made. One company can no longer be responsible for the entire conceptualization, engineering and manufacturing of a particular product. Instead, several stakeholders are usually involved in producing an item, no matter how small. In addition to meeting consumer expectations, the increased use of technology has also made the production process of many products more intricate.
Due to these changes, having a capable supply chain management system is especially important for manufacturers. With so many parts involved, it can be very easy to make a mistake — and one that ends up costing the company lots of time and money. An efficient SCM manufacturing solution will minimize the likelihood of mistakes, no matter how complicated it may be to create the product.
2. Brand Owners No Longer Build Their Own Products
In the earliest days of manufacturing, one company may have been responsible for the concept, design and manufacturing of all their products. Today, that is not the case. Due to the increased complexity of products as we just discussed, several companies are typically involved in producing one brand’s product or products. A report from CIMdata estimates that 40 to 70% of today’s consumer and industrial goods are made using procured-in parts and components. While this allows companies to specialize in certain tasks and products, it also increases the chances of miscommunication or other errors related to quality and manufacturing.
With more stakeholders involved in the modern production process, the engineer who designed a product must be able to include parts, components and sub-modules that other companies create. They must research these products and select the ones that will meet their specific design needs, despite the fact that the items are not immediately available to them. Parts suppliers are also held to higher standards to streamline the manufacturing process, as they must be more directly involved with the engineering and design stages of the products for which their parts will be used.
By having a reliable SCM system in place, manufacturers can enhance their communication practices and reduce the likelihood of any costly mistakes or misunderstandings.
3. Technology Is Taking on a More Significant Role in Manufacturing
The manufacturing industry, like many other sectors, is seeing an increase in the reliance on technology to complete the production process. More specifically, the Internet of Things (IoT) is transforming the way manufacturers organize their operations. The IoT encompasses all technology that can exchange information via wireless connectivity without any human assistance or prompting. Research leader Gartner predicted 26 billion devices will operate on IoT technology by 2020. With the growth of the business world’s digital components and needs, leaders in the manufacturing supply chain sector must have a significant focus on their processes’ ability to operate on these digital networks.
In addition to the IoT, the influx of remote subcontractors and suppliers involved in the manufacturing process — which is made possible by the advancement of technology — can hinder the flow of the manufacturing process as a whole. With an estimated 80% of the world’s manufacturers being subcontractors, placing a focus on the functionality of the supply chain will help manufacturers avoid having a weak link in their supply chain that could set back production or negatively affect product quality.
How Does an Effective Supply Chain Impact a Manufacturer?
Upon implementing an effective supply chain, manufacturers will see several benefits to their processes and overall operation. When facility leaders and upper management realize how to improve manufacturing efficiency through supply chain techniques, they will experience the following four benefits.
1. Saves Time
An efficient manufacturing supply chain will save companies a significant amount of time for several reasons. Most notably, manufacturing SCM solutions allow facilities to increase the speed at which the produce each item they must send out. Some of the ways a supply chain can minimize the amount of downtime a manufacturer experiences include:
- Improved input reliability: A well-designed supply chain management system will ensure all product input to the facility is properly timed and tracked. This allows warehouses and other facilities to avoid over-staffing in times where shipments are delayed, as well as under-staffing when large orders are coming in at once. It also decreases incidents of shipments being later than expected because fewer mistakes will be made in the ordering and distribution stages of the manufacturing process.
- Simplified communication: By operating in accordance with a set supply chain method, employees and managers at manufacturing facilities will know exactly who to go to and how to reach them in the event that they have questions or concerns. These simplified and easy-to-understand procedures allow manufacturers to save time on communication and problem-solving and focus more on creating the products and getting them out to the customer.
2. Saves Money
Thanks to their focus on efficiency and increased production, manufacturers can save large amounts of money when they follow a well-designed SCM plan. In fact, 79% of companies that have what is considered a high-performing supply chain have higher levels of revenue growth than other companies within their sectors. Similarly, only about 8% of the companies that have less advanced supply chains report revenue growth higher than their industry’s average rate.
Some of the costs you can cut by implementing an effective supply chain process include:
- Distribution costs: Supply chain management allows manufacturers to reduce their direct sales and overhead costs at once by decreasing what they spend on distribution. Examples of SCM methods used to cut distribution costs include fuel-efficient warehouse vehicles, strict procedures for material handling, advanced navigation and routing systems for both robots and human drivers and cost-based order-processing and purchasing systems. With these technologically advanced tools and procedures, manufacturers can reduce the amount of money they spend on distributing their products to customers.
- Production costs: Delays in production can be extremely costly for manufacturers. Supply chains help to ensure suppliers can deliver parts to warehouses and other manufacturing facilities to avoid expensive production shutdowns.
- Purchasing costs: Purchasing and inventory costs are another expense that supply chains can minimize. It costs warehouses more money to store more expensive parts and products, such as electronics and automobiles. With an effective supply chain, manufacturers can deliver these items quicker to save on holding and purchasing costs.
- Overall supply chain costs: When you consider the cost savings of distribution, production and purchasing, it’s safe to say supply chains allow manufacturers to be more efficient and profitable in the marketplace overall.
3. Improves Customer Service and Satisfaction
When manufacturers organize their operations and have an effective supply chain, the ultimate benefit is that it improves their ability to serve and satisfy their customers. In general, we can break down the benefits SCM has for customer service into the following categories:
- Product quality: Manufacturers with established supply chains will almost always make better quality products due to the efficiency of their production processes. This is especially true for companies that work with contract manufacturers that handle multiple aspects of the supply chain, as fewer stakeholders are involved and more responsibility falls onto one reliable partner.
- Ease of ordering: An effective supply chain will make it very simple for customers to place orders correctly and customize them as needed. Customers won’t have to jump through hoops to ask questions about their orders, and the ordering procedures will be clearly outlined and streamlined for their convenience and peace of mind.
- Delivery time: When a manufacturer follows a specific, strict supply chain, they will be much more likely to meet important deadlines, such as delivery times. If a customer’s order is continually being delayed with no explanation, it will lower their satisfaction with the company as a whole, no matter the source of the setback in the supply chain.
4. Supports Company Infrastructure
Company infrastructure refers to the way a company is organized to achieve its ultimate goal. This can include the equipment and technology used, the types of staff members employed and whether or not contractors are needed. A well-designed supply chain encourages manufacturing companies to plan out their company infrastructure in a way that benefits them most.
For example, one manufacturer may find the savings in cost, time and space worth the investment in a manufacturing contractor, while others may choose to spend more money on equipment, tools and technology to give themselves more control over their distribution processes. These in-house distribution systems can be very expensive depending on the products involved, so figuring out supply chain methods first will allow manufacturers to make educated decisions regarding their infrastructure.
How Does Contract Manufacturing Make the Supply Chain More Efficient?
Project managers and other company leaders are constantly trying to learn how to improve production in manufacturing. There are several ways to do this, but the simplest solution is to streamline your supply chain management. As you perfect the manufacturing process at your facility, you may realize there is some room for improvement and potentially some opportunities to reduce your costs. When you choose to partner with a company that specializes in contract manufacturing models, you can significantly streamline your supply chain, making it incredibly cost- and time-effective.
The benefits of partnering with a contract manufacturer to simplify your supply chain management include:
- Reduced likelihood of mistakes: With fewer stakeholders involved in the manufacturing process, companies can reduce the likelihood of mistakes occurring during each stage of production. A contract manufacturer will handle multiple — and potentially all — stages of the supply chain, so there is less room for errors.
- Improved communication: When you only have to communicate with one contract manufacturer, it will be easier for both the facility and the contractor to explain certain procedures and issues with the process. Since so many suppliers are now typically involved in the creation of one product, it can be easy for miscommunications to occur between these companies and the manufacturer. By having a leading SCM process and partner, you cut down on the number of people and companies you must communicate with as a manufacturer.
- Enhanced understanding of the production process: A contract manufacturer will understand each part of the production process from beginning to end because they will have some level of responsibility in every stage. This means manufacturers can save time on figuring out where the issue is in their SCM strategy and instead consult with their supply chain partner.
- Boosted productivity: Contract manufacturers will contribute to a company’s productivity by streamlining their supply chain procedures and providing the necessary structure to ensure the manufacturing process goes as smoothly as possible. Issues like waiting on merchandise to arrive, certain parts not working correctly and not having enough staff members to get large orders out for shipment are all avoidable with a knowledgeable, organized contract manufacturing partner.
- Increased profits: Anytime a company can save money and reduce the number of errors they make, they will be increasing their profits one way or another. With a contract manufacturing model that streamlines your supply chain, your facility can complete more orders in less time, as well as reduce downtime and save money on employee payroll and other time-related expenses.
Choose PBZ as Your Reliable Manufacturing SCM Partner
At PBZ manufacturing, we understand the role of a manufacturer and the importance of having an effective supply chain management plan in place. With a focus on Resourceful Manufacturing, we make all decisions and implement process improvements based on our manufacturing supply chain process. As a full-service metal manufacturer, we can remove excess layers from your supply chain, save you money and increase your production speed. With expertise in engineering, manufacturing, finishing, assembling and shipping, we are a one-stop-shop for all your manufacturing needs.
If you’re ready to improve your manufacturing supply chain processes, contact the team at PBZ manufacturing for more information on how we can help.
Andy Weaver
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