Unlocking Potential: Integrated Supply for Manufacturing Efficiency
The common fragmented approach in tail supply management frequently creates missed opportunities for manufacturers. The often-overlooked tail parts play a pivotal role in operational continuity, and neglecting them can have far-reaching consequences. The concept of integrated supply has emerged as a beacon of efficiency, synchronizing procurement, processes, and logistics management activities. Can the principles of integrated supply be applied to elevate this complex web of reactive tail supply into one holistic model? This blog explores the potential of transforming to an integrated tail supply system.
What is integrated supply?
What exactly does the term ‘integrated supply’ mean? Integrated supply is the holistic process of streamlined business flows including procurement, processes, and all logistics management activities. It is a single, uniform system to procure all kinds of goods. In such a system, sourcing, purchasing, storage and delivery are all planned and executed as a collectively controlled business process. This system works across multiple sites, multiple production lines, multiple products and multiple users. An integrated supply chain operates with a single set of business objectives and policies, synchronized across the different physical processes.
Common tail supply issues faced by large manufacturers
Blue-chip manufacturers with cross-border production facilities commonly face multiple challenges in the areas of sourcing, logistics and processes. They have complex global supply chains and are operating in a very volatile and complex world. On a daily basis, they need to manage material shortages, transport challenges and other logistical challenges. Especially tail parts may seem insignificant in comparison to high-profile items, so they are often neglected. Limited resources are rather devoted chiefly to large, long term ‘strategic’ supply instead of tail spend. However, a missing or delayed tail part can have a huge impact on the organization’s operational continuity.
At the production site or department level, managers tackle challenges within their own scope of responsibility. Procurement managers deal with the huge number of suppliers for low-value C-parts (tail spend) that account for up to 80% of the transactions yet only 20% of the total spend. Operations managers want to have lean processes and minimize the risk of production downtime, but they lack sufficient influence over the purchase of tail parts. Meanwhile, site managers are expected to align with multiple internal stakeholders who are focused on optimizing costs and impacts for their own department rather than for the organization as a whole.
As a result of this setup, the organization is failing to seize opportunities. The fragmented approach makes it harder to build relationships with strategic suppliers – relationships which give access to technological, service-related and business-related innovation. Uncertainty about availability can negatively impact the offers made to end customers by Sales or Customer Service teams and impairs the ability to achieve what retailers call ‘efficient consumer response’. Manufacturers miss out on the chance to simplify processes and streamline inventory – which would not only reduce the cash tied up in stocks, but also the commitment of labour and assets in warehousing, administration and IT.
And while management is busy ‘firefighting’, skill and talent that could be better applied elsewhere in the business is being squandered. Can we apply the tenets of integrated supply to this field? Can we, in effect, elevate this complex tangle of reactive, transactional business processes into a strategic tail supply?
Unlocking value through integrated tail supply solutions
The aim of integrated supply is to create a single, holistic approach to spend areas that will increase business efficiency. Since tail spend mostly includes 80% of the supplier base, there is a lot of potential here. To make these tail supply chains more integrated, tailored solutions focused on optimizations across sourcing, processes and logistics are the answer.
The key advantage of integrated tail supply solutions is the reduction in the total cost of ownership (TCO). TCO is the sum of cost savings visible in procurement costs, the reduction of the required resource base, the elimination of risk and the added value that arises from the ability to redeploy skills and resources to focus on more profitable channels. Some examples of these integrated solutions for tail supply include supplier consolidation, storeroom management, kitting and vendor-managed inventory (VMI). Clients of MAG45 that outsourced their tail supply management and transformed to a fully integrated supply model typically see a 15% to 30% reduction in TCO over time. Integrated tail supply solutions bring back control and transparency, it will enable resources to refocus on strategic matters, drive efficiency and production uptime.
Take the next step
Are you ready to revolutionize your manufacturing processes? Download our white paper: ‘What? Integrated Supply?’, to delve deeper into integrated supply solutions. Alternatively, connect with our consultants to explore firsthand the transformative benefits of integrated tail supply for your business.
