Buying in parts is just not as easy as it used to be. Where once just-in-time (JIT) supply methods were common, they are no longer. “JIT relies on relative stable demand and delivery, neither of which is currently taking place. As demand is up, manufacturers are pushing for more parts; however, suppliers cannot keep pace with this increase. This leads to a whiplash effect throughout the supply chain,” says Jared Keipert, director of procurement at Earnest Machine Products.
In such an environment, customers are asking for greater reassurance. “People are being more strategic in how they buy, and are seeking reassurance to make sure that we can supply. More customers are asking for confirmation of lead times than before” they place an order, says Mark Moody, sales and marketing director at WDS Components.
While that may seem obvious, granting such a wish is not so simple, he explains. “It can be tricky to provide lead times. The market is far more dynamic than it used to be. There’s a reluctance to commit to the longer term. We can guarantee that something is put on a boat now, but asking for a commitment [of that] in 3-4 months is harder. People aren’t holding to their plans; they are changing as they go.”
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“Component parts are very low-cost in a production process, but if they aren’t available, they can have a high impact,” saysMoody. “We make sure that we’re aware of that, and need to make sure that customers’ demand is met wherever possible. Sometimes that means talking more to the customers to learn more about what they really need, and re-prioritising.”
He adds: “Larger customers are accustomed to sharing work. I’m talking more about customers that shop around trying to find the best deal. They might get a good price, but not the availability. Everyone needs to be more open about their requirements. If they get a sudden spike order, could we spread it over months? It would be better if we can talk about it. We can work with suppliers to keep production lines running. There is no need to panic-buy.”
At Earnest Machine, Keipert says: “Customers should rethink their relationships with sources. If anything can be learned from this, it is that information sharing and stability are critical. I expect to see less ‘price shopping’ and more integration with suppliers.”
Another voice echoes those ideas. “Communication with our customers and suppliers is key. Long-range forecasting along with long-term customer/supplier commitment allows for increased risk mitigation factors. Ensuring shipments are on schedule, and identifying problems early allows us to react in good time,” says David Cartledge, director of sales at Staytite.
Lock, latch, hinge and handle manufacturer EMKA has used its close relationships with customers to help keep them on the right side of a cost increase, explains UK MD Andrew Billingham. “We were forced to have a price increase in October. What we did was rang the customers and told them to get their orders in before then, and we would honour the price. Because we have the same rules with the parent company. That was appreciated by customers.”
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For Billingham, the key to getting ahead of supply chain disruption is to plan ahead and have a longer lead time. He says: “We have seen an increase in call-off orders, which are forecasts with some commitment: ‘in the next 12 months, we expect to use X volume.’ What that means is that we can then commit to buy that from the parent company. We have a certain horse-box manufacturer for whom we stock their annual complement of handles. We found buying in a year’s stock at a time is the most economical way to do it. They commit to take that over 12 months.”
Earnest also recommends this approach, which it calls a stock & release programme. Explains Keipert: “If you place an annual PO with us, we can make sure we get your full year’s supply and distribute it to you as you need it. This is a great programme, as you are guaranteed stock on the parts you consistently consume with the added benefit of being billed for the parts as you consume them. So, you do not have to worry about tying up money in inventory, we will bill you as we release parts to you.”
This goes hand in hand with increased stockholding in the UK. EMKA has increased UK stock levels in its warehouse (pictured, below left) by 25% over the last 18 months. “We used to be carrying less than £1m stock; now it’s above £1.6m. That’s been a gradual change. We review customer usage, and we don’t always wait for them to decide. Sometimes we make a decision from our side and put in a stock order so we have it.”
It’s the same story at Leeds-based WDS. Moody says: “We are increasing our stockholdings, trying to get better at stock management and stock turn.” In August, WDS introduced a stock guarantee, to make sure that it has a stock of items customers want on the shelf. It offers a 10% discount if items advertised under the stock guarantee are not in stock.”
Meanwhile, at fastener supplier Staytite, Cartledge says that the company first started to ramp up stocks before Brexit. “We took a strategic decision to increase our stock levels to cover any blip in supply as the rules changed. While we only envisaged this would last a maximum of six months it has continued to this day. Stock is critical: without it, you have no customers.” Overseas, the company is increasing stockholding in China and Dubai, he adds.
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Just because stocks are unpredictable doesn’t mean that parts will never be available at short notice; there are still options, but they will probably cost more. Air freight is a case in point: it avoids the current disruption at the ports, but won’t necessarily be inexpensive, as many standard parts are metal, which is heavy.
Reshoring is another possibility. Although UK-made goods might be more expensive than imports, that cost differential might pale in significance when certainty of supply is taken into consideration. For example, behind WDS’s Leeds warehouse is a machine shop producing nuts, washers, studs, screws and other mechanical fastenings. Moody reflects: “This year we are definitely manufacturing more than last year. Onshoring is an option all the time. We will look at products and see if we can make them cost-effectively. We also have the option to top-up supply; we can make some for an urgent order, or supplement stock with local manufacture where we need to.”
That’s not the only option. For parts needed in less than a few weeks, Stuart Southall, general manager of Earnest UK, says that the company could modify an in-stock part. “Earnest has previously cut parts down, re-thread parts, stripped and re-plated parts we had in inventory to the required specification.”
For the same reason, Cartledge at Staytite advises that manufacturers take the time to consider broadening their supply lines to de-risk part hold-ups. He asks: “Have they designed a single source solution into their assembly?Act now to approve secondary sources or alternatives that can easily be slotted into the supply chain should the nominated source of supply run into issues.”
In conclusion, Keipert at Earnest observes: “The past 12-18 months have been challenging, but they have been an opportunity to reinvent how we procure and push innovation within our supply chain. We have grown and improved in key areas, such as utilising category management, demand planning and supplier management. We have realised that the future of supply chain management will be driven by data analytics, and that innovation is essential.”