Whitepaper: Building A Better Fastener Supply Chain

Supply chains come in all shapes and sizes. There is no one-size-fits-all solution. Supply chains can be as simple or as complex as needed to produce a product or support a business. They can be based on handshake agreements or highly developed contracts; created around common sense or optimized with artificial intelligence. Multiple supply chains normally exist within a company.

The fundamental purpose of a supply chain is to ensure the reliable supply and timely delivery of the materials that a business needs to perform a function (such as build a product or install a device).

At a minimum, supply chains must be efficient. But efficiency is just one aspect teams should consider when evaluating supply options and priorities.

At a higher level, a supply chain may create operational efficiencies (lower administrative, storage, distribution and inventory costs, for example), or improvements to processes (faster assembly, easier installation, higher throughput, etc.). In these ways, supply chains can help companies create competitive performance advantages.

At the highest level, a supply chain is designed to support, protect, and enhance the long-term strategic interests of a company. Careful planning and supplier selection can help management eliminate or mitigate threats that could result from economic, political, social, or weather events.

This paper will discuss goals in building a fastener supply chain, identify potential risks, and offer actionable solutions to create a sustainable supply chain that delivers reliable performance as well as continuous improvement.

Defining what is “better” in any supply chain operation requires consideration of various factors and is dependent on the nature of the business.

Optimized quality, reliability, service, and cost are basic supply chain fundamentals. For higher levels of value, supply chain managers may incorporate value-added vendor services such as warehousing, vendor managed inventory, kitting, just-in-time delivery, custom shipping, and labeling. Information management systems (ERP systems, reporting capabilities, billing and payment systems, etc.), and third-party services (logistics providers, financial services, etc.) also play key factors. At the highest strategic levels, comprehensive supply chain analysis will involve vendor project experience, competitive market considerations, vendor environmental practices, and social responsibility performance as key decision factors.

Defining what is better in each unique situation – given the importance of these factors – is a necessary starting point in building a better supply chain.

 

Attributes of Better Supply Chains

From simple to complex, all supply chains must provide the framework for achieving the reliable, efficient, and uninterrupted supply of products and services. These “musts” are necessary to support the operational and strategic needs of the business. In this section, we will briefly discuss important attributes that help define what “better” supply chains look like. Not all attributes will apply to every situation.
We expect supply chains to be efficient, but efficiency is not enough to be “better.” As a point of context, supply chain decisions that are based on efficiency, at the expense of other factors, can prove to be counterproductive.

Consider the case of “High-Speed, Low-Cost Supply Chains” that are unable to respond to unexpected changes in demand or supply, as discussed by Hau L. Lee, the Thoma Professor of Operations, Information & Technology at Stanford Graduate School of Business. “Supply chain efficiency is necessary, but it isn’t enough to ensure that firms will do better than their rivals,” according to Lee. “Only those companies that build agile, adaptable, and aligned supply chains get ahead of the competition.”¹

In the quest for a better supply chain, it is important to look beyond mere efficiency and reliability (the basic characteristics of any supply chain), to discuss additional characteristics required for agile, sustainable and adaptable supply chains.

1 Harvard Business Review, The Triple-A Supply Chain, Hau L. Lee, October 2004 https://hbr.org/2004/10/the-triple-a-supply-chain

Agility

It’s no secret that supply and demand continually fluctuate. Agile supply chains are able to quickly respond to unexpected changes in supply and demand, efficiently and cost effectively.

Agile supply chains help companies achieve competitive advantages in the market and – in the case of disruptions caused by economic, political, or environmental events – can be essential to long-term business risk mitigation.

The most important building block to a partnership is collaboration – suppliers and customers working together to develop smarter processes, continuously sharing data and responsibility, with incentives to react dynamically to changes in supply and demand.

Adaptability

The work to build a better supply chain is never done. Organizations must continually adapt their supply chains to a changing world.

In addition to dealing with changes in supply and demand, a better supply chain is adaptable to structural market changes and/or evolutionary developments created by outside events. Technological advances, economic cycles, political influences, social events (e.g., labor disruptions), and natural disasters can create the need for rapid change. Planning for these types of contingencies is a critical part of supply chain adaptability.

In addition to being prepared for the unexpected, adaptable supply chains can help companies continuously stay competitive. Adaptability helps companies anticipate, improve, and react swiftly to market changes, economic shifts, changes in strategy, and competitive market factors.

Sustainability

We’re not referring to environmental sustainability. Here, we refer to the ability of supply chains to be sustainable.

To a high degree, supply chain sustainability occurs when there is alignment between the individual interests of the parties in the supply chain. Alignment creates incentives that help optimize the chain’s performance. Risks, costs, and rewards can be shared to create economic incentives. Inventory replenishment decisions can be managed from the supply side, encouraging improvements in production, distribution, storage, and handling practices. Alignment assumes that partners share in winning. Supply chain alignment benefits everyone.

Visibility

Supply chain visibility requires different parties in the supply chain to see what is going on in the supply chain at all times. The ability to track components and products at any point in the supply chain is essential. Through the use of RFID, ERP, AI and other supply chain software technologies, visibility is increased. Workflow and logistics planning efforts can be continuously optimized for improved performance. With visibility, near real-time data is available to all supply chain participants, up to or including the final customer.

Collaboration

In the continual quest to build a better supply chain, nothing is more important than the “working collaboration” between companies and suppliers. Working with suppliers who have experience in your industry, and a working knowledge of your markets, can increase the quality of potential collaboration. Choose partners with the expertise and resources to engage at a high level in the process of continuous improvement.

The ability of any supply chain partner to perform on a consistent, reliable basis, with continuous improvement, will ultimately define important aspects of the supply chain’s success.

Geographic Footprint

If geographic coverage is important – for example, to support multiple manufacturing or fabrication sites, assembly points, or distribution areas in the supply chain – take a measure of the fastener supplier’s geographic operating scope. Analyze the location of manufacturing, warehousing, distribution centers, and logistics networks to ensure the supplier’s ability to efficiently deliver products in a timely manner, according to your requirements.

 

 

 

 

 

 

Industry Expertise

Does the fastener supplier have expertise in your industry, and experience with projects of comparable scale?

Manufacturing

In the event that fastener components are to be manufactured by the supplier, learn about the facilities, processes, resources, materials, and technologies used by the fastener manufacturer, in order to eliminate or mitigate potential manufacturing vulnerabilities. Manufacturer certifications, quality assurance programs, testing capabilities, raw material sourcing policies, inventory maintenance levels, lead times, health, safety, and environmental programs, and logistics capabilities are key areas to evaluate.

Sourcing

Just as manufacturing processes must be evaluated, so too must sourcing practices be analyzed. Does the sourcing partner have redundancy within their supply network, in order to eliminate the possibility of shortages or stock-outs? Are adequate testing capabilities in place to ensure the quality of all sourced components? Does the supplier follow ethical sourcing practices? Is their scale of operations sufficient to ensure competitive market pricing, particularly when new parts or components are required?

Technology

Does the vendor have the technology infrastructure required to collaborate in a modern supply chain? What is their ability to collect and report data? Receiving and processing data received from other supply chain partners, is a key aspect in building a truly integrated supply chain. Through use of ERP software and related management information systems, vendors can add immediate and ongoing value to supply chain operations.

Testing

In the fastener world, testing is critical to verify conformance to specifications, and ultimately, to ensure expected quality levels in the final product. Fastener suppliers should demonstrate their ability to provide ongoing testing capabilities through a certified in-house laboratory or licensed 3rd-party testing lab. The ability to certify test results, and independently trace.

Vendor Services

In addition to certified manufacturing programs, competitive sourcing, integrated technology infrastructure and product quality testing, fastener suppliers may offer value-added services that save time, reduce costs, and simplify assembly or installation processes. These services can include Vendor Managed Inventory (VMI), parts kitting, stock and release, just-in-time delivery, drop shipping, and custom shipping services to increase overall supply chain efficiency. product batches in the event of a problem, are key to an effective fastener testing and quality assurance program.