Leveraging partnerships
Material flow becomes less complex when your firm partners with a 3rd party point-of-use service provider.
By Dr. Thomas L. Landers -- Modern Materials Handling, 4/1/1998
In his recent book, "Citizen Soldiers," Stephen Ambrose describes the fierce fighting among the hedgerows of Normandy in World War II. Reading the book brought to mind this question-for "combat" in today's business world: Are you breaking through the hedgerows?The traditional supply chain is not an integrated process. Instead, it is divided into functions inhibiting good material flow. We separate warehousing, manufacturing, and distribution; and we distinguish among raw materials, work-in-process, and finished goods inventories. These arbitrary boundaries result from old management theories, organizational structures, and accounting practices.
Increasingly, change management involves business partners. It is a paradox that the trend toward outsourcing and partnership is breaking down the barriers and helping integrate the supply chain.
On the outbound side, we see a best practice called postponement assembly. Expensive and inflexible finished goods are replaced with small final-output buffers and flexible semi-finished modules.
This practice enables the manufacturer to meet demand for standard products instantaneously and to rapidly customize in response to actual customer demand. Reductions in both inventory investment and customer response time result. Some traditional manufacturing functions, like assembly, are now performed in distribution centers as value-added services, often by third-party providers.
For inbound materials, point-of-use delivery and storage is a best practice that eliminates the warehouse or stockroom, and integrates materials into the manufacturing process. We see vendors and service providers directly managing materials in a process called vendor-managed inventory. Information technologies, including electronic data interchange, facilitate the partnership. In some cases, the partner visually reviews and replenishes the point-of-use stocks on a daily cycle, much like bakery and snack-food vendors replenish the shelves in a grocery story.
Buddy Thomas of Purchased Parts Group (PPG) knows about partnership. His company provides third-party point-of-use services. By reengineering material flows and owning the component stocks, PPG cuts the partner's investment and process steps to a minimum. He suggests the following tips for a successful partnership: (1) Form a project team including all partners, (2) Define partners' short and long term goals, (3) Establish performance metrics, (4) Benchmark existing processes, (5) Measure performance of integrated processes, (6) Review progress toward goals, (7) Communicate continuously. Follow his advice for change management and you will successfully break through the hedgerows.
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