A production chain is often made up from multiple layers of suppliers that all ultimately steer towards an OEM (Original Equipment Manufacturer). With the suppliers under pressure to deliver complex products at low volumes against low costs, the sharing of knowledge and information between the suppliers is the key to managing this challenge successfully. The better they can do this, the better their competitive position against other chains in the sector also becomes.
Big OEM-producers like ASML and Philips Healthcare design and assemble high-tech machines. The components – both individual parts and modules – are produced by chains of suppliers, often from the surrounding area. As such, the OEM places considerable responsibility for its success on the chain. And that in turn follows a cascade of further dependency. The first line suppliers place a share of their responsibility by their (the second line) suppliers. And there may even be a third line in the process, making it clear how complex the supply chains under OEM producers of large, complex machinery can become. And how important it is that they all function effectively to retain the business of the OEM on which they all depend.
Low volumes against low costs
The first, second and third line suppliers have become increasingly important in the delivery of innovative products with short lead times. That, while being forced to deal with pressure from the OEM looking to leverage their volumes against lower prices. And if that wasn’t enough, the complexity of the products is also increasing while the volumes required remain relatively low. The suppliers need to be prepared for this challenge, while continually being pushed hard on price.
Sharing knowledge and information in the chain
To deliver high quality, innovative products against a sharp price, the sharing of business intelligence between companies within the chains is becoming the game changer. Consider changes in the following steps:
- The exchange of ‘plain’ item information, like coding, descriptions, delivery times, compulsory CBS-data, prices etc.
- The exchange of order information. The purchase order for the one business is the sales order of the other. Consider what a complete waste of time and money it is when the request information is literally typed across by the supplier.
- The communication taking place around an order. For example, confirming the required delivery date with the receiver, and, if it’s not possible, going through the process of setting a new one.
- Then to finish, a range of technical product information can also be shared. Think about drawings, bills of materials, quality requirements, maintenance documents and more.
In short, staying competitive demands that this information is not only made available, but actively shared. The manufacturing chains need to aim to fully link up their business software systems (ERP, PLM, etc.) from top to bottom to make this as simple, fast and accurate as possible.
Sharing information via the cloud
Cloud technology offers suppliers just the platform they need to do this. Why would you create an order, if the requirements themselves can be made directly visible to the suppliers? That saves serious administrative hassle and minimizes the chances of mistakes being made – by either the supplier or the receiver. And if it can go quicker, then all the better!
The benefits of this form of chain integration are multiple:
Reduce costs and cut out mistakes
The manual transfer of information increases the chance of mistakes being made - mistakes that cost money and cause stress.
Profit from shorter turnaround times
By sharing information digitally, it can be processed quicker on both sides of the transaction. Compare it to the original situation, where a mail is sent, that then sits for a while in an inbox before an order is made (in the best case scenario). In many cases that mail only results in one or more questions being raised – the mail being sent on or back with a request for additional information. The result is that manufacture starts later, that the turnaround time is longer, that rush orders become necessary, and that the customer is ultimately dissatisfied.
Invest less time in registration and administration
These procedures cost time and in reality add no value to the end customer. By coupling the information digitally you create time that can then be invested in other activities that do add value for the customer.
The cloud makes it possible to work digitally throughout the entire chain, sharing data between companies, and properly aligning related processes with each other. In short, it supports a new way of working effectively together.
Chains that compete with chains
Supply chains are going to increasingly compete with each other. That’s exactly why organizations like Brainport Industries are setting up total supply chain integration. A partnership organization in the high tech sector, the group is made up of 90 suppliers that all deliver components to a small number of major high-tech OEMs. By sharing knowledge and information in the chain, the suppliers can be more efficient and effective in their production, in turn enabling a stronger competitive position. This makes them stronger in their positioning against other supply chains, bringing new markets into scope. By ensuring that every link in the chain is a strong as possible, and supported by the right IT solutions, they create the greatest chance of success - together.