Connecting People to Solutions: How Quality Relationships Strengthen Supply Chain Resiliency

Strengthening manufacturer-supplier relationships can help improve supply chain resiliency.

Chapter 1: Problems arise in all shapes and sizes...

Historic events exposed vulnerabilities in lean manufacturing and just-in-time inventory management worldwide. But it doesn't take a catastrophe to disrupt a supply chain. The U.S. baby formula shortage illustrates what can happen when just one factory, making about half the country's supply, is shut down for FDA violations.

Chapter 2: Solutions follow...

Calls to diversify production across multiple factories, plan for slack capacity, and make surplus inventory of the most critical products -- just in case – sound prudent in hindsight. Investors and consumers, however, don't typically reward companies for that kind of resiliency because it costs more. Wall Street and Main Street sentiment on that front isn't likely to change overnight, especially while U.S. inflation is at a forty-year high. Shifts toward re-shoring, near-shoring, and improving tech-based intelligence are more likely to be the ongoing resiliency trends.

Supply chain managers would welcome any relief. Bloomberg recently reported that 28% of them quit in 2021, based on LinkedIn data.  Like millions of others, they are looking for less stress and higher pay. On the employer side, openings for supply chain managers more than doubled on ZipRecruiter Inc. since January 2020, according to Bloomberg. Bandwidth to engage and retain managers is becoming as scarce as qualified talent, but no less important.

While companies can't necessarily control volatility brought on by external forces, they shouldn't be surprised by it anymore. Improving their individual supply chain resiliency by strengthening manufacturer-supplier relationships, in whatever shape they take as industries transform, should not be overlooked among the different strategies, experts say.

Chapter 3: Landscapes are changing...

Paradigm shifts, already underway in the automotive industry for example, continue to disrupt the traditional alignment and strategies of both original equipment manufacturers (OEMs) and tier suppliers.

"Suppliers are staying competitive by diversifying their products and services," said Actalent Client Success Executive Justin Mahrer, who has 20 years of experience in Automotive Engineering and Manufacturing,"as well their OEM partnerships upstream."

Take Japanese suppliers for instance. Historically, Mahrer said, they've only worked with Japanese OEMs. That's no longer the case.

"The new norm is for suppliers to have a diverse portfolio of end customers and not be handcuffed to one revenue stream," he said.

Consumer and industrial technology companies are also emerging for the first time as automotive suppliers. They're carving out market share within the electric vehicle/artificial intelligence/connected car segment, Mahrer explained. And even though they're automotive suppliers, their customers aren't just automakers. They've diversified across industries.

Automotive OEMs, on the other hand, are consolidating aspects of production under their own footprints.

"OEMs are mitigating risk by buying out some of their third-party suppliers and merging businesses," Mahrer said, "or even growing their own greenfield supply chain companies as separate entities underneath their parent organization."

Plante Moran's annual Working Relations Index indicates the quality of OEM-supplier relationships varies greatly, even among industry leaders. How will these relationships be defined moving forward?

For traditional automotive suppliers that aren't being bought out or diversifying their offerings, it means the window to expand customers for certain products is already shrinking.

And that's just automotive. Many industrial landscapes are changing. In life sciences, for example, mergers and acquisitions continue to be a growth strategy. Paths are re-routing. New relationships are forming. And the dynamics keep evolving.

Chapter 4: Yet it remains...

"Companies that have strong supplier relationships have less surprises," said Allen Ennis, a manufacturing and quality expert at Actalent, with more than forty years of experience across multiple industries. "Both sides collaborate and understand each other."

Ennis leads a team of manufacturing and material experts within Actalent's global services groups. Part of what teams like his do at Actalent is help companies find, vet, and manage suppliers. They also help suppliers make connections up and down the chain, too.

"They're both aligned on their wants," said Ennis, referring to the benefits and characteristics of strong OEM-supplier partnerships. "They're aligned on the specifications and the details of the product. They respect each other's schedules. Suppliers provide honest delivery dates and immediately notify the customer if there are difficulties. OEMs spend less time, money and resources overcoming supplier delays and mistakes. Suppliers will spot design issues that the OEM missed. All of that avoids problems down the road and costs are reduced. Companies can allocate more time and energy to other aspects of their business."

Actalent's global services practices support OEMs and suppliers in the transportation, life sciences, consumer products, industrial products, aerospace, and defense industries. They're experts in supply chain management, along with smart manufacturing and industry 4.0, product support, validation, and sustenance, manufacturing and industrial engineering, and tool and equipment engineering. Additional capabilities include mechanical and electrical systems development, controls and automation engineering, plant engineering, systems and software, quality management and regulatory compliance, and clinical and laboratory services. And much more.

Chapter 5: Due diligence...

Fully evaluating suppliers up front, not based solely on cost, and with weight given toward making sure they're a good fit now, and down the line, is a crucial step toward building a strong relationship, Ennis believes. And by extension, resiliency.

"It's all about taking a balanced approach and making informed decisions," said Ennis. "That means evaluating a supplier not just on cost, but on their overall quality, reliability, communication, understanding of the product, and compatibility with your company. After all that has been considered, then it's about negotiating price"

Over the next five to ten years, in automotive manufacturing specifically, pressure on both OEMs and suppliers to find new ways to overcome obstacles, and stay competitive, will intensify, Mahrer said. Identifying and optimizing hub and spoke connections, amidst scarcity, will be more critical than ever.

"As supply chain logistics straighten out, as full production becomes the standard again, and advancements in EV technology continue to integrate, the reality of a talent crisis will remain. Companies will continue to face the hard question of, ‘how are we going to get this work done," Mahrer said. "It is becoming increasingly critical to have awareness of all approaching new model launches at the OEM level and following the hub and spoke strategy to understand who is going to be awarded new supplier business, and then connecting those communities together. As a leading global services and talent solutions organization, Actalent will continue positioning itself amongst the top automotive industry leaders as a strategic partner, aligning our ability to make critical connections and create unique workforce solutions in a dynamic market."

Not all organizations have the necessary bandwidth to cultivate optimum OEM-supplier networks. Actalent can find and fully evaluate a company' operations, Ennis said, and leverage their existing knowledge of proven, reliable manufacturers and suppliers to make strong connections faster.

"Trust grows," said Ennis, "with the knowledge and assurance that comes with having taken the time to learn about each other and understand the risks and benefits."

Chapter 6: It's who you know...

Speed and price are easy concepts to sell and be sold. Basing partnerships and hinging outcomes on them alone, however, is like aiming for the edge of a target; there's a lot to miss, and likely hit, that you don't want to. Understanding supply chains can be complicated. Managing them even more so. But they don't have to be. When they're viewed as a network of people, as relationships, they become less complicated and more tangible. Then it comes down to this simple concept: How well do you know the people in your network?

Actalent helps companies in all different industries answer that question every day. How? We work with the people that make the products the world relies on. We work with the people that make the components for those products. We work with people that make the equipment that make those products and components. Knowing and connecting networks with solutions is our business.

Before picking a supplier, OEMs should know or be seeking answers to the following questions:

  • What are your gaps and pain point where the work comes in and goes out?
  • How complex and/or vital is the part? Should it be produced closer to home?
  • What expertise, materials and procedures will be required to make the part?
  • What is the market availability of those materials?
  • How many hours will it take to make the part?
  • Has the supplier made the part, or similar parts, before?
  • Is the supplier qualified and equipped to make the part currently?
  • Are the supplier’s facilities up to standards?
  • Who will be the main points of contact on both sides?
  • How well does the supplier communicate? Are they easy to reach? 
  • What suppliers do they work with?
  • How long will it take for them to deliver? How will they deliver?
  • Do they know, understand, and comply with all applicable regulations?
  • Do they follow quality part processes, such as PPQ and PPEP?
  • Are their practices compatible with yours?
  • Are there back-up suppliers that can quickly take over if there is a shut down or a problem?