SUPPLY CHAINS IN TRANSITION

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INDUSTRIAL ENGINEER – VOLUME 47 NUMBER 3

BY PAUL ENGLE

Most lean practitioners build strong bond with their supply chain partners. They may even share confidential information concerning new product designs and invite their partners to participate in product development. In return, suppliers provide their customers with high levels of service at competitive price.

What happens when the relationship sours, or the supplier experiences rapid, unplanned changes? Like people, companies and their supply chain do not live forever. Changes in leadership, financial problems, sale of the company or natural disaster produce less than satisfactory outcomes.

While some companies continue to support multiple sources for the same products and services, many smaller organizations rely on a single partner. Management must respond when these partners fail to perform.

Nearly all lean companies actively support their suppliers? improvement activities. Suppliers in transition should not be exceptions. Coordinated action between the company and its supplier may negate the need to develop a replacement source.

Meetings between the company and its transitioning supplier should focus on performance goals and improvement progress. Avoid discussions related to personalities, past issues and competing suppliers.

While working with the supplier, carefully consider other options. While they may not be required, alternatives help mitigate risk. I typically recommend a combination of buffer inventory and active pursuit of an alternate supplier. If the supplier fails to meet mutually agreed upon targets within a reasonable amount of time, other alternatives will be required.

Transitions may be difficult, but supply chains evolve and partners may change. Monitoring programs can be an effective control that mitigates risks to the value stream. Investing in suppliers provides some level of assurance that predictable outcomes are achieved. Measuring performance verifies that suppliers are capable.