With the news of backlogs at record highs this year, industry OEMs and suppliers are looking for ways to ramp up production to meet demand. Meeting these needs can become challenging when fulfillment issues arise. According to forecast experts like Deloitte, manufacturers in 2019 should be focused on strengthening their supply chains, more effectively managing projects, and leveraging advanced technology to increase efficiency. As OEMs and suppliers both contemplate ways to meet demand, here are a few things all procurement professionals should look for in suppliers to prevent fulfillment pitfalls.
Lack of capacity, along with rising operating costs and increased competitive pressures, have caused companies to explore the option of contract manufacturing for their products. Contract manufacturing outsources certain manufacturing operations to a third-party, passing on the responsibility for materials, capital, equipment, staff, and software.
In developing standardized procurement processes, operations and purchasing decision-makers should consider strategic sourcing as a part of their procurement best practices. However, they should keep in mind that strategic sourcing is not a single project but rather a key continuous process.
For those companies sincere about establishing control over their supply chains, incorporating strategic sourcing principles should be evaluated. Decision makers must ask: Do we control our supply chain, or does our supply chain control us?
Understanding Turnkey Manufacturing
Turnkey manufacturing solutions are a common outsourcing practice. The term refers to outsourcing production to a single manufacturing partner who controls the process from beginning to end. Companies choose this model because it eliminates the hassle of managing relationships with multiple vendors, making it is as simple as “turning a key” to complete a project.
Original equipment manufacturers (OEMs) in the aerospace and military defense industries rely on efficient integration of many different parts with little margin for error. As a result, effective aerospace and military manufacturing relies heavily on maintaining good business relationships between different buyers and suppliers on the production chain.
Strategic sourcing processes allow manufacturers to choose the best vendors based on more factors than cost alone. By evaluating other characteristics such as quality management practices, efficient operations, design capabilities, and sustainability, purchasing managers are using strategic sourcing techniques to look at the “bigger picture” for long-term growth.