Rapid Supplier Identification Using Automation – Fives Steps to be More Agile

Guest Author: William Crane, CSCP, CEO of IndustryStar

Have you needed to adjust your suppliers quickly during this pandemic?

Many supply chain professionals have felt the fragility of their supply chains. As they strive to adjust their supply base to bend not break; time is a luxury they can’t afford.

Supply chain leaders are now required to select and source alternative suppliers in a compressed, more stressed market environment. Moving forward, managers will have to re-evaluate their supplier selection process and criteria, as traditional approaches with a heavy emphasis on low piece cost has resulted in too much risk.  

Manufacturers heavily reliant on high-risk low-cost country global sourcing will need to identify domestic alternative suppliers to combat volatile tariffs and fluctuating delivery times. High industry spend concentrations in financially distressed suppliers will lead to supplier cash flow constraints and resulting bankruptcies forcing manufacturers to re-source.

In planning for similar future disruptions, supply chain leaders will need to seek out alternative suppliers to simply mitigate risk, e.g., different regions, shorter distances, and dual sources. Supply risks and their consequences have become glaringly apparent with the US-China tariffs, COVID-19 pandemic and 2020 recession.

Preparedness fosters agility. We’ve outlined five key steps below to help you be better equipped moving forward to adjust suppliers quickly if needed.

  1. Earlier Identification of Risk in Secondary and Tertiary Suppliers. For example, a Tier I supplier of handlebars can experience cash flow issues, due to the rapid motorcycle sales slowdown at OEM Harley-Davidson, which then results in little to no invoice payments to a Tier II supplier of powder coating for the handlebars. As supplier invoices can range from Net 30 to 90 days, a 60 day drop in revenues for the supply base can quickly wreak havoc. Supplier available funds to restart and maintain high manufacturing fixed costs in raw materials, parts, and people are stretched thin. One at risk supplier, like the Tier II supplier of powder coating can quickly halt production not only at the Tier I supplier of handlebars but also at OEM Harley-Davidson.

Earlier identification of risk by the Tier I supplier of the Tier II supplier’s cash flow issues and swift remediation could have avoided costly manufacturing disruption throughout the supply chain. When proactive actions to remediate supplier issues break down, the Tier I supplier may be forced to rapidly identify, qualify and ultimately resource a supplier.

  1. Shift from an Event to Cycle Mindset. World-class supply chains must continuously identify suppliers to maintain a healthy supply base to account for normal and unforeseen exits of preferred suppliers. The problem with supplier selection though is that it is often described as a cumbersome manually – driven process that requires enormous amounts of time, of which we do not have.

Many supply chain managers describe the supplier identification process as the “event” bottleneck to strategic sourcing. However, it is a bottleneck that is completely unnecessary and easily overcome with already proven tools. Intelligent software productivity tools and supporting data services are empowering supply chain professionals to automate the supplier identification process. Automation is freeing up professional’s time from the tactical to enable them to focus on more impactful work such as supplier relationships and strategic sourcing.

  1. Accelerating with Intelligent Software. Cloud-based supplier search intelligent software can provide unified information and inputs to identify suppliers faster, more strategically and with more resilience. These self-service software tools allow professionals to gain access to powerful advanced search tools and vetted existing supplier data. Technology capabilities can include advanced supplier search filtering by countries and artificial intelligence (AI) that make supplier recommendations based on your unique industry supply needs further accelerate results.

Newer software technologies that allow users to add data e.g. suppliers, manufacturing processes and contact information solves the problem of having to document your supplier data in offline manual analysis tools such as Microsoft Excel. Further, intelligent software that tracks your supplier interactions and makes supplier recommendations to you based on your unique requirements can be akin to adding a team member to support you on your path to success.  

  1. Collaborating with Productivity Tools. Identifying suppliers is only part of the bottleneck challenge, once we have our data, we need a place to put it. Typically, we store our supplier lists, capability data and notes in manual note pads or our heads.

Today, leading supply chain professionals are collaborating real-time on the same critical supply needs e.g. identifying suppliers with a specific welding capability, using collaborative software productivity tools. These more agile ways of working allow more work to be done by multiple team members at the same time. Further, software that allows for teams to build supplier lists, add custom data, track supplier statuses, and document interaction notes enables teams to accelerate the supplier identification to sourcing award process.

  1. Enhancing with Data Services. There is no one source for all supplier data. Further, as suppliers are always changing, e.g. financials, capabilities, services, your approach to continuously acquire quality data is just as important as your initial search. Traditionally, we are left to utilize multiple software, website and database tools and aggregate our research into manual analysis tools e.g. Microsoft Excel. This approach can work fine, but it is slow, expensive, and prone to human error.

Select software companies also have service offerings that can quickly acquire, clean and enter ideal data that is tailored to meet your specific needs. Digitizing, consolidating, and acquiring supplier data are key capabilities to enable supplier identification speed. Scanners to convert paper documents to digital records, automation software to upload data and machine learning to quality check data are a few examples of technology tools that can reduce your supplier data management time. Supporting data services should free up your time while saving you money versus acquiring data by throwing people at the challenge.

Preparedness Fosters Greater Agility

We are in the first quarter of a long game as global markets remain volatile and key input variables of the pandemic, recession, and tariffs remain unknown. To combat these headwinds, we must proactively document our supplier lists by spend category, prioritize high-risk suppliers, and identify backup suppliers to foster greater supply chain resiliency. Documenting your supplier lists by supply need and identifying and qualifying backup suppliers is a proven strategy for reducing ongoing supply risk.

We cannot predict specific supplier issues or suppliers we may need to resource. However, we can control the speed at which we address future supply needs and issues by anticipating downstream risks, shifting to a cycle mindset and leveraging technology to be more agile.  

About the Author

William Crane, CSCP, CEO of IndustryStar, an Ann Arbor, Michigan-based on-demand supply chain services and software technology company that partners with leaders to reduce the cost, time, and risk of bringing new product ideas to production and beyond. William is a trusted advisor in supply chain with demonstrated results starting, launching, and enhancing procurement, logistics, supplier quality, and manufacturing organizations.

His work has appeared frequently in the American Production and Inventory Control Society (APICS), Institute for Supply Management (ISM), Council of Supply Chain Management Professionals (CSCMP) and Sourcing Industry Group (SIG), among others. William’s passion for bringing technologies to market that have a positive impact on the world can be found via his blog Supply Chain for Tomorrow’s Technology.

William is also Host of the Supply Chain Innovation podcast where he interviews top industry change-makers to uncover strategies, tactics, and tools to expedite, optimize, and de-risk supply chain operations. William may be contacted at [email protected]