East West Manufacturing Blog

How Cheap Killed Your Supply Chain

Written by Andy Reese | April 09, 2015

No matter how great the individual talent of each team member is (think the Dream Team – 1992 USA Basketball) the job of the head coach is to get the team to play together.  Thus is the life of the strategic sourcing and supply chain teams for manufacturing companies and OEM’s alike.  While much of the work goes to you, Chuck Daly, he was supported with other coaching greats: Mike Krzyzewski (Duke), Lenny Wilkens, and P.J. Carlesimo.  Those three would be the rest of your team!

While technical skills in manufacturing are what capabilities you seek when selecting a global contract manufacturing partner, if you deemphasize the importance of solid supply chain management you are sunk!

Consider an EMS Sourcing Manager that is managing dozens of parts and component suppliers.  If one part runs short, an undisciplined sourcing and supply chain team may be tempted to turn to the gray market where counterfeit components are very hard to spot.  Purchasing tends to default to lower cost and faster delivery.  However if quality is lost you have gained NOTHING.  In fact, add back in returns, additional quality problems, additional freight, paying a premium to expedite either parts or finished product, and damage to your reputation and the cost escalates.

How to protect the integrity of your supply network:           

  • Work with like-minded companies
  • Ask how manufacturers manage the processes during the courting stage to avoid this potential disruption
  • Keep a little safety-stock.  Even the most the most conservative CFOs cannot find fault with this strategy
  • Don’t trade Quality for a Cheap Price

You cannot protect against every single potential disruption in your supply chain.  You could, but you would tie up every dollar of working capital in inventory and that’s not good advice.   Attack the weak areas first to ensure your supply chain keeps feeding your production line.  Any good global contract manufacturing partner will partner with you to help solve your issues.