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The Importance of Tapping Into Your Supply Chain for Manufacturing Growth

Thursday, 10 January, 2019 Written by Mike O’Donnell

Manufacturing_Supply_Chain_GrowthWhile manufacturers contributed more than $49 billion to Ohio's economy in recent years, some important players in the industry struggle to maintain that kind of relative success. Namely, small and mid-sized manufacturers can falter in comparison to their larger competitors—they lack the same advantages in financing, production efficiencies, distribution channels, and more.

But small and mid-sized manufacturers have reason to be optimistic in the face of this challenging climate. There is untapped growth potential in many of their toolbelts: the supply chain. Only 25% of manufacturers report that their relationships with suppliers are partnerships, meaning the vast majority of manufacturers are missing out on crucial opportunities.

Leveraging partners in your supply chain means gaining access to substantial resources you wouldn’t normally have the means to obtain—and it can transform the way you do business.

Why Your Supply Chain Holds the Key to Growth

The suppliers and customers bookending your supply chain have the potential to become lucrative partners in your success. Consider the following assets and how they could impact your business, if only you had access:

  • Intellectual property
  • Top industry talent
  • Time-tested strategies
  • Money and other capital

Odds are that many of your suppliers and customers have one or more of these assets at their disposal and could share them with you for mutually beneficial outcomes. 

These are just a few examples of how businesses in the supply chain can collaborate:

  • A customer in need of new material or product could finance a small manufacturer’s research and development (R&D). For them, it’s a minimally risky way to share in potential rewards.
  • A large supplier could finance R&D tooling for a smaller customer in need of new components or materials, in return for a long-term contract.
  • A partner could offer as-needed production capacity for unexpected or seasonal demand spikes in return for some other service.

See the potential? It’s time to start thinking of your supply chain as potential partners.

Turn Your Supply Chain Relationships into Partnerships

Among manufacturers with less than $25 million in revenues, more than half have a “buy and sell” relationship with their suppliers—in other words, strictly transactional. Furthermore, most small and mid-sized manufacturers would agree that the majority of their time spent communicating with customers and suppliers revolves around resolving conflicts

These are wasted opportunities. Instead, manufacturers should focus on finding suppliers and customers they trust and forging partnerships. 

Many small and medium companies face similar obstacles when getting started. For example, they often hear from their suppliers that they’re too small to make an impact, but there’s a simple solution: Join a purchasing organization or buying consortium to gain buying power. Remember, just as smaller organizations face similar challenges, they also have similar benefits—larger companies, who aren’t as agile and can’t build or test a new product quickly, will often happily partner with a smaller plant to create a new product.

Get new partnerships off the ground with a few simple steps:

  • To get started, try simple collaborations, such as a joint process improvement initiative or a simple R&D project. A true collaboration is where the customer and the supplier share in the created benefit, be that speed, cost, or quality.
  • No matter how you start, establish clear goals from the outset and communicate the win-win opportunities
  • Create open and frequent lines of communication within your supply chain. Set reminders to reach out to your partners quarterly and ask open-ended questions about their needs and goals. Enter the discussion prepared with ideas for collaboration, and encourage candid feedback.

A word of caution: When you do start collaborating, protect your intellectual property (IP) from suppliers and customers, as they could back-integrate and diminish the value of your products and ideas. If you’re unsure, ask a patent attorney whether you should keep your IP a trade secret or publish it as a patent. 

The sooner you make a practice of creating supply chain strategic partnerships, the sooner you’ll all see greater success.

Want to discover your manufacturing company’s unique advantages and opportunities for improvement? Take the five-question Manufacturing Advantage Assessment to find out.

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Categories: Growth