Supplier Diversity

November 4, 2013

If you have a diverse supply base in traditional terms, you have a pool of suppliers manufacturing different things for you. The different pieces that make up the end product to your company all come together at some point in time. Think of the work, time, and money involved in making this happen; using five suppliers and the associated risk involved to insure everything comes together perfectly. An example of this process is below. I ask that you think of all of the work your company performs and cost incurred when doing business this way?

You outsource the following pieces for your end product through a traditional diverse supply base in process (A) shown below.

Process – A

  • Supplier (A) has CNC machining capabilities and manufactures two bushings for you that are shipped to supplier (D).
  • Supplier (B) has laser and metal forming capabilities and manufactures three steel pieces that are shipped to supplier (D).
  • Supplier(C) has tubular processing equipment and is making two steel tubes for you that are shipped to supplier (D).
  • Supplier (D) has welding capabilities and welds the parts sent by suppliers, A, B, and C, together to make a sub component. This sub component is shipped to supplier (E).
  • Supplier (E) has powder-coating capabilities and coats the sub component welded together by supplier (D) and ships it to you.

In the above process you have five different suppliers involved to complete your product. In this scenario your company is generating five different orders at minimum and is incurring all costs involved, from the generation of a purchasing order to paying the invoice. In the above process think of the handling, transportation, time, communication demand and substantial quality risk involved so everything works as planned. What are the total true costs in getting your product? Now, I ask you to consider something going not just right in process A, and the increase of risk and total cost to you?

Taking the above example and using what I call a diverse supplier, Summit Steel & Manufacturing and I ask, what makes sense?

Process – B

  • Summit Steel & Manufacturing, manufactures two bushings, three lasered and formed parts, two steel tubes fabrications, welds these seven components together and then powder coats the sub component and ships it to you. All in house and ahead of your typical leadtimes.

What way would you, or are you performing business, using process A or using process B? I believe the choice is pretty clear and if your looking at total cost and controlling your quality and delivery, process B, is the choice I would be using for my business. Supplier diversity is not the amount (quantity) of suppliers available but rather the use of suppliers, such as Summit Steel & Manufacturing, that have unparalleled capabilities, knowledge, and expertise coupled with competency and unwavering customer service.

A truly diverse supplier will provide your company with the following benefits:

  • Shorter lead time, start to finish
  • Lower transportation cost
  • Reduction in handling
  • Reduction of risk related to product quality
  • Reduction of administrative cost
  • Improved communications
  • Stream lined ordering and processing
  • Highly trained, experienced, cross functional people
  • A supplier that knows your product
  • One source with large array of capabilities
  • A lower overall cost for you to get what you need

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