Supplier issues are creating real challenges for manufacturers – from long lead times and extended delivery dates to poor performance from key suppliers. In this Supply Chain Byte, Lisa Anderson explains why companies must pay close attention to demand signals, translate demand into supply requirements and confirm whether suppliers truly have the capacity to support the plan. Knowing when materials will arrive and having a clear ETA is critical.
According to the S&P’s Global Purchasing Manager’s Index (PMI), the Suppliers Delivery Time Index is showing lengthening lead times not seen since 2022. Although much of the index will translate to the issues stemming from the Strait of Hormuz, it is also seen across our client base with no correlation to the complications due to the Strait. It appears as though it could be partly because of increasing demand, the reconfiguration of supply chains, and various disruptions occurring in the global supply chain. For example, in a food and beverage manufacturer, supplier performance has been abysmal. Products are not arriving on time even if the expected delivery dates are updated weekly. Also in an industrial equipment manufacturer, the lead times for castings has increased from 15 weeks to 24 weeks with little to no notice.
What should clients do? We recommend three key strategies:
- Demand signals: Pay attention to your demand. Focus attention on your SIOP (Sales Inventory Operations Planning) processes to capture the appropriate customer demand, quotes and sales inputs. If you aren’t providing material specific forecasts to core suppliers, they won’t have time to prepare for demand changes.
- Translate into supply: Successful manufacturers focus on translating demand into supply. Whether it is determining how to translate from CRM to CPQ (configurator) to material requirements for MRP or translating CRM, e-commerce and customer demand into channels or distribution centers replenishments, you must convert demand into meaningful supply requirements.
- Status & visibility: Gaining real-time insight into status and order visibility throughout the end-to-end supply chain is essential to resolving these shortages. If you know the estimated time of arrival (ETA) with greater certainty, you can incorporate this insight into production planning, replenishment planning, and revenue forecasts. Whether you perform this process manually, with simple toolsets, or with advanced planning and visibility systems (APS), the critical need is to attain directionally correct information.
The bottom line: manufacturers need a supplier performance plan to stay ahead of disruption and protect customer commitments.
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