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Combatting today’s supply chain shortages
An easy strategy any brand can follow

Horror stories of supply chain issues and chip shortages have been flooding the news for months. Many companies have been scrambling to meet their production demand, and ultimately, the consumer is paying the price. As with every obstacle, an opportunity to position your business in a new way also exists. Companies can earn key advantages by understanding and managing common manufacturing challenges in today’s market.

We commonly how manufacturing timeframes have extended from 30 days up to 60 or 75 days. To fully understand and navigate this challenge, we have to break down the issue to the root of the problem to find and support the solution.

The answer isn’t complicated and the solution is much less costly than the manufacturing timeframe extension from 30 days to 75 days (additional 45 days). In actuality, the increase in days does not mean the manufacturing or assembling of your product is taking 45 days longer. The product assembly timeframe of your product, while it’s on the production line, is likely no more than one week. Let’s break this down further based on the traditional 30 days (or we can call it four weeks).

These are the activities that happen throughout your manufacturing process broken down by week.

Week 1: Ordering of raw materials, and supply chain components
(Pre-Existing prototype or similar sample is produced or reference for approval )
Week 2: Inbound and arrival of materials for assembly
Week 3: Manufacturing Pilot production run. This is a test run for the factory to set up and optimize the production line with staffing, machines, and assemble stations. Often this produces a small batch of early samples we commonly called and used as sales samples. When the production line manager is satisfied with the product and line set up the product can move to final manufacturing.
Week 4: The final week. This is when your product hits the manufacturing line and is assembled, tested, and packaged for shipping. For most common consumer goods this can be as short as two days and commonly will not exceed a week.

So, where do the extra 45 days of manufacturing delays come from? There could be two factors.

1. You’ve increased your order volume by a magnitude in which the factory does not have enough production lines to scale your business. In which the production run has to extend for additional weeks. This generally means your facility is no longer right-sized for your company and product. A decision will have to be made on whether you continue with your existing facility and trust their abilities to scale their facility and staff correctly with your growing demands. If they are not the right fit, it will be time to right-size your facility with a manufacturing partner that is properly suited to your current volume and moving towards in the future. However, even with a wrong-sized facility running and an extended production timeline this doesn’t fully make up or justify a 45-day extension.

2. Week 2 is where the delay happens. Manufacturing assembly factory orders the materials and they do not arrive on time. The most common reason for today’s extension is raw material or supply chain component facilities are delayed. Parts like componentry vendors for bicycle parts or shortages in microchips cause delays in the supply chain. These are generally less common parts and are likely a small component in the overall makeup of materials in your product. Fortunately, we can get ahead of this problem by simply forecasting and pre-ordering materials.

If we take a common consumer household electronic product and break that down we can note the major components are plastic, metal, perhaps glass, and wires, all of which are readily available with no shortages. The common component today facing shortages is the chip-set. However, knowing our full list and makeup of materials we can separate the components into two lists of components. The first list (List 1) includes items not impacted by delays. The second list (List 2) includes items impacted by today’s supply chain shortages or delays. For an electronic product, this would result in your chip-sets.

What we can now do with this information is preemptively plan with our manufacturing partners to forecast and pre-order components on our delayed list (List 2). As a company, we can model the comparison cost of pre-purchasing 6-9 months of chip-sets vs. facing timeline extensions of 75 days or longer.

Your manufacturing facility is well-aligned with your goals. Everyone wants to have the order placed and exited in 30 days. Shorter transactions are efficient transactions.

So how do we enact and activate this program?

It is as simple as setting a planning meeting with the manufacturing leadership team and their procurement team. We pre-outline a meeting agenda of items we’d like to discuss noting the goals of pre-ordering and storing critically delayed components. As for key members to attend the meeting for resolution options to our mutually challenging timelines. We let their finance teams know we are prepared to invest in pre-purchasing raw materials and components and are looking for their help in storing and maintaining these components for our future commitments to their factory. Following the alignment meeting, we draft recap notes to be included in a manufacturing agreement document to lock in any pricing, currency, and storage rates associated with the pre-commitment of production volume for these parts we are ordering.

Now, we are set and completely ready for a normalized manufacturing timeframe giving our company a dramatic advantage in the marketplace. Ability to deliver goods in half the time or meet market demands or gaps which commonly arise without options to be filled.

Earlier this year, the drought in Taiwan was apparent and manufacturers all knew of the looming shortage of parts, however, western markets trailed in this understanding and knowledge, which resulted in little preventive action. With the information from Asia manufacturers, we were able to act early and secure additional chip-sets at market rates of the time and for inventory, demands forecasted 12 months out. Ultimately, what happened was chip sets doubled in prices along with shortages, companies were willing to pay triple in prices to get their goods produced. This put our products, manufacturing partners, and supply chain in a favorable position as we now had optionality and the ability to meet the demands of the marketplace customer when a gap in availability occurred.

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contact@processag.com
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