vanputten said:
Hello Ted:
Why would a company want to second source anything? To have the suppliers compete against each other on price?
Why do business on price? We should be doing business on overall cost.
There is a tremendous increase in complexity and variables to be monitored and controlled when you start to add suppliers. If you add a second supplier, then you have to define requirements twice, monitor twice, split purchasing volume (or do you just keep one supplier on the side - don't give them business, but require that they know your requirements and implement them if you ever issue a PO?), build multiple relationships, everything to create a mutually beneficial supplier customer relationship must be done twice. The customer is spliting the limited resources bewteen suppliers. This make it more difficult to build mature, beneficial relationships.
Some orgnazitions that say second sources are required, do this to mask or work around mutually beneficial relationships. If an organzation truly works with a supplier and builds a muture business and supply relationship, the need for a second source can be eliminated.
Competition between suppliers hurts the suppliers and the customer. And if you want to talk about knowledge of the auto industry related to the number of suppliers, all auto companies have been trying to reduce the number of suppliers since the mid 90's. They have finally recognized that mulitple suppliers means excessive varibility and multiplicity. Also, cusotmers want systems andnot components. They don't want just the exteriror mirror, the want the mirror and the door. Fewer components and fewer suppliers is easier to understand, manage and montior.
Standards need to apply to many different types and sizes of suppliers. To say that ALL organizations should be required to second source is myopic. Think about very small auto suppliers. They may have only a few suppliers in total. Why second source?
Your comment about 10 lines or fewer really confuses me. One can get a degree in supply chain management. If it can be done in 10 lines or fewer, why are there degrees in this subject. Saying that a complex issue can be explained and justified in 10 lines or fewer is just amazing to me.
Please tell me everything about the benefits and impacts of second sourcing in 10 lines or less. Wow! A don't forget to include how the increase or decrease in variables of the supplier relationship is effected, include a complete explination of doing business on price Vs. cost, and include a description on the impacts of causing suppliers to compete with each other instread on one supplier collaborating with the customer.
I have been in the audo industry since 1991 and the quality industry since 1997. Your generalism about the Cove and the level of competency of the members is offensive to me. But I will get over it.
Regards,
Dirk
I'm pretty difficult to offend - my ego allows me to discount most sniping.
Thus said - let me tackle the question of "
Please tell me everything about the benefits and impacts of second sourcing in 10 lines or less." in as few lines as I can - who knows how many until we count them?
- I think "pre-set" second sourcing should be reserved only for custom-made products, NOT off-the-shelf items.
- Second sourcing is essentially "risk management" in the event some "event" blocks shipment from prime source for critical time-sensitive products.
- If the order would take up too much capacity of any single source, then second sourcing may be a necessity.
- Both prime and secondary MUST be aware of each other and willing to cooperate on keeping customer supplied with no "line down" situations.
- Cooperate means EVERYBODY is in the loop for changes, raw material supplies, tooling, inspection instruments & techniques.
- Raw materials suppliers must be willing to divert shipments from primary supplier to the secondary supplier if catastrophe or disaster hits primary (Conflagration, inundation, labor strike, etc.) to maintain orderly flow of finished product to customer.
- Secondary supplier should get fee to stay on standby.
My own experience:
As a primary supplier, I brokered a deal for a customer who absolutely, positively needed a constant source of supply of a special component.
Our reputation gave us the nod for the sole source contract, but I knew we couldn't build up a sufficient amount of "safety stock" held in a third party off-site warehouse to cover our customer if we experienced the unthinkable and got shut down for more than one or two weeks.
One of my friendly competitors in another city had exactly the same machines we did and I had a lot of respect for his ability. I set up a conference call with the customer, who agreed to put up a "standby fee" to my competitor to come to my rescue if we flopped.
I kept a small stock of raw material in quarantine at my competitor along with a sufficient supply of expendable tool bits to sustain production until our national supplier could deliver more to him. We coordinated inspection instrumentation and my competitor also turned out a "First Article" to show his capability, using a duplicate of our computer programming. The unit pricing would be the same for each of us.
We kept my competitor in the loop throughout a three year contract and on two occasions, we had him fire up to meet expanded demand and to produce safety stock to meet future contingency.
I suppose I could have arranged something similar "under the table" without telling the customer, but I was, and remain, a great believer in "NO SECRETS!"
As a supplier of custom products, I NEVER agreed to participate in an "auction" for a customer's business. One of the first questions we asked was,
"Who else are you getting quotes from?"
If the guy said,
"None of your business."
We replied,
"You make it easy. No quote! Bye. Take care."
If he mentioned two or three others, we always replied,
"We don't participate in auctions. We make custom products to your design. We will willingly negotiate a price, but not to beat a competitor. You can always find someone desperate enough to give a low quote. Do you really want to deal with a desperate supplier?"
The answer we really wanted to hear was,
"We came to you first because you have a good reputation."
Surprisingly, we had a lot of guys come back and play our way who had initially told us,
"None of your business!"
Space here is much too short to give a course in how to run a custom manufacturing business without being bullied by your customers and still be "customer-centric."