Posted by Elizabeth Abraham, CEO, Top Tool
While we stay vigilant on the human circumstance, the manufacturing sector also is managing related supply chain disruptions. The impacts vary in form and scale, with U.S. auto plants and other manufacturers that use Japan-produced components facing the most immediate, complex challenges. The situation will normalize eventually. In the meantime, we’re all getting a lesson in the critical nature of smooth-running, cost-efficient component supply chains.
But it doesn’t take a natural disaster to justify best practices in material supply chain optimization. Raw materials and various component parts contribute 30 to 60% of an OEM’s cost-to-produce. So the supply chain pressure from Japan simply confirms the education OEMs and suppliers have experienced over the past few years in the face of steadily rising material costs.
As a result, when it comes to raw materials for precision metal stamping, Top Tool provides an increasing amount of on-site inventory management. Rising prices – and price volatility – make it automatic for us to collaborate wherever we can in the supply chain to help customers gain more control and visibility. Primarily by procuring materials sufficient for several months, or even a year, of order fulfillment to capture volume price breaks. We purchase the material, stamp components according to the manufacturer’s demand forecasting, and release the parts as needed.
In addition to capturing locked-in volume discounts and avoiding price volatility, especially in the case of precious metals, on-site inventory management by the metal stamping vendor enables customers to accommodate unexpected demand spikes. Or ride out uncontrollable scenarios brought on by events like the Japan disasters. Over the years, Top Tool has focused time, creativity and innovation on materials management that takes place far upstream from the finished metal stamping. As a result, we have rigorous, tested materials management processes and systems already in place to isolate customers from the financial risk and complexity related to metal stamping in volatile commodities.
Equally important, we’ve learned that materials management is a collaboration. We approach it as a customer-supplier relationship – instead of a buyer-vendor transaction. That enables us to jointly develop and use good “intel” from previous history so the materials solution is based on what’s likely to happen in the future.
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It’s difficult to recall what it’s like to not consult CNN.com or the evening news for an update on the devastation challenging the people of Japan. It’s only been a short while since the March 11 earthquake and tsunami, so I check-in hoping for indications that conditions have at least stopped worsening.
While we stay vigilant on the human circumstance, the manufacturing sector also is managing related supply chain disruptions. The impacts vary in form and scale, with U.S. auto plants and other manufacturers that use Japan-produced components facing the most immediate, complex challenges. The situation will normalize eventually. In the meantime, we’re all getting a lesson in the critical nature of smooth-running, cost-efficient component supply chains.
But it doesn’t take a natural disaster to justify best practices in material supply chain optimization. Raw materials and various component parts contribute 30 to 60% of an OEM’s cost-to-produce. So the supply chain pressure from Japan simply confirms the education OEMs and suppliers have experienced over the past few years in the face of steadily rising material costs.
As a result, when it comes to raw materials for precision metal stamping, Top Tool provides an increasing amount of on-site inventory management. Rising prices – and price volatility – make it automatic for us to collaborate wherever we can in the supply chain to help customers gain more control and visibility. Primarily by procuring materials sufficient for several months, or even a year, of order fulfillment to capture volume price breaks. We purchase the material, stamp components according to the manufacturer’s demand forecasting, and release the parts as needed.
In addition to capturing locked-in volume discounts and avoiding price volatility, especially in the case of precious metals, on-site inventory management by the metal stamping vendor enables customers to accommodate unexpected demand spikes. Or ride out uncontrollable scenarios brought on by events like the Japan disasters. Over the years, Top Tool has focused time, creativity and innovation on materials management that takes place far upstream from the finished metal stamping. As a result, we have rigorous, tested materials management processes and systems already in place to isolate customers from the financial risk and complexity related to metal stamping in volatile commodities.
Equally important, we’ve learned that materials management is a collaboration. We approach it as a customer-supplier relationship – instead of a buyer-vendor transaction. That enables us to jointly develop and use good “intel” from previous history so the materials solution is based on what’s likely to happen in the future.
(Give us your thoughts by clicking on “Comments” in the blue bar below.)
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