Strategic supply processes

by Dr. Robert A. Kemp

This is the second in a series of three articles that examines the integrative MRO supply management process. My first article defined the need and the process and examined barriers that preclude many companies from switching to integrated operations. We defined integrated supply management as organizational processes that tie suppliers and customers together with joint strategies, collaborative planning, cooperative processes, merged operations and effective teams. The supplier assumes responsibility for many customer operations.

This article presents specific examples of companies using integrative operations and how they have worked to ensure successful operations. Broadly speaking, our potential suppliers for integration range from “work for fee” service providers that accomplish the task without holding inventories in their name to providers that buy and resell inventory as part of the service process for you. Integrated supply operations can be for all firms — big and small or highly technical to relatively low levels of technology. The supply market is extremely dynamic. It will grow, and supply managers will have many opportunities to select the best supplier or suppliers.

Point to Point Business Development Inc. (www.P2PMRO.com) represents the “work for fee” service providers. President Jeff Miller says Point to Point is a specialist integrator. They will manage your in-house operations, tool cribs, purchasing transactions, supplier relationships and payment processing. Using the relationships with existing suppliers, Point to Point has been able to drive annual savings for its clients in excess of 18 percent. Point to Point represents both the supplier side and the buyer side in building the most efficient supply chain. Both buyer and supplier pay a small transaction fee for the services provided by Point to Point, which includes the use of their World Class e-Procurement system.  Point to Point is engaged in managing procurement programs with more than 180 client locations with over 3,600 suppliers, in the U.S., Canada and Mexico.

Susan Modeland, C.P.M., a supplier support manager at Goodrich Turbine Fuel Technologies, represents a highly technical firm supporting the jet engine industries. They are now working with Engman-Taylor as their integrator for complex and extremely precise machine tool operations. More than just running the cribs with its Cribmaster software programs, Engman-Taylor (ETCO) provides sound and welcome advice and assistance with new tooling questions and new processes.

Modeland says, “Our integrator provides us with needed technical advice and service.”

When asked, “How does a company get started with an integrator?” Ms. Modeland has four points of sound advice: 1) Move slowly and select the supplier carefully; 2) Ensure that each party understands what will be done and by whom; 3) Establish a project champion for each party and ensure that sound communication processes are working; and, 4) provide frequent reports and ensure that problems are satisfactorily solved upon discovery.

Townsend Engineering makes world-class meat processing machinery for the food industry and competes worldwide from Des Moines, Iowa. Bill Wonderlich, C.P.M., A.P.P., the director of worldwide supply management, is delighted with the progress of their integrated supply project. Townsend had used several suppliers with in-house support roles, but now has moved to an integrated process with Fastenal. They have eliminated inventory stock points in stores and the worksite. Fastenal delivers the materials directly to the point of use. In some cases, this change has reduced high-value inventory by about half. Similarly, they are moving to integrate supplies for janitorial services, safety, shop floor and even some direct materials. Inventories and control of sophisticated tooling for the floor will be changed from stores to point of use. Mr. Wonderlich says that even though the move to integration is still under way, it is clear that they have reduced costs by 25 percent and that figure will increase as the integrated system in completed. Fastenal has more than 1,200 branches in the North America and is expanding worldwide. Townsend is an integral part of the expansion to the Netherlands.

Whirlpool is a huge manufacturing operation supporting the white goods industry. Whirlpool, according to MRO project manager Timothy Burwell, has been moving deliberately to extend its use of integrated suppliers by carefully defining its requirements by major commodity groups and then selecting the best supplier for each commodity through RFP, RFQ and negotiations.

The strategic agreements carefully delineate Whirlpool needs and expectations in terms of service, rapid delivery, web-based, point-to-click catalogs, cost control, etc. The Whirlpool goal is to have at least 75 percent of the daily spend under strategic contract. This will free supply manager time to concentrate on better managing the other 25 percent.

Burwell says that, “They see this integration process as a life-long project. It will never be finished, but rather just become bigger and better with each new improvement in technology and supply operations.”

Clearly what we see here from these companies is that integrative supply operations are for everyone—big or small. Integrators come in many forms and provide diversified capabilities. Firms looking to integrate suppliers into their operations have many opportunities. I am convinced that this supply management process will continue to expand into more new areas with excellent opportunities for our firms.

My next article will take you step by step through the process of integrating suppliers into your operations to reduce costs and build value.

Robert Kemp is a consultant, speaker and the former president of the Institute for Supply Management. He can be reached at kempr@mchsi.com. 

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