An urgent matter of supply chain preference
Karl Heinrich Lauri, managing team member at MRPeasy says implementing an ERP/MRP
system should be high on the supply chain priorities list of smaller manufacturers – that is,
if they wish to become ‘preferred suppliers’.
COVID-19 has accentuated problems and accelerated change in a global supply chain
environment already under stress. Supply disruptions are no longer a once in a generation
act of god; they have become routine. Demand is increasingly fragmented and
unpredictable. The risks of Just in Time begin to outweigh the benefits; large, long term
commitments to low cost suppliers half a world away no longer look so attractive.
In theory, the uncertainty and complexity rule presents an opportunity for smaller
manufacturers and suppliers who are closer to market and that are agile and responsive
enough to change in a way that challenges larger organisations. But complexity is costly.
A number of countermeasures can be taken along the supply chain. Retailers may
rationalise the variety of merchandise they stock. OEMs can reduce the degree of
customisation they offer.
These measures could see the niches for products and services offered by smaller firms disappear as companies limit complexity, uncertainty and cost by reducing their supplier base. With major procurements now having to be constantly monitored and actively managed, companies don’t feel they have the bandwidth to interact with the myriad small suppliers.
SMEs risk being squeezed out of the eco-system. There is a similar dynamic upstream in the supply chain – suppliers with their hands full dealing with major accounts, changing their requirements on a daily basis, are less eager to service small, intermittent orders, or to prioritise smaller customers in times of shortage.
Small manufacturers have to make themselves ‘preferred suppliers’ or indeed, ‘preferred
customers’. This goes beyond technical and quality standards, competitive pricing, service
levels and financial checks. It is about making the SME as easy and hassle-free to trade with
as the larger companies – if not, more so. ‘Seamless’ is the word: the customer’s procurement, operations and finance people should be essentially unaware of the boundary
between their own company and their SME supplier.
Recent developments in business systems automation, delivered through SaaS, mean that
even SME suppliers can come close to this supply chain nirvana. An appropriate MRP system
is at the core of delivering such a system.
Now, the small manufacturer may reasonably say that they don’t really need sophisticated
manufacturing resource planning – the issues are well understood and can be
accommodated on a couple of simple spreadsheets. But look at this from the corporate
customers’ point of view – what do they want, expect, and increasingly demand? In three
words, simplicity, visibility and confidence.
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Can the SME provide, very quickly, a quotation that accurately reflects real production costs,
and offer guaranteed, achievable delivery times? Can the SME dynamically reschedule
production and delivery as customers’ requirements vary? How robust and well documented
is batch and serial number tracing? Can the SME raise orders on its own suppliers quickly
and easily? How timely and effective is the commissioning of carrier and courier
requirements? How easy is it to generate dispatch advices and delivery notes? How accurate
are the SME’s invoices?
Crucially, how much of this activity can be done electronically and automatically, machine to
machine, without phone calls, emails and costly, time-consuming and error-prone rekeying
of data? Is the firm set up for e-commerce? E-invoicing, at the very least, is often now an
entry-level requirement for trading with major corporates, and indeed with the public
sector. Corporates expect that if with one key-stroke they send a revised order/delivery
schedule, everything else will happen from their point of view, automatically.
While commercial customers expect to purchase through portals and websites, many small
manufacturers are also building Direct to Consumer e-commerce channels, partly due to the
Take small brewers for example. The Covid-19 lockdown has been devastating for the
industry. While the big brands were able to supply grocery chains in volume, smaller
independent brewers who sold mainly through pubs, bars and restaurants have been hit
hard and need to adapt. According to a survey of small brewers across the UK, conducted in
April 2020 by the Society of Independent Brewers (SIBA), 70% of breweries are offering new
delivery or takeaway services in order to help supply their local communities with
independent craft beer. 61% of those breweries now offer free delivery to local
communities. The survey also found a 55% increase in online orders.
As with other small manufacturers, this raises the need for, amongst other things, dynamic
real-time rescheduling, and public visibility of stocks and delivery times.
Customers, no matter where they are in the supply chain, demand visibility and confidence.
They need the certainty that the goods are in stock, or an order has completed a key
manufacturing process, or that it will arrive in the booked docking slot. They want the
assurance that, if problems do arise, the SME has the systems to pick them up, act on them,
and if necessary advise the customer. They may require real time access to and visibility of
This can’t be achieved sensibly by phone calls, emails and huddling over a brief-case full of
spreadsheets, even when that is allowed again. It needs systems and, although not all these
applications are core MRP functions, MRP provides the backbone from which they all
Building an MRP backbone is no longer a long term, big ticket, consultant-intensive project.
Systems from MRPeasy are highly graphical and intuitive, easy to use, with low training
requirements. They can be readily tailored to the business practices of the individual firm –
usually by the users themselves. As a Cloud-based software offering, initial investment is low
and on-costs are determined by the features used and the level of usage, which is highly
scalable, without long-term contract commitment. Updates and patches can be installed
automatically from the Cloud, as can new features developed from the shared experience of
the wider user community.