Supplier Consolidation for Mechanical Parts & Components

A streamlined operation can allow companies to respond faster and make their business more flexible to changing demands and conditions.  It is also more capable to modify or adapt production to the needs and satisfaction of customers.  CNC machining is one way to improve production by speeding up production process for products that require a high level of precision and involves very repetitive works such as mechanical parts and components. Another way to complement the production streamlining caused by CNC machining is through supplier consolidation.

Supplier Consolidation

A streamlined operation can allow companies to respond faster and make their business more flexible to changing demands and conditions.  It is also more capable to modify or adapt production to the needs and satisfaction of customers.  CNC machining is one way to improve production by speeding up production process for products that require a high level of precision and involves very repetitive works such as mechanical parts and components. Another way to complement the production streamlining caused by CNC machining is through supplier consolidation.

Also known as supplier rationalization or vendor consolidation, supplier consolidation is a supply chain management strategy that involves of reducing or minimizing the number of your supply partners within a specific supply market by concentrating on the most efficacious and reliable suppliers. This pertains to suppliers that consistently meet your demands.

Supplier consolidation for mechanical parts and components pertains to working on the optimal number of suppliers for metal manufacturing needs.  In assessing and choosing top performing suppliers, the two criteria used by manufacturers are usually lead times and quality of metal parts.

How to implement Supplier Consolidation Strategy

Here are the general steps to implement supplier consolidation:

Determine and identify your real partners. Identifying your real partners means knowing who exactly supplies your materials or mechanical parts in the supply chain.  This also means partners who have been getting the job done correctly and those partners with whom you share similar business objectives.  These attributes are important because you intend to establish enduring and long relationships with these suppliers.

Determine which projects are assigned to each partner. CNC machining may be involved in manufacture of different projects.  You should match which of your projects should be supplied by which of your suppliers based on their ability to fulfil specific order requests.  Aside from evaluating the capacity of suppliers to meet the order, pricing of the supply is equally important in your assessment.

Gradually do away with Suppliers You Don’t Need.  To do this, you should first determine which suppliers are not performing well or with whom you are having difficulty.  To transition them out, you can opt to gradually order only in smaller quantities or simply stop from working with the supplier by not awarding them any supply contract. Make sure however that you already have another substitute supplier that will cover for supplier to be transitioned out.  With thousands of suppliers for mechanical parts, it would be easy to find replacement for suppliers.

Clearly Convey your Project Requirements.  To prevent problems or delays, you must make sure that you are able to clearly communicate your requirements to your new supplier partner about the projects that replaced supplier used to handle. To ensure that specifications for mechanical parts are correct for instance, it is advisable to send the new supplier with a sample for each part so that now disparity occurs between what you need and what is delivered.

Supplier consolidation is essentially geared towards better and stronger business relationships and fewer overhead management. It’s about building business partners willing to invest in each other’s growth and development.

Benefits and Advantages of Supplier Consolidation

Lower purchasing costs.  Lowering costs is one of the advantages upon which consolidating suppliers are built.  If for instance, you have various suppliers for CNC machining, industrial welding, painting etc. You can decrease purchase order threefold if all metal components needed all three services. A single supplier for all these manufacturing processes can work together internally better compared to three separate vendors. Moreover, assigning more order to fewer suppliers, you also can receive better pricing deals for the product.

Lower process costs. If you have less supplier base, you will also significantly lower your transactional costs such as general freight, handling or shipping fees and other expenses required in setting up a supplier internal system and completing transactions (supplier meetings and negotiations). Lesser suppliers mean you only need to talk or contact one or two people to negotiate or resolve an issue.  Meanwhile the time you save in talking to less suppliers can be spent for high-priority objectives and functionalities of the company.

Reduce risks. Depending on less suppliers will greatly decrease you risk also. With less people to talk to and manage, you can better concentrate on fortifying and obtaining all your needs and prevent risks throughout the supply chain. For instance, you can improve on compliance and other legal policies that both you and your supplier need to adhere to. Compliance is one benefit of supplier consolidation that is beyond cost savings.  In CNC machining where tasks are repetitive, any mistake in specification compliance can potentially render the whole production a waste.  Supplier consolidation allows for one less thing to think or concentrate about thereby allowing you to focus another important aspect of manufacturing which compliance is.

Foster stronger supplier relationships. Managing lesser suppliers gives you more time to focus on improving and strengthening relationships with your principal suppliers, accomplish prospects and align tactical ideas and missions. If for instance an issue or problem arises about mechanical parts, you can immediately convey and discuss about it with your supplier partner instead of burrowing through a heap of supplier communications. You also get to know your suppliers well in a more intimate level than if you are talking to a lot.  In that case, you also become aware of any problem that may arise about your supplier or any change that would affect your business.

Improve consistency. The less or more consolidated your suppliers especially in a global scale, the easier for you to manage supply.  More specifically, you can better validate and check of the service delivery and consistency of the quality of supply which is rather difficult to achieve when supplies come from different sites with different policies and follow different processes and compliance procedures.

Empower contract manufacturers. Instead of competing against each other to get a contract with you, suppliers are forced to work together to meet your requirements and look things in a larger picture which is ultimately beneficial for your business.

Metalworking Circular Grinding Tool

Metalworking Circular Grinding Tool