Real-World Example
Supplier Stabilization During Supply Chain Bottlenecks
Background
Active management of large supplier networks is becoming increasingly important and complex against the backdrop of rising product quality standards, more tightly integrated supply chains, and a highly dynamic economic environment. This is particularly true for the automotive industry. A supplier’s reliability is by no means a given in the first few years following its selection. A comprehensive qualification process prior to awarding a contract and ongoing audits after the contract is awarded help counteract potential negative changes at the supplier and enable early detection of risks to one’s own supply chain. According to KBC’s experience, effective supplier management is characterized not only by the rapid identification of weaknesses but also by the active management of crisis situations that have already arisen.
Consequently, many OEMs are increasingly focusing on short-term measures to stabilize their suppliers. The targeted deployment of interdisciplinary task forces can mitigate the impact of supply chain bottlenecks in the short term and resolve vulnerabilities in the long term. Comprehensive transparency regarding supplier performance and rigorous management of corrective actions are essential in this regard.
Specific Task Description
Restoring delivery capacity and reducing the backlog of orders for a Tier 1 supplier in the United Kingdom.
KBC Approach
- Conducting a root cause analysis to identify and prioritize actions
- Introduction of key performance indicators for daily tracking of the 1st-tier supplier's delivery performance
- Conducting data-driven subprocess analyses to ensure quality and reduce scrap rates
- Establishing communication between OEMs and suppliers and standardizing reporting all the way up to the executive board
- Day-to-day management of the task force team, prioritizing and scheduling parts deliveries, and resolving quality issues in the production chain
Impact Achieved
The OEM’s short- and medium-term supply needs were successfully secured. Through rigorous reporting, performance for the OEM became transparent all the way up to the executive board level. Thanks to regular communication between the OEM, the supplier, and the task force team, risks were identified as early as possible and the need for escalation was flagged in a timely manner. Through targeted tracking of corrective actions, the scrap rate for key subprocesses was reduced by over 20%. Supplier reliability, as measured by OTIF (on-time in-full), was raised from below 10% to over 90%. A backlog of approximately 3,000 parts was sustainably reduced through close collaboration between suppliers and the task force team. In addition, a multi-day inventory buffer was built up in anticipation of Brexit, which was imminent at the time.
