There's a lot of talk about how to "fix" manufacturing. What's missing from these conversations is a focus on the costs associated with years of distrust between supply chain partners.
Distrust fuels the need for extra time, inventory, paperwork and more, ultimately building more cost and inefficiency into the supply chain.
Changing how partners work together, and tearing down the walls of distrust, is essential to accelerating innovation, driving down costs and returning manufacturing to the economic engine it should be.
The True Cost of Trust (or Lack thereof)
If you believe that time is money, then every time a part waits, is reworked or is held, then money is wasted.
When I look at our operation, I see wasted money everywhere: from incoming material that's idle and rework on 0.2% of rejects to finished goods that are held and excess packaging on parts shipped.
This money is wasted because we don't trust our material suppliers, our employees or our customers. In most cases, a single instance of supply chain failure leads to an added expense to all future products.
Across our extended supply chain, I see the same issues -- amplified by a hundred or more suppliers. Each manufacturer adding inventory to smooth production; adding process steps from a long-forgotten corrective action; shuffling pallets because no one knows where exactly to place them; holding finished goods; over-packaging shipments, etc.
If we're wasting just $100 a day, and we have 100 extended suppliers wasting $100 a day, it adds up to more than $10,000 a day or over $2 million every year. That's money we could reinvest or return to customers. With that much money at stake, why aren't we working together to eliminate the problems?
The Way Forward
The answer lies in trust.
How do you build trust into the manufacturing relationship? It's not easy. Trust cannot be measured; metrics don't help in determining how trustworthy a partner or customer actually is today -- or more importantly will be when trouble starts.
All too often, we buy promises, and when disappointed, our disillusion turns into punitive actions that exacerbate the issues we're trying to resolve.
We can change this vicious circle. One successful effort focused on value-stream mapping, and brought partners -- both up and down the supply chain -- together to work on issues. The effort showcases a model where trust among partners created a foundation for re-engineering the extended supply chain to accommodate lean principles and most importantly, illuminated the requirements for building, maintaining and repairing trust:
- Communication: Partners openly share plans, issues and objectives with one another so that all understand - and can work within -- the constraints of all.
Sincerity: How well partners keep promises is important, of course. The greater measure is how they respond and resolve missed commitments. - Competence: Honest assessment of each partners' baseline for performance with the resources available to each ensures that expectations are realistic and can be met.
- Reliability: One win does not ensure a sustainable model -- repetition and recurrence must be demonstrated
- Continuous and honest feedback: Regular and rigorous sessions where success -- and failure -- are reviewed and redressed are critical to maintaining trust.
(To learn more about mapping extended supply chains, check out the Lean Enterprise Institute's "Seeing the Whole Value Stream.")
We're at a critical crossroads in our industry. In every extended supply chain, there's an opportunity for coordination and cooperation that can drive continuous improvement. Trust is the fuel that drives that opportunity -- and it's what is needed most now.
Rob Olney is president of Massachusetts-based ETM Manufacturing.
