Managing through Raw Materials Shortages
May 3, 2021
After a year of mostly somber economic news, the Federal Reserve Bank of Philadelphia’s March 2021 Manufacturing Business Outlook Survey offered welcome optimism. According to the report, which surveyed Northeastern U.S. manufacturing leaders between March 8-15, the index for current manufacturing activity and the new orders index both rose to levels not seen in about 50 years.
The results are encouraging. However, they portend that the raw materials shortages and price increases the manufacturing industry is experiencing may continue for some time as demand increases and suppliers struggle to ramp back up after slowing production throughout 2020. The fact that materials scarcity, in particular, could put heavy equipment manufacturers’ projects at risk suggests that manufacturers could benefit from critically evaluating their supplier-partners’ supply chain agility.
Supply Chain Management Best Practices
As a strategic fabrication supplier-partner, Miller Fabrication Solutions proactively manages its supply chain to reduce or eliminate the impact of raw materials, like steel tubing, carbon plate and other metals, shortages on its customers. Miller’s processes demonstrate why industrial equipment manufacturers can rely on the company as a preferred supplier-partner.
- Maintains historical data on its suppliers, including quality scorecards that track on-time materials delivery.
- Produces forecasts of up to 12 months, as appropriate to a customer’s production schedule. At minimum, Miller maintains a clear understanding of a customer’s need through the next two months.
- Stays in constant communication with its supply base to regularly provide updated forecasts and prompt notification of product or schedule modifications to give suppliers ample time to respond to changes.
- Addresses any supply chain issues swiftly, holding daily or weekly calls with affected suppliers to identify the root causes and to problem-solve.
- Dual sources raw materials so another supplier is on tap to step in if the first one encounters supply challenges.
A Solutions Approach
Its supply monitoring and management processes ensure that Miller can see potential supply chain issues on the horizon and address them early. In rarer instances, if Miller were to experience a delay in receiving or an inability to get materials, the purchasing team would open internal communications with customer service, production, plant managers and the customer manager to determine the extent of the issue and identify options.
Very quickly, Miller would engage the customer to explain the challenge and recommend solutions. In some cases, the lowest-impact resolution might be to substitute a different-but-suitable material or adjust the schedule to temporarily remove one product line from production and pull in a different line for a short time, as an example.
“Our forecasting expertise and strong relationships with our supply base typically provide Miller with advance notice of potential material shortages,” said Miller Purchasing Manager Mike McDade. “That knowledge enables us to give our customer complete visibility into the issue so we can alleviate it together, a process that ensures heavy equipment manufacturers of our commitment to no-surprises relationships.”
Timely materials acquisition will vex the manufacturing industry for months to come. To serve OEMs effectively, strategic supplier-partners must manage through that uncertainty as increasing demand creates both opportunities and challenges. Miller’s approach involves relying on its systems resiliency and an agile decision-making and communications process that responds to customer supply needs transparently, collaboratively and in real time. To experience real-world applications of Miller’s solutions-based approach, visit the Project Gallery.