Material, while usually the most expense part of your Total Manufactured cost, a huge contributor of your inventory totals and generally the longest leadtime in your end to end supply chain - so little is known or designed to ensure reliability and efficiency is guaranteed.
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Forecast vs Variation - always one of my favorite conversations and one that is least liked by my purchases agents, leadership or planning organizaitons. Forecasts for most large companies of consumer goods underwent a transformation of their shoppers and their habits during the economic down turn. Consumer came back, but not at the same size, venue or brand. This has shook the foundation of my forecasting systems since the are heavily weighted to the past use. This conversation is needed to discuss what I like to call "variation insurance"....how far above and below can the supplier meet my needs - most contacts state some mute 1.3 c:d ratio - what if my forecast goes 2-3x or fails to produce expected sales? All critical discussions to have with your leadership - as options are expensive at times, but out of stock is worse. Packaging used to be the critical area for these discussions (I would have my suppliers provide me with the top 10 over and under performing materials for discussion), but in today's chemical industry complexitities with acquisitions, choices slimming on available items and asset utilization - these chemical materials need a thorough discussion and review (oddly the smallest and most restricted materials are generally the most critical in a formula and at most risk with the lowest visibility)
Promotions - the sales force generally has booked these events with the customers months in advance, why is it generally a surprise for the supplier? How do we communicate the sale, in forecast, as a stand alone conversation or a shake of the "crystal ball". What happens when we oversell, is the supplier committed or is it additional costs, or not at all - what if you do not consume the forecasted amount - do you have to take it? is there a restocking charge? do you leave the supplier holding the bag (wait til negotiations come around again).
Changes in Formulation (you or the supplier) - do you meet with R&D to understrand what is happening in the near and distant future. Researchers are not supply chain experts - we make a beautiful pair of knowledge when fused. We can teach them about the industry as supplier experts, they can teach us about the changes they are thinking about.
Lead times to consider congestion - regionally and now especially with the port situation and customs requirements and governmental changes. I mentioned some synchronization tools in an earlier blog on responsiveness you can reference.
All materials are NOT equal - especially in packaging, but also in terms of critically to your formula or brand equity (consumer noticeables). I mentioned above the beauiful relationship between R&D and Material Managers - this is also true when it comes with criticality to the formula or equity. Knowing which materials can be substituted in like or % of inclusion can be powerful. Also knowing which materials are critical with no substitution is game changing during a crisis.
Purchasing Materials - what is going on with the supplier or the industry? Knowing these things can allow yourself and planning (including leadership) smart decisions on buy ahead, price bracket improvements, or multiple supply sources. Knowing where the heat map is gives you a step up on your competition.
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So when you think synchronization and end to end design - don't forget the impact of materials on your process and the supplier's ability to meet your vision - especially when looking for low cost options to save or inventory reductions to hit goals - understand the impact so you don't disappoint the customer!
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