Vanguard Magazine

Why taking Care of your smallest suppliers is important W hen I was running a manufacturing business and responsible for de- livering final goods to an end user in the defence sector, our team had become very com- fortable with our supply chain and since we didn't have any issues for so many years, there never seemed to be a huge ur- gency to fix anything. After all why to fix it if it isn't broken? Our head of supply chain was incredibly talented and had fostered relationships with everyone, particularly the larger and critical suppliers, such as advanced coat- ings providers and other suppliers that made up a large percentage of our spend, such as raw materials providers. We paid very little, if any, attention to the smaller suppliers, such as the nuts, bolts and tent stakes providers for in- stance. When our large U.S. Department of Defense contracts started to decrease, we needed to go to our suppliers to have them adjust delivery schedules, reduce their prices and work with us on slightly revised work scopes. These changes were no problem and life continued as normal. That is until there was a near-colossal mess up with one of the minuscule components of the shelter system - tent stakes. Small but not insignificant At 17 cents a piece there was little to no margin available for that supplier for some kind of error. We missed the supplier on our radar and despite their seeming insig- nificance, one missing link caused a near miss delivery...and a missed delivery is a missed revenue hit, which can be for some SMEs running on the margin, a near pay- roll and expense miss too. In other words, the tent stakes can take down an entire business. In our case, they didn't, but served as an important les- son in how some of the suppliers that feel most critical have the most cushion and how sometimes the smaller and "insignifi- cant" ones need to be watched closest. We learned that, as buyers, we should be wary of squeezing these suppliers on cost or forcing them to change delivery schedules. But most of all, we learned how much the strength and success of our sup- ply chain translated directly to our success. Overall, when managing complex sup- ply chains, aerospace, and defence (A&D) companies face challenges that can pose tremendous risks to their overall product delivery and profitability. While my example above is more about timing, communications and taking care of the smallest of suppliers, there can be more extreme issues having to do with quality and reducing the risk of poor qual- ity parts being delivered in supply chains. For instance, the Takata airbag recall was a major setback in the automotive in- dustry, both in reputation and cost to the industry. In total, a single point of failure that was found in the supply chain of 14 different automakers, specifically a metal cartridge in the inflator, affected an esti- mated 100 million vehicles worldwide. Supply chain risks As of March of 2016, the estimated costs to the industry were pegged at approxi- mately $31.6 billion. These losses amount- ed to more than the $26 billion initial estimates for Canada's Canadian Surface Combatant (CSC) program, which will be this country's largest procurement to date. Takata itself is unlikely to survive the fallout and the reputations of some of the world's best-known automotive brands have also taken big hits as a result. This example should serve as a cautionary tale about the importance of reliable supply chain partners across any industry, but es- pecially ones where the safety and security of people lie at the core of every product, as is the case in aerospace and defence products. Shifting back to aerospace and defence supply chains, KPMG released a report earlier this year highlighting concerns from executives in A&D firms about their 42 ocToBER/NoVEMBER 2016 www.vanguardcanada.com Your company's success is directly related to the strength of your supply chain T TecHnOLOGY WATch by nicole Verkindt Isaac's team

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