Work begins in most organizations when orders are booked or forecasted. In the perfect business world, organizations wouldn’t begin production until there was confirmed purchase order for their good or service. After all, when organizations take a guess at future market demand, they often guess wrong which results in wasted resources or missed opportunity. Too many wasted resources and you’re out of business.
The ideal situation is for a company to always have the available resources necessary to meet increases in demand. Sadly, the perfect world doesn’t exist for a very logical reason. Few organizations’ business models allow maintaining idle resources just for the sake of being flexible to market changes.
From a customer satisfaction standpoint it makes sense for a company to maintain change flexibility and be able to meet all changes in demand both up and down. But how can that happen in a LEAN organization? One of the best ways to maintain flexibility to change is to maintain a flexible resource capacity. The term resource capacity refers to the availability of equipment, machinery, supplies, personnel, information or other necessary resources.
Many companies pursuing a LEAN Methodology turn to their key suppliers as a necessary part of the solution because the key suppliers business model is flexible by design. Generally key suppliers service several different customers in one area of expertise. Thus, when demand is reduced as one customer sees a market downturn chances are a supplier’s other customers are not experiencing the same degree of demand reductions. Therefore the overall impact of one company’s downturn is easier absorbed collectively by all of a company’s key suppliers.
How does a company develop key supplier relationships out of their pool of suppliers? The fact is the more a company treats their supplier as a branch of their own organization, the better able the supplier will be to work as a business partner. The key supplier will naturally help to fulfill the company mission statement just as any committed employee would do.
Many companies make the mistake of equating a sole-source suppler to a key supplier and are quickly disappointed. Key suppliers will always embody a sense of sharing and will work hard to make a customer’s business a complete success. A sole-source supplier simply has all of your demand for a product. Which type of suppliers does your organization have?
If a company feels suspicious that their key supplier might steal business, then that company is using the wrong supplier. Noncompete clauses in contracts with the supplier can also help reduce the chances of someone trying to cut you out of the loop but they are by no means a substitute for a good key-supplier relationship.
