Whether you manufacture auto parts, airplanes, medical devices, or generic widgets, there’s one fact you can’t deny: The majority of the value chain in most industries today is found outside the walls of the manufacturer. On average, 70% of product value is added by outside suppliers. In automotive, the industry that pioneered the extended manufacturing supply chain, that figure can be as high as 80%.
The reality is that suppliers can make or break your manufacturing business. If one of them fails to deliver a part on-time, you could face an expensive shutdown. According to analyst firm Aberdeen Research, 82% of companies have experienced unplanned downtime over the past three years and that unplanned downtime can cost a company as much as $260,000 an hour.
Sadly, unplanned for downtime is a reality—not a rarity. The majority automotive manufacturing executives surveyed, ranging from parts suppliers to engine makers to automakers, said that the cost of stopped production is incredibly high—an average of $22,000 per minute.
Think that’s all just data talking? Let’s look at a real-world example: The Boeing Dreamliner. When the company launched production of the twin-engine 787 in 2007, it promised record production times—a promise that was broken within months. Boeing wound up pushing back delivery on that 787 at least half a dozen time. By the beginning of 2009, 31 orders for the 787 Dreamliner aircraft had been cancelled by LCAL, a Dubai-based leasing company, and S7 Group, Russia’s second-largest airline. More cancellations followed, as delays followed delays.
The major issue for Boeing: A critical shortage of fasteners, the hardware that held the aircraft together. Boeing engineers could never have imagined that lowly fasteners, which comprise approximately 3% of the total cost of an aircraft, would become such an issue. But those fasteners contributed to delays that saw Boeing lose billions of dollars in sales by the time it finally started delivering the 787 in 2010.
Supply chain failure takes many forms. Beyond shutdowns, you can also face issues with poor quality parts, lack of information for good decision-making, and tedious manual processes that prevent your manufacturing company from reaching its full profit potential. To avoid costly shutdowns, get higher quality parts from your suppliers, and have the most reliable information available to you at all times, you need to improve your supplier performance by automating interactions.
You can do all that with a cloud-based supplier platform. A cloud-based supplier platform gives both manufacturers and suppliers the visibility, security, and traceability they need to improve quality, cut costs, and strengthen their relationships.
Get the scoop on how a cloud-based supplier platform can cut your supply chain failures.