26 Jul Resin Material Suppliers: How many is too many?
Optimization and cost-effective solutions are the goals every company strives for when creating their material supplier list. To achieve this, however, it can feel like Goldilocks as you review your supply base; too many material suppliers, too few, too expensive, the selection and review process can be exhausting.
Is there a “Right” Number?
How many is too many material suppliers? How few is too few?
The best answer to this question is “it depends”. Circumstances will change based on company size, needs and goals. Everyone is different, every situation is unique. The number of material suppliers will depend on what materials are run, the industry, and what the quoted lead time is to deliver the manufactured parts. The best plan is to find material suppliers that will be a partner, working collaboratively to help you reach your goals.
When planning your material supply base, a good rule of thumb is to apply the 80-20 rule. When applying this rule, your top suppliers should be heavily utilized having them fulfill 80 percent of your total need. The last 20 percent of your material ordering needs would then be fulfilled by the remaining 80 percent of your suppliers.
As the number of material suppliers in your base grows, it becomes more challenging to ensure that your base is as efficient and cost-effective as possible. Without any exacts for the right number of material suppliers, it can be difficult to tell when you have too many, but there are some red flags to keep an eye out for.
Warning signs to watch for
When working with your material suppliers, there should be a sense of comfort. Companies should be able to meet with their material suppliers at least on a quarterly basis and should feel that their suppliers are working for their best interests.
With your top material suppliers, there should be well-established goals that are mutually beneficial. When you and your supply base are working on the same page, it becomes easier to ensure that goals on both sides are being met. These goals should revolve around reducing the total cost to your company as the supplier is simultaneously growing the supplier’s market share.
There should also be a sense of urgency when working with a material supplier to ensure your needs are being met and your requests are being handled on-time. Working with the same representative allows for relationships to be built on mutual trust while providing you with the reassurance that your order will be fulfilled and delivered on-time.
Danger of having Too many Suppliers
When a material supply base is too large it can put a company in a position to limit their own success. The associated cost with a large material base can be higher, while negatively affecting company efficiency.
Here are some examples of how this can happen:
- High administrative costs of issuing and managing multiple purchase orders
- Different purchase order formatting and submission requirements of each supplier can be difficult to manage and create inefficiencies on your end.
- Use of non-standardized transportation providers due to the capabilities of each supplier increases your total procured cost.
- High utilization of receiving team resources when many suppliers are shipping product to your company.
- Purchase price of materials will be higher in situations where you are not leveraging overall volume to reduce material pricing. The larger the total size of the relationship, the more opportunity there will be to reduce your procurement costs on each material.
Efficiency is vital to the success of your company and having too many incoming shipments will pull valuable resources away from other areas in your organization. When weighing your options, consider if it is more efficient for your receiving team to receive just one shipment with four gaylords of material, rather than four separate shipments.
What else to consider
When analyzing your current supply base or when you are considering new partners, ask them to analyze where their strengths and weakness are. One supplier may be strong in providing in Polycarbonate but may be lacking in their offerings of Nylon.
Finally, consider dual-specifying materials during the sampling phase. Having a contingency plan for using a replacement material for when there is an unexpected material shortage. Being prepared for the unexpected will keep you and your customers on the same page while reducing your total cost and risk.
Make a plan to start reviewing your supplier base. Ask yourself, if you are receiving the attention necessary, if your needs are being met and if are you able to meet with them regularly. Continue to build the relationships with your current material suppliers and when adding new suppliers be sure to highlight strengths and weakness. With all of your suppliers, make contingency plans for material shortages. By reviewing your supplier base, you could identify areas where you are overspending or lacking in efficiency.
Reach out to your PolySource representative for a better resin-buying experience.