Skip to content

On- and off-highway manufacturers can reduce complexity by streamlining supply chain


June 25, 2020

You’ve got the recipe for the perfect pizza.

But imagine the sauce alone requires you to visit three different stores – one for the right kind of tomatoes, the other has the best onions, and a digital storefront is the only place to get the seasoning you need. The cheese and toppings send you in even more directions. 

If you work in purchasing, you know this is just a simplified version of the spaghetti-esque dynamic of most industrial supply chains. 

“Procurement strategies which involve a large number of suppliers can be notoriously difficult to manage, leading to miscommunication and a lack of cohesion,” writes Mike McCreesh, vice president of supply chain for Office Depot Europe, in Supply Chain. “By using just one provider for multiple processes and products, organizations reduce delivery numbers, minimize risk and help to unburden logistics managers. It also increases leverage for negotiating more favorable contracts with suppliers, given that a sense of trust, partnership and confidence is allowed to develop.” 

One large trucking OEM Horton works with has more than 600 suppliers to manage. Proctor and Gamble lists a whopping 75,000. 

Of course, quality and expertise is paramount. A company with the size and scope of Horton tends to specialize in one thing or set of things – in our case, cooling components – and can easily adapt that “thing” to specific customer needs. 

But suppliers that add additional value by applying their technology and knowledge in other ways is paramount. For example, Horton developed drive hubs and tensioners for one large construction OEM and now has them available for any interested on- or off-highway manufacturer. 

It also offers value well beyond the fan clutches it is known for and pioneered – fans, spacers, controllers and related components. A team of application engineers, each dedicated to a specific market or account, ties everything together by working directly with OEM design engineers. 

In any case, it’s all about finding the right balance between specific capabilities and long-term value. The better the balance, the more trust exists. 

Which is always important but especially crucial during the time of severe disruption and complexity we’re currently in due to COVID-19. 

In KPMG’s most recent global manufacturing outlook, DS Smith Group Chief Executive Miles Roberts put it this way: 

“We’re after deeper, longer-term relationships. We want more value from our suppliers — value that isn’t just the price of today. It’s about innovation and how we can both improve. Our relationship with these parties has to change as well. There does have to be more trust. So when we look to our suppliers, we’re not saying, ‘How much can you do for us?’ We’re saying, ‘How great can you be in the fields where we’re asking you to be?’ And I think this is going to be an increasing trend.”