COVER STORY It wasn’t all that long ago that a number of product and equipment manufacturers made most of the parts that went into the final assembly of their products sold to the endmarket user. John Deere Co., the agricultural and heavy equipment manufacturer with substantial operations in Wisconsin, is an oftenshared example of a firm that made every component part of its tractors right down to the bolts that had “JD” stamped on the head. In the last four decades or so in the United States, manufacturers have discovered sourcing various components not only helped make the supply chain from raw materials to finished products more manageable, but it often carved out a host of inefficiencies, lower-than-expected quality on parts, and wasted costs. Just because an operation is among the best in the world at making and selling agricultural equipment doesn’t mean that it can efficiently and effectively forge the bolts that hold it together. Now that horizontal integration dominates much of the manufacturing environment in the U.S., it’s accepted that anywhere from 50 to 90 percent of the total cost of goods sold on a product from an OEM comes from their external supply chain. In fact, it’s rare that an OEM is below 50 percent in regard to the value its supply chain contributes toward the end product, said Buckley Brinkman, executive director of Wisconsin Manufacturing Extension Partnership, which has emerged as the nation’s leading MEP in supplier development. “It’s a trend that you outsource and take a purchasing approach to your supply chain,” Brinkman said. Of course, there’s lots of hidden costs in the supply chain, and a variety of advantages to minimizing the stations in the supply chain where waste and mistakes can rear their heads. Borrowing many of the best practices in product sourcing that helped lead to Toyota’s rise as a heavy machinery manufacturer a half century ago, the science and philosophy of supply chain management has been ever evolving during recent decades as original equipment manufacturers – or OEMs, for short – strive to compete in what seems to be a shrinking global marketplace. Various processes – often in combination with one another – have been adopted by northeast Wisconsin manufacturers to remain ahead of the curve on competitors, adding jobs and generating revenue here in the region.
Journey to improve WMEP itself works with OEMs and many of the smaller manufacturers in their vendor supply chain to teach and implement systems to provide consistent quality and remove inefficiencies from the manufacturing process that otherwise increase the amount of time and the total cost to create product. For manufacturers who haven’t endured any kind of supply chain improvement system previously, WMEP offers its Accelerate program as an introduction to the lean journey, teaching the very basic principles of process improvement. Not surprisingly, those newly indoctrinated manufacturers generally find the greatest return on investment at the outset of the process. “For manufacturers who have not worked in a lean environment, it’s not uncommon to take 50 to 70 percent of waste out of the process,” said Brinkman.
Since 1857, the City of Appleton has been dedicated to meeting community needs and enhancing the quality of life. Contact us to see how Appleton can work for you! Community & Economic Development Department 100 N. Appleton Street, Appleton, WI 54911 (920) 832-6468 www.appleton.org
NEW NORTH B2B l MAY 2012 l 19