Should You Dual Source or Single Source?

We’ve all heard the saying, “Don’t keep all your eggs in one basket.” Common assumptions are that there is a lower cost with a single source manufacturer, due to you leveraging your volume but less risk with dual sourcing products due to having a qualified supplier up and running if the other fails to perform. Current reality is that all of our current customers either currently dual sourcing manufacturers, or they plan to do so in the near future.

To dual source means to use two preferred suppliers to provide the same product or service.
To single source means to use just one preferred supplier, despite there being multiple capable suppliers available.

Many companies choose to dual source a product to maintain quality levels of service to their customers and mitigate potential supply chain issues. It is a major strategy used to help mitigate organisational risk. See our previous blog on Manufacturing’s Role in Value Creation.

What are the benefits of dual sourcing?

1. Ability to Scale Your Business

When you project an increase in customer demand, the first question you should ask yourself is, “Can my current supplier handle the expected increase in volume?” For example, do they have the capacity to provide you with 100% of your demand, along with the appropriate service and fulfillment rates? This may be a case for dual sourcing; after all, you can’t sell a product when it isn’t available. Being out of stock means money lost for your business in the short-term and lost contracts in the long-term. Dual sourcing products can mitigate this lost revenue and potential loss of customer loyalty. Many times when a supplier cannot match your ramp up in product demand, you will continuously fall behind in fulfilling open orders, and potentially lose accounts altogether.

2. Covering Your Bases

Recently there have been numerous examples requiring companies to recall and replace products, forcing companies to pull products off the shelves. Companies who do not dual source run into inventory and shelf-presentation issues. For a company, not having product on the shelf is a major NO-NO, and results in customers no longer coming to you to fill their wants and needs. Having an alternate source in the case of recalls is critical. Many times your alternate manufacturing source can help you overcome issues in a timely manner. This may come at a price, but it is wiser to contract with two companies, than to lose the opportunity to provide product to your customers. You can even make safety-stock a point of discussion in contract negotiations and establish an agreement that if a disruption strikes they will help to the best of their ability.

3. Co-locating Supply and Demand

The most common form of dual sourcing we come across is outsourcing to China or other parts of the world. The logistical considerations of dual sourcing in this case are often not fully understood. When you dual source a product, many times the manufacturing plants are in different locations of the country or world. If customer demand or your production facilities are geographically dispersed, suppliers may be best suited to provide products and services to the nearest stores/distribution centers/facilities. In this case, you can save on freight charges and decrease lead times. Alternately, if supplier locations are close, you may be able to consolidate the product and ship in full truck loads rather than partial shipments. With dual sourcing manufacturers, many times you can find logistical cost savings as well as service lead times improvements. 80% of our “dual sourcing” manufacturing partnership customers are not located in Christchurch, enabling our customers to reduce organisational business continuity and manufacturing risks. Logistical challenged are virtually non-existing due to the ability to ship overnight, no customs or tax issues, etc.

4. The speed of trust

At Contour Engineering we believe in building enduring long term relationships with our customers. Our customers know that we have their back, and having access to trusted manufacturing suppliers often mean the difference between success and failure. Having access to more than one supplier enables you to re-act in emergency situations as well as when there is a spike in customer demand. You can dial your manufacturing needs up and down more easily than just dealing with a single source. The America’s Cup is starting in a few weeks and we understand the need to manufacture and ship urgent requirements as we support the team in Bermuda (see our post about Manufactring and Global Competitiveness).

In a competitive world where customer loyalty and market share truly matter, there are many reasons why you should consider dual sourcing your product manufacturing. The four examples above are sufficiently compelling to make it worth your time to at least consider the trade-offs in cost, service, and risk mitigation. You can’t sell a product when it’s not available, and you can’t run the risk of losing your customers to your competitors.

Feel free to contact us to discuss your manufacturing needs or to request more information.

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Manufacturing: The Little BIG Things

At Contour Engineering we are in pursuit of manufacturing quality products and components “On Time, Every Time”. Most of our clients are in the high innovation, high tech industries where quality is not negotiable. The other factor in this pusuit is speed, where a client’s (and therefore manufacturer’s) speed to market is often everything.

Of course, it is quite easy to achieve one of these at a time, and in fact achieving both at the same time is almost impossible. This is however, what our customers require of us all day, every day. There is no room for compromise and error in a lot of the industries we supply to, like the aerospace and medical industries. Getting it wrong can be expensive.

In a regular catch-up and review session with a client recently we asked: What do we need to improve on? This started a discussion around how we managed to deliver On Time with Zero Defects to date. In the field of precision engineering and hi-tech manufacturing, there are many out there that are easily able to say the words, ‘on time with zero defects’, but fewer follow through. Those that don’t deliver on this promise are quickly found out.

 

The Pursuit for On Time and Zero Defects

The reality is that we do not always get this right, but we aim to and are continuously reviewing our manufacturing systems and processes to ensure continuous improvement. The biggest differentiator we believe we have is our people and the relentless drive we have day in day out, job after job to make sure we deliver quality products on time. We’ve experienced success in many different fields that has enabled our clients to do amazing things like save lives and even travel to space, and helping with these projects drives us every day.

If you want to work with engineers who produce results on time with zero defects, contact us today.

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Manufacturing and Global Competitiveness

To be Globally Competitive you Need to Dominate Locally

The Role of Manufacturing in Achieving Success

Recently we had the privilege to be invited to the launch of the Team NZ Americas’ cup challenge where the new race boat was introduced. It reminded us that there is no lack of innovation in New Zealand. Success and winning at a global level can however be difficult. Only a few companies scale successfully locally and go on to be a global success (think Xero and TradeMe), or perform above expectation or against all odds at the world stage, like TeamNZ in the America’s Cup. Why is that?

What is often not well understood by most companies is the impact of core (internal – the things we are good at) and non-core (manufacturing, etc. that we are not so good at) and the direct correlation of these activities to success. Company leaders need a holistic view of manufacturing that considers the entire value chain, from research and development (R&D) and design to supply management, production, go-to-market strategies, sales, etc.

High Value Manufacturing Value Chain

At Contour Engineering we have learned the value we can add as part of the value chain by focusing on building solid partnerships where we partner to combine our core strengths (high precision engineering and manufacturing) for a better outcome.

The TeamNZ challenge is relying on both core, for example R&D and design, as well as non-core capabilities, such as engineering and manufacturing though partnerships to enable performance at the highest level. In our industry we often see companies fail due to inattention to non-core activities.

At Contour Engineering we get real about our core and non-core capabilities every 90 days as we review our strategy. Have you recently done and audit of both your core and non-core activities to ensure you stay competitive? Is manufacturing one of those activities (whether done in-house or not)? Have you considered dual sourcing?

If you want to have more information or want to discuss how our “OnTime – Zero Defects” approach can help you achieve success and take your products to the global market, get in touch with us.

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Can You Eat Off The Floor?

If you think about world class precision manufacturing facilities, what image comes to mind? Is it a dark, dirty workshop in the back of a warehouse? A room full of greasy overall-wearing men? I doubt it.

Usually, the sorts of images associated with these firms is verging on the futuristic. Clean, bright environments where nothing sits out of place and innovation reigns.

I learned this approach on the job with world class manufacturing operations like Toyota, but it is a principle also enshrined in lean manufacturing theory. The “5S” principles were developed in Japan as a way of maintaining neat, organised workspaces.

5S stands for sort, set in order, shine, standardise and sustain. That is, making sure all unnecessary work tools and supplies are removed from the workspace (sort), all necessary tools have their specific places (set in order), work spaces are cleaned as work is performed (shine), cleaning methods are applied consistently (standardise), and that the practice of 5S is continually improved (sustain).

At Contour, we simplify this to asking ourselves – ‘can you eat off the floor?’ Clean and tidy workplaces not only make it easier to work in but also are appealing to customers. It shows that you care about your business and what you do.

The way in which the business presents itself in general should be “clean enough to eat off”. Whether that is the clothing worn by employees or the product delivered to the end-users, you should always keep in your mind that good enough is never enough.

The reputation of high performance engineering workforces is a key success factor but can also be the hardest thing to build. If the customer experience is lacking, your reputation will suffer as a consequence. The first impression a customer gets visiting your workspace should flow right through the product they can deliver their end-users.

If every part of your business is saying to themselves “good enough is never enough” you begin to create a culture of excellence, where everyone works just a little bit harder to make something perfect. This is the sort of culture that customers take notice of and makes great impressions on them, developing a great reputation for your business and helping to boost success.

Contour Engineering have produced an eBook on the four principles for creating a precision manufacturing culture that delivers ‘on-time with zero defects’. In this eBook we outline, explain and delve into each of the principles. You can also learn more our precision engineering services here.

Download the eBook “It’s not always about the machines” to learn more.

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