Vendor Diversification Is Here to Stay

During the COVID-19 pandemic, many manufacturing businesses were forced to expand their vendor network to obtain crucial raw materials. While at the time this might have felt like a short-term solution, with many intending to revert back to using a select group of long-standing vendors, the increasingly challenging economic climate has forced some businesses to consider alternatives.

Why Now?

Supply chain or vendor diversification isn’t about driving down prices – although that can happen, it’s more about preparing the supply chain to be flexible in response to pressures in the marketplace.

After decades of globalization, the past few years have seen the tide turning, with significant supply chain disruption forcing many manufacturers to reconsider how they’re running their operation, looking to source raw materials and key components from more local suppliers. This

Promoting Innovation

Despite always using the same supplier having many benefits, it can stifle innovation. Vendors expect your regular order and while they will no doubt continue delivering, how often will they challenge if things could be done more efficiently or at a lower cost?

By working with a diverse range of suppliers, you will benefit from more innovation. Similarly, by working with more small and medium-sized suppliers, you can capitalize on their ability to quickly pivot in line with sector-specific challenges, allowing you to ramp up the production of certain products or expand into new markets.

Reducing Costs

With the right technology in place, managing multiple suppliers doesn’t need to be over-complicated and resource draining. By building a large database of vendors, you are in a much stronger position to negotiate on cost. Armed with a number of different prices and quotes, you might actually realize that you have been paying far more than you should have been for certain products.

Minimizing Disruption

Manufacturers can be impacted by a whole range of supply chain issues and it’s key that when these issues do occur, they are able to recover quickly.

By diversifying the number of vendors you deal with, you mitigate the chance of any on-going disruption and future black swan events. Spreading your procurement of raw materials out so you’re not dependent on just a few suppliers, allows you to safeguard your own supply chain, especially for your most critical products and procedures.

With a robust supplier diversification strategy in place, you can lean on a number of smaller suppliers, while your primary one is held-up and over the past few years we’ve seen many businesses successfully improving their supply chain resilience by revisiting their sourcing strategies.

How the Deacom ERP Solution Can Help

As a manufacturer, you need to have the flexibility to easily switch between vendors who supply the raw materials you require to produce your products. In the following brief demonstration of Deacom ERP, we show how you can set up and manage multiple vendors and based on the production planning dictated by the integrated MRP system, make the determination of which of your vendors can supply those products.

The software offers the ability to define specific vendor parts that contain their own lead times, minimal purchase order quantities, unique vendor part number, and descriptions, as well as pricing information that can be set with specific valid from and expiration dates. This information can be used by purchasing users to make informed decisions when ordering supplies and can also help when using the optimize prices feature in Deacom to determine the best possible price for specific items. Items may contain multiple vendor-specific parts and each vendor-specific part may contain multiple pricing options or pricing breaks based on a combination of time periods and order quantities. Once the appropriate vendor parts and corresponding pricing information is setup, the MRP system has the information it needs to recommend the best possible pricing information. The vendor part record also allows users to identify a preferred vendor, which can be displayed when running MRP reports, and allows the use of the optimize prices and auto purchase order features.

Contact us today to find out how the Deacom ERP system can help your manufacturing business develop a successful vendor diversification strategy, minimize inventory handling, and maximize production output based on your actual and forecasted supply and demand.