Under the traditional supply chain, if the ABC Food Manufacturing Co. needs a new roller bearing for a large mixer, for example, it has historically contacted its industrial distributor for the part. On-time delivery of the right quality component was virtually assured through the process, which has been refined over generations of interaction between buyer and seller.
In addition to reliably obtaining quality components on time, food manufacturers also traditionally have enjoyed access to branded component suppliers. This can be an invaluable service. Let's say that the ABC Co.'s mixer experiences frequent unexplained bearing failures. Such failures can bring production to unexpected and costly stoppages. With each instance of downtime, there is lost production, the cost of replacement parts and maintenance needs for machine repair. If the industrial supplier is a manufacturer’s authorized distributor, it can call on the manufacturer for assistance. The manufacturer’s expert engineers can diagnose problems, often at no cost, and repair the root cause of the recurring failure condition. For example, the root cause of a recurring bearing failure in a mixer might be that it is resting on a "soft foot," creating misalignment and, ultimately, recurring failure.
So far, we have:
1) Food manufacturers demanding lowest-possible-prices from their distributors or sourcing from second tier sources, such as Internet suppliers and catalog houses.
2) Distributors responding by delivering cheaper product that is not backed by critical engineering services.
Now for the third party in the traditional supply chain: brand component manufacturers. These producers of quality bearings, lubricants, seals, shafts, electric motors, gearboxes...and more are facing a challenge. The very distributors that for decades had represented them as agents in the marketplace and brought their products to food manufacturers are now being forced to act as buying agents for food processors. Instead of explaining the advantages of quality branded components to food processors, assuring reliable delivery and bringing in engineering services when needed, they are now often ignoring quality brands and seeking out lowest cost options. Accordingly, the component manufacturers who are being bypassed will eventually be forced into finding new ways to reach the food manufacturer end user. When this happens, the supply chain that has historically served food manufacturers, distributors and quality component manufacturers so well will face severe challenges and may be permanently disrupted.
The consequences to food manufacturers include:
- Difficulty in sourcing quality branded product when the economy becomes more robust.
- Difficulty in sourcing expert engineering services.
- Concerns over product quality and availability.
- Pricing instability.
- Damaged business relationships among food processors, distributors and brand manufacturers.
To avoid this, food processors, distributors and branded component manufacturers are encouraged to work together towards a smooth evolution of the supply chain and sidestep trends that are leaning towards a supply chain revolution.
This recommendation to food processors: Reaffirm your business relationships with conventional venues and instruct your distributors to supply quality branded components at reasonable pricing levels in place of cheaper parts from off-brand manufacturers. The payoff will be greater product reliability, access to engineering services that keep critical equipment operational, and the continued culturing of proven supply chain procedures.
Bill Moore can be reached at William.C.Moore@skf.com.