JÄGER Business Blog

Supplier integration in the
rubber and plastics sector - working together is key

A secure supply of raw materials and intermediates is an important success factor for any manufacturing company. Whether this is successful depends above all on how well the organization cooperates with its suppliers. The closer both sides are networked, the more effective the cooperation. Especially in the current pandemic situation, supplier integration is therefore a major issue.

Supplier integration in product development

Involving suppliers in research and development has several advantages. For example, the company can ensure that all components of its products are designed for production. This is particularly relevant for rubber and plastic parts, as only a few designers have experience in this area.

In practice, there are various approaches to integration, depending on the planning horizon of product development:

Some companies turn to rubber and plastic suppliers as short-term problem solvers. They have encountered a challenge in the design process (for example, a seal that cannot withstand the vibrations that occur) and are now looking for support.
In other cases, production companies contact their suppliers at an early stage for a joint development project in order to benefit from their expertise (for example in material selection or geometries) and realize synergy effects. This either takes the form of joint project teams, or the customer provides the supplier with design plans at an early stage of the project to obtain input for elastomer or plastic molded parts.

Tip

Early contact is usually preferable for both sides, as crisis situations with tight deadlines can thus be avoided. Unfortunately, some manufacturing companies still underestimate the complexity of rubber and plastic parts and contact their suppliers too late.

Technical integration

The days when companies placed orders by fax are largely over. Today, almost all orders are received electronically by suppliers. However, there are differences in terms of the depth of integration.

Especially for small companies, e-mail is still the primary communication channel for exchanging information with suppliers. However, it has to be sent manually, which always involves a risk of error. In addition, the workload is relatively high.
For larger companies, an EDI connection to their suppliers is common. This enables both sides to exchange purchase orders, delivery bills and invoices digitally. For example, the customer can provide a dynamic preview of its goods requirements for the next six months (calculated on a rolling basis from production planning data in the ERP system), which allows the supplier to prepare production orders and deliveries at an early stage.
An alternative is to network the ERP systems of the customer and supplier so that a demand for goods or low inventory on the customer side automatically triggers an order in the supplier's ERP system. This is functionally equivalent to an EDI connection, but without an EDI server. This option is particularly attractive for price-sensitive customers.

Process integration in purchasing

Probably the most common procedural integration in the purchasing of rubber and plastic components is the use of framework agreements. Here, the supplier agrees to provide the customer with an agreed quantity of goods at the agreed conditions over a certain period of time. In practice, there are two options for implementing framework agreements:

Firstly, the customer and supplier can agree fixed delivery dates for quotas of goods, for example once a quarter. This option is primarily suitable for companies that can plan their requirements for rubber and plastic components relatively precisely.
Secondly, both sides can negotiate delivery lots . These are fixed quotas of goods that the supplier holds ready for call-off over a specific period (for example, quarterly). The customer can make flexible use of these quantities, which makes this option attractive for companies with less planning certainty.

Collaboration in logistics

In logistics, supplier integration is primarily aimed at reducing frictional losses so that materials and components arrive more quickly where they are needed. One important starting point is order picking. If the supplier delivers goods in packaging units that correspond to the customer’s planned consumption over a certain period of time, there is no need for the customer to decant and sort. This not only reduces the time spent by warehouse personnel, but also the amount of packaging waste.

For example, if the supplier knows how much material the customer will consume for an average production order, he can pre-pack the corresponding quantities of items and fill them into small load carriers, such as those used on the customer’s factory floor. The latter can take the boxes directly from the delivered pallet and process them further. The intermediate steps of decanting and sorting are eliminated.

Special features for rubber and plastic

As far as elastomer components are concerned, production companies should be aware that rubber compounds have a limited shelf life. After about four weeks, the material starts to overage and loses some of its properties. In addition, there is a risk of pre-vulcanization if temperature specifications are not met during transport.

As a result, rubber supply chains are somewhat more fragile than is the case with other materials. On-time deliveries are all the more important in these industries because they cannot keep a buffer in stock for the long term. If there are delivery problems with individual components of a rubber compound, the delivery dates of the finished component are quickly put in jeopardy. This can even affect several suppliers if the component is rare and only a few suppliers have it in their range. It therefore makes sense for production companies to maintain redundancies in their supply chain and, in case of doubt, to release several rubber compounds so that they can react more flexibly to disruptions.

Conclusion

There are many ways to achieve closer integration with suppliers, from technical interfaces to framework agreements in purchasing to joint development projects. However, manufacturing companies only achieve synergy effects when they combine these approaches and work hand in hand with suppliers. This type of supplier management is somewhat more costly, but the benefits are worth it – especially in times of crisis.

Whitepaper:
Secure the Start of Production

Learn which factors influence your SOP!

Author: Ralf Aumann

Ralf Aumann heads the Supply Chain Management division at Jäger. As a graduate in production engineering and mechanical engineering, he joined the company in 2010 after holding several positions in the automotive industry.

r.aumann@jaeger-gk.de | +49 511 5358 131

Share this post!