How to Reduce Supply Chain Risk with Digital Factories
In this session, aPriori experts will walk you through some of the plays we have available within our tool, focusing on running a set of parts in aP Pro and utilizing our aP Analytics platform for analysis. The aim is to provide new or further visibility into some of the aPriori functionality, to increase exposure and understanding of costs, and to equip you with the tools required to reduce supply chain risk.
Michelle Harvey: Hi everyone and welcome to Reducing Supply Chain Risk Whilst Increasing Exposure and Understanding of Available Regions, Suppliers and Routings. My name is Michelle Harvey and I’m an Expert Services Consultant at aPriori based in Belfast in Northern Ireland, and I’ve been part of the aPriori team coming up four years in December. I’m joined today by my colleague, Kraig Pereira. He is also an Expert Services Consultant and based on the East Coast of America. So thanks for joining me, Kraig.
Kraig Pereira: Yeah, you’re welcome. Thanks for having me. Welcome everyone.
So the intent of today’s session is to walk you through some of the plays we have available within our tool, focusing on running a set of parts in aP Pro and utilizing our aP Analytics platform for analysis. The aim is to provide new or further visibility into some of the aPriori functionality, to also enable increased exposure and understanding of costs and to equip you with the tools required to reduce supply chain risk.
Global Supply Chain Leaders’ Post Pandemic Plans
Given the current climate, 33% of sourcing leaders plan to move business out of China by 2023. From 2018-2019, US imports from China decreased by $90 billion. During the same time imports from other low cost Asian countries increased by $31 billion, and Mexico also increased by $13 billion. So this is just one example of change and this has been intensified by COVID-19.
Examples: How Managing Supply Chain Risks Can Result in Competitive Advantage
Today’s presentation will give a high level overview of some of the capabilities within our product to help you with visibility into supply chain risk management. Opportunities such as exploring new and different process routings and whether this will save time or cost, how the costed region can have direct impact on cost, and exploring how new suppliers can provide increased insight into cost impacts. One of our customers found a potential savings of over $500,000 for just five parts by changing the manufacturing process routing from stock machining to casting. Another customer found a 50% cost difference on a part set costed in two of their potential supplier regions. I’d like to highlight, the order in which I present the alternatives today, this is definitely interchangeable depending on industry and the part sets that you’re costing with. We must also account for other factors, including shipping, logistics and tariffs, and I’m happy to help answer any questions regarding the order of these alternatives.
1. Real-Time Risk Mitigation Strategies
So the first alternative we will explore in our demo is the alternative routing play. The outcome of this play will be to provide the visibility of any cost or time savings by changing the process routing. This in turn may increase the numbers of suppliers able to produce the parts in question. Benefits of this include increased market, which in turn creates a competitive market. Another benefit is the ability to determine feasibility and relative cost by selecting a new routing. And finally, the ability to minimize the cost impact of current production in parts associated with the routing alternatives. In the demo today, my alternative routings are within the same process group. However, changing process groups is also viable depending on a number of factors, including raw material and part type.
2. Vulnerabilities in Certain Regions Can Lead to Supply Chain Disruption
The next alternative we will look at is taking the increased options for process routings and costing these in a number of regions. This will help us eliminate higher costing regions and provide insight into potentially new regions. Another outcome will be to determine whether the part is a good candidate for repatriation. Some of the benefits of this include the ability to quickly determine relative cost in varying regions, understanding if these parts are suitable to repatriate, and if deciding to relocate, the ability to note the lowest cost region that has established suppliers with the least logistical pitfalls.
3. Evaluate Your Supplier Ecosystem Based On Profitability Opportunities
And finally, we will evaluate the parts with the highest cost outliers or opportunity for potential savings, then explore, analyze, then narrow our manufacturing sources for these parts. Benefits of this include the ability to determine whether or not certain suppliers would have the capacity to manufacture your required part, and the relative cost of your parts within each source, and the cost impacts of relocating, whether it’s via repatriation or a new supplier with an existing or new region. This is just a visual representation of an example outcome of our proposed plays. Depending on the intention, we would be able to determine a new or increased range of regions and suppliers, whilst exploring feasibility of routings and gain a better understanding of cost implications.
Risk Identification Demo
So within the demo, I will walk through a part set of sheet metal components. So this is obviously interchangeable depending on your part types as mentioned. I’ve also chosen a number of regions, which may not be directly applicable for your use case, but hopefully, at least one, if not most of these reports will be of interest and applicable to your use case. The first report we’re gonna take a look at is the alternative routing report. So this will provide insight into how changing the routing affects the impact of cost on the parts. It will also allow us to check the feasibility of the routing. This will also allow us to determine whether certain parts are suitable to a change in routing leading to an increased number of potential suppliers.
So I’m just gonna change my login here. Perfect. So the first report we’re taking a look at is an ad hoc report. So this is a custom report that we have built, and the first one is the routing comparison report as mentioned. So as we can see here, what we have is a given set of parts within the sheet metal process group. And as mentioned, I have not changed the process group. It’s all within the sheet metal, but again, it could be that you’re changing between multiple process groups. In this case, I’m looking at progressive die, bend brake, turret press, laser cut, and waterjet cut as my potential routings. Well, another thing to note is this is based on relative annual volume. So this is our annual volume multiplied by our piece part cost.
So what we can see in this report is our part side by side alongside our feasible routings. So an example here, this long thin plate does not have all available five routings due to feasibility. The neat thing about this report is, in this example here in the bracket thick, we can see that we have a feasible routing for each of the available routings that we’re looking at, and if we hover over each of them, we can see the relative annual cost and the process group in question. So in this example, our turret press is coming out as most expensive part. If we hover over to the bottom, we have laser cut, which is our cheapest in this example.
I’m gonna jump back to our presentation. The next report we will look at is alternative routings report. This report will allow us to compare the same part set in varying regions and note how the cost is impacted. This will also allow us to identify if any parts are suitable candidates for repatriation. Similarly to the last report, this allows us for potential increased supplier base, leading to a more competitive market. So again, as mentioned, this is another ad hoc or custom report. So I’m just gonna jump to the regional comparison report. So what we can see here is the same part set that we looked at in our previous example, and we may have varying or optional routings here. But over here on the right hand side and directly below here, I have my given set of regions that I’m applying to, and obviously, you can apply supplier regions or your own custom regions. In this example, I have my baseline regions here.
One thing to note as well, I have based this on one particular volume, in this example, 1000. This may then be high, medium or low volume depending on your use case. So what we can see here is we have our scenario fully burdened cost and our parts, and what we have the ability within this report is to change the routings, or at least give some visibility of the impact of the cost in each of these regions. So straight away, with this part set, I can see if I hover over the USA, aPriori USA is my highest costing region. So I can just toggle that on and off. So then I can start to narrow my field of potential regions. By narrowing both Italy and aPriori United Kingdom, my next two regions, I can see, within a couple of minutes, the same part set costed in China, Mexico, and India with the same annual volume, we can see that it’s starting to get closer in terms of potential costings within those regions. So those would be potentially three regions that I could take a look at and maybe include the likes of logistics or further processes such as surface treatment or machining if I have not accounted for those already.
One thing I’m gonna jump back to is, within our ad hoc report, we can jump to the particular part type, and by changing this chart type back to bar chart, the difference with this one is I’m gonna focus now on potential repatriation efforts from the same part set. So what we can see here, again, we can see bracket basic or bracket thick, pardon me, is our highest costing part. But an example of a potential part for repatriation would be one that has a little discrepancy or I guess lower variance between costing regions. So an example here would be our base plate. So we can see that the fully burdened cost variance between regions is maybe not as high as this one. So potentially, this one, and maybe a few others, would be potential candidates for repatriation, assuming USA, in this example, would be my home nation. Likewise, over here, this would probably be one of the last parts that I would consider for repatriation due to the high cost within the home region.
One final report I wanna take a look at within the regions is then taking those regions and basing it on volumes as I mentioned. So as we mentioned earlier, my initial part set was based on an annual volume of 1000. If this is something that potentially you’re looking at increasing the volume and how that would impact the cost at an annual volume, what we can do is just toggle over here and I can change my regions to, example, aPriori China and aPriori India. And what I have here, if you see on the bottom, is in this example, three varying volumes, so 100, 1000 and 10,000. So what this now allows us to do is to, first of all, narrow or increase the regions, then narrow and refine by the lower costing regions, and then if it is applicable that potentially you’re bringing in sales to, if you were to increase the annual capacity that you purchased from that supplier, how that would have direct implications on the overall cost.
So what I’ll note and take away straight away is our lower volumes, and what we can see here is the three remaining volumes would be aPriori China at 10,000, aPriori India at 10,000 and aPriori India at 1000. So what we can see is, very quickly, our refined regions and how the impact of the annual volume will also have direct impact on the cost.
Cost Outliers: Bottlenecks to Profitability
So the next report we’re gonna take a look at is called the Outlier Identification Report, and this is one of our standard or out-of-the-box reports. This report is focusing on a refined dataset and allows us to evaluate the parts with the highest cost outliers or potentials for negotiation within the suppliers. For this example, this could be focused on one particular potential supplier or already existing supplier, and we can have updated routings based on the previous report. So it could be additional routings or routings that we’re already considering with that particular supplier. So walking through this report will allow us to analyze, then refine the manufacturing sources for this part set.
Perfect. So we have our cost outlier identification report here, and again, this is specific on the same sheet metal part set that I’ve worked with before. This time, what we may also include is if we know that particular supplier has alternative routings as an option, we can include those here as well. In this example here, we have a given set of parts and we have included the suppliers quote and we’ve also got aPriori sheet cost, and what we can see is the annualized potential savings of those differences. So what this report allows us to see is a side-by-side comparison of our cost outliers. So in the past, potentially looking at a part over here and has a potential savings of just over $9000. Instead of spending effort and time negotiating the smaller potential saving parts, we can take a look and see straight away within this report that we have three or four contenders within this given part set that have a higher potential for negotiation. So these would be the parts that we can start to focus with that supplier partnership on for negotiation.
The chart below also then represents the same part set and the percent difference between that supplier as well, which you can see by hovering over. A couple of things, we can do with this report, alongside any of the reports I’ve demoed already, is we can export to PDF or Word document or Excel, depending on your particular quite pit requirements. By jumping over here on the right hand side, we have a details option, and what this allows us to do is to jump from that graph and bring it into a tabular form. So what we can still see, in ascending order, is the part set that we have been given here and the potential savings in highest ranking order first. So this then also can be exported to PDF as mentioned. So this gives it in tabular view.
Decision Making Methodology: Which Parts to Negotiate?
And one thing we can also do as well, on the particular part, individual components, so if for example, I’m in negotiations with the supplier, I know that these would be my first three parts that I want to take a look at, I could click on the particular part itself and it will bring me, similarly to the part details or part cost report within aP Pro, it will give me the thumbnail and high level details of that particular component. Within that, obviously, we’ve got information including production information, our cost information and raw material information. And if I just jump over here, we can also then get into further detail, including manufacturing process routings, the cost estimate breakdown at a total level or process group by process group level. So this is something that we can bring in obviously to that supplier negotiation, but it also allows us to jump back to aP Pro if necessary.
The final report that we’ll take a look through today is the capacity planning report. So again, specific to our source and suppliers. Similarly to our previous report, we can set this report to focus on a specific supplier and determine whether or not they would have the required annual capacity for the given part set. So what I’m gonna do here is jump into this report and export it to PDF. It’s just a little easier to see from PDF.
So while that’s loading, as I mentioned, the previous report and this report are specific to the actual suppliers, and this is something that we can take into particular supplier negotiations. So it may be that it’s a potential supplier, and you’ve been able to attain the quotes from that supplier. And what this report will allow us to see is the capacity required by that particular supplier. So again, as mentioned, this is the same part set that we’ve been looking at through the previous reports, and what we can see straight away is the time required for any given process for this particular part. So obviously, this is not required in total. It’s a process group by process group time requirement. So what I’ll start off as an example would be, if we are going to your supplier that is focusing on manufacturing within waterjet cut for this particular part set, we can see straight away that the annual capacity, so the annual volume in hours, would be this time requirement for this part set.
So we can see straight away, would they even have that capacity, and are they accounting for depending on the part process group, are we taking into account tool change, machine downtime, other factors similar to that? Another example about this report would be, you can see here, within the progressive die, that we have varying press force machines required for this part set. So again, this could be something that we could even take a look at further in saying, if we were to potentially move one part into a different press for it to avail further capacity for other projects and how that would directly impact the overall cost of the parts.
One other thing I want to focus on is, within this report, and if we take a jump back to our first report on the available routings, the bracket thick was most expensive for turret press and cheapest within laser cut. But what we can see within this report is the actual time required to manufacture this particular part within turret press is a heck of a lot lower in terms of hours for our laser cut. So this is, again, another area that we can start to look at, the time versus cost impact on the parts. So this potentially could incorporate sales in terms of if we increase the annual volume and purchase more from a particular supplier, how would that directly impact the overall cost from a time or cost standpoint?
Cost Evaluation of Existing Parts for Increased Profitability
So we are coming up to the end of today’s presentation, and I wanted to give a quick recap on what we’ve covered today. So walking through a variety of reports, based on alternative routings, regions and sources, enabled us to attain greater insights into our existing parts. This increased visibility and impact of cost or time savings by changing the process routings, as mentioned, determining whether or not changing the region or repatriating would lead to a decrease in effort or cost, and gaining greater insights into the capacity required and potential for negotiations with varying suppliers.
At this time, we’d like to take a couple of minutes to respond to some of your questions. We’ll bring Kraig back in to start to answer some of those questions.
Kraig Pereira: Hey, good afternoon everyone. Thank you for joining the session. We’re pretty lucky we have a decent amount of questions today, Michelle, so we can start to go through those. And if anybody else has additional questions, please feel free to drop those in the chat for the session, not the Zoom chat, and we’ll get to those first come first serve. So one of the first questions that we have was, what happens if I’m not licensed for a region I want to evaluate?
KP: Okay, perfect. So that’s a really good question, and I guess it’s something that we can ask your CSM or Client Success Manager if you don’t have expert services, and it’s something that if you have expert services, we could potentially cost those parts within that region for you. And if it’s something then that you’d like to pursue, it’s definitely then something within licensing and your CSM that we can follow up with. And if it’s not something that you have… Oh, sorry, if you don’t have expert services, we can definitely help with the CSM, and it may be a case of switching current regions that you have availability of or potentially discussing engaging more purchasing in other regions.
Awesome. Thank you, Michelle. Great answer. The next question that we have is, how many total regions are there available to users?
MH: Yeah, that’s a really good question. So it’s something that we are constantly working on to ensure that we have great coverage globally but also trying to start to break down per regions within a larger physical location. So at the moment, I think we have over 80 regions, and I know we’ve been adding some more regions in our most recent aPriori release.
KP: Awesome. Thank you, Michelle. The next two questions can probably be asked as one question, but how do I know which regions I can cost in and what do I do if I’m not licensed for a region?
MH: Okay, perfect. So I guess one of the first areas that we could take a look at, depending on what we call access control, when you’re in your aP Pro, on the left hand side in the cost guide, there’s a dropdown menu and that will allow us to see what regions we have access to, and then you’ll note whether their aPriori followed by our region or your customer or supplier name followed by our region. So one thing to note would be you’d probably have access to or understanding access by accessing the aPriori baseline regions. You may not necessarily have a particular customer or supplier region automatically created for you. So if you don’t know what regions you have a license for, again, that will be another great question to ask your CSM. They have access within your license to see what available regions you have and also whether you have any available to add into your license as well.
KP: Awesome. Thanks, Michelle. This wasn’t asked but it might be a good follow up question, is, how would a user know which process groups they’re licensed for?
MH: Again, a really good question. So in our aPriori Professional, we have a help in the top left corner, and then if you click view license, it’ll allows you to see on your screen what licenses or what process groups you’re licensed for. So it’ll give you a breakdown at the high level what it is and then the sub processes within that are operations. That’s one way to look at it, and again, similar to the previous answer, if you’re still not 100% sure, you can definitely ask your CSM and they would have the updated license list which includes process groups.
KP: Awesome. Awesome. Great answer. Thanks, Michelle. We have just a couple more questions. We can probably move through these pretty quickly. The next one is, how do I get access to the reports from the presentation today?
MH: Okay, perfect. Really good question. So if you have expert services, I would definitely request, if you’ve never seen aPriori cost insight reporting before, you can definitely ask them either for a follow up demo, but also they can help with gaining access. So it’s something your IT or system admin on your side has the ability to add. So they can… If you have an aPriori license, you automatically have a cost insight license, it just may mean your system admin may need to set you up with the login credentials, so they would add your username and provide the hyperlinks necessary to gain access.
KP: Awesome. Awesome. Thanks, Michelle. And the last question that we have is, what if I do not know my supplier’s capacity, I guess in relation to the supplier capacity report that you showed today?
MH: Yep, that’s a really good question. So I guess, depending on if it’s an established supplier or whether it’s a new supplier, if it is an established supplier, I guess that’s something that hopefully you’d be able to ask them regarding capacity, and if they’re not willing to delve into that, I guess it could be, we could start to provide some probing questions. So understanding if there’s any downtime, if you have any holidays, and start to to probe the questions there. I don’t know if there’s anything else you want to add there, Kraig, on that, but…
KP: Yeah, sure. There’s definitely the opportunity to compare suppliers that you do know the capacity of, that might have the same process manufacturing ability or produce similar parts. And then you can compare the capacity of one supplier to another supplier based on, like Michelle was saying, number of workdays in a year, work hours, number of machines that can produce the part, etcetera, and then try to get a gauge to understand if the supplier’s going to be able to support your endeavor or not. So that was the last question that we have, but I don’t see any more coming through the chat windows. I guess maybe one good follow up, Michelle, just so that everybody understands, you’ve mentioned expert services a couple of times today. Would you be able to just give a quick control to what expert services is and what we do?
MH: Sure, yep. So expert services is the technical support on the account. So you have your CSM or Client Success Manager, but as an expert service consultant, we have a varying range of capabilities that we can help provide. So examples would include that we would meet with you guys as a customer to align on the strategy of the account from as technical standpoint. So it may be that we meet on open items, there may be particular parts that you’d like help costing with, a play, such as some of the items that we’ve walked through today. It could also be helping create and configure, is the terminology we would use, a supplier location. So for example, if you have a new potential supplier or a supplier that you don’t have a particular digital factory for, we can help configure that for you. Likewise any enhancements within the functionality or working with general workflow and any technical issues within the account. So we have a number of different areas that we can cover and our portfolio is ever expanding. And we also have set hours, I guess, per month that we can provide of our services. So, yeah, I guess that was pretty much all I had from the expert services. I don’t know if there’s anything you wanted to add, Kraig?
KP: No, that was great, Michelle. No that pretty much covers everything, and essentially we are just trying to support and add value to aPriori as a software, and anything that that we can do to help our customers grow and find value with the software and save money or reduce time to design is what we’re here to do.
MH: Yep, perfect.
KP: And that just about covers it questions wise. Michelle, I don’t see any additional questions coming in.
MH: Okay, perfect. We can wrap up then. So I guess, thank you to everybody for attending the session today. If you are interested in digging deeper into this topic, you may wanna check out Harmon’s case study on collaboration with suppliers, and also there’s another webinar on matrix costing capabilities. I think those are both, two that may be applicable to your use case as an example. Lastly, we would love your feedback on the session. The session survey can be found on the session page under survey links and we’ll take you less than a minute to complete. So a final thank you on behalf of Kraig and myself. As you can see, our emails are applied or available on the screen that we currently have here, and we hope you have a lovely day wherever you are, whether it’s night or early morning.