Why Partnerships Are More Important than Ever in Manufacturing

The Alard Engineering team is troubled by the state of manufacturing today. 

Industry issues are stressing an already vulnerable supply chain and prohibiting CNC machine shops from doing quality work. If manufacturers and customers don’t come together to solve these problems, many shops won’t be able to stay in business. 

Let’s explore the current challenges in manufacturing, the implications for machine shops and customers, and the actions we can take to move toward a more collaborative future. 

Current Challenges in the Manufacturing Industry

Here’s a look at a few of the current challenges affecting manufacturing: 

Supply chain issues

Supply chain issues began in 2020 with the onset of the pandemic. However, events in the following years have continued the disruption, including the Russia-Ukraine war, weather-related disasters, and strike threats. 

The pressure on the supply chain to ramp up production rapidly is mounting, but the reality is that the system remains weak. Material shortages, labor issues, and high prices persist, impacting the production of critical parts in defense and aerospace machining.

Transactional relationships

There was a time when the manufacturing supply chain provided easy access to materials and labor, and suppliers were united by a common interest in national security. During World War II, this robust system enabled the production of ships and planes in mere months. 

Today, transactional relationships throughout the supply chain plague the industry. Customers have unrealistic expectations regarding the complexities of production in the current climate. As a result, they’re not willing to pay more for their parts or allow extra time to receive them.

Limited visibility

Because of these transactional relationships, manufacturers often have limited visibility into customers’ future demands, complicating planning and execution. Customers may withhold critical information until RFQs and purchase orders are submitted. By then, it’s too late for the manufacturer to meet the deadline with quality parts because the supply chain is being rushed.

Implications for Precision Machining Shops and Customers

These challenges impact precision machine shops and customers in a few key ways: 

Extended payment terms and order-to-cash cycles

Longer payment terms and prolonged order-to-cash cycles financially strain suppliers. Years ago, payment terms averaged around net 15. Now, the average is anywhere between net 60 and net 90. 

The average order-to-cash cycle used to be about three months. Today, it’s six to nine months. No matter how big a supplier is or how much cash they have on the balance sheet, they will inevitably run out of money under these circumstances.

Rapid scaling pressure

As the pressure mounts on smaller, less-equipped shops to do more with less, it’s getting harder for these businesses to survive, let alone thrive. There may be plenty of manufacturing work available, but what happens when CNC machine shops must fold because they can’t handle the demand—and only a few are left in business? That’s the direction the industry is hurtling toward at an increasingly fast pace.

Speed at the expense of quality

When customers request a rush to meet their demands, it often compromises the quality of parts the precision machine shop produces. There’s no time to ask questions—more importantly, the right questions—and the end result is not what it could have been had there been time for a conversation. 

How to Move Toward a Prosperous Future Together

Manufacturers and customers everywhere must come together to work toward a prosperous future. Here’s what we propose: 

Understanding and empathy

To improve the state of the industry, the supply chain's upper tiers must understand and empathize with the challenges contract manufacturers face. Material is scarce, pressure is great, costs are rising, and orders are taking longer. We’re all suffering from long lead times; let’s work together to get ahead of the issue.

Open communication

Customers can play a crucial role in navigating these challenges by forecasting their needs and getting CNC machine shops involved earlier. Enhanced visibility and open communication significantly help the planning process and the ability to meet demands more efficiently. Alerting machine shops about a contract you’re working to secure allows them to prepare for the project.

Realistic contract arrangements

Contracts should reflect the realities of the current supply chain. A long-term agreement must include specific details such as minimum order buys to fulfill demand over the next several years. Otherwise, shops won’t have enough visibility to plan and execute projects properly. By providing essential information upfront, the customer can get better prices on materials, quicker turnarounds, and better products.

Alard Engineering’s Commitment to Being an Excellent Partner

The future of manufacturing hinges on building strong partnerships. Alard Engineering recognizes that we must do our part to foster true collaboration with our customers by focusing on mutual benefits and long-term goals.

Our next blog post will discuss how our team is investing in partnerships and signaling a new era of cooperation and mutual growth in the industry. 

What are your thoughts on the manufacturing industry and our proposed solutions? Contact us with your feedback.