What’s the current state of sourcing for mid-market manufacturers? Why is reassessment such a pressing need right now?
Many simply wait too long to take a deep look. They stick with what has worked in the past, even as warning signs continue to pop up. Common triggers include operations disruptions due to poor quality or delivery delays, cost increases from tariffs, or simple miscommunication with suppliers. We saw it many times during the pandemic – logistics costs jumped, and companies had to scramble. Any major cost hike or disruption should trigger a reassessment. And yet, many hesitate.
What’s behind the hesitation?
One of the biggest reasons is overconfidence in their current supply base. Companies believe they can react when needed instead of being proactive. However, by the time poor quality shows up – often 60 or 90 days after production – the cake is baked and there’s more of that product in the pipeline. Needless to say, this is a very expensive problem to fix after the fact. A well-run Sales & Operations Planning (S&OP) process should be constantly evaluating supplier performance: Are they meeting lead times? Quality standards? Cost expectations? If not, it’s time to start asking questions.
How can companies tell if they’re being proactive enough?
The ones that do it well stay on their toes and look around corners. As an example, one firm we worked with moved quickly during round one of the tariffs eight years ago and they diversified their sourcing base ahead of the curve. They continue to benefit from those prescient decisions. Proactive teams also stress test their supply chain on a regular basis, again by raising questions. What if a critical supplier fails? What if geopolitical instability hits a key region? They don’t wait for disruption to strike—they scenario-plan and act early.
We all know how fast the picture can shift. Realistically, how far ahead can companies be planning?
Twelve months as a baseline, but ideally 18 to 24 months. That gives enough visibility to start conversations today that may affect production and sourcing six months down the road. It also allows time for phased transitions rather than emergency changes. When you’re constantly living inside a 90-day planning window, you’re in survival mode. You need that long-term view to build resilience.
What types of questions should companies be asking to start this reassessment?
They should focus on the what-ifs. For example, what if there’s a labor strike, port closure, or natural disaster? How quickly can we pivot? Can we continue to supply our customers? If the answer is “we don’t know,” or worse, “no,” then it’s time to look at alternative sources, different regions, or even design changes that can make manufacturing less risky. Single-source dependencies, especially in volatile regions, can be acutely dangerous.
Diversification of sourcing is crucial. What’s the best way to go about this?
It starts with a risk assessment. The parts or suppliers that pose the biggest threat to your operations if disrupted should be priority number one. From there, explore alternatives such as dual sourcing, nearshoring, or automation, all of which can reduce labor risks. As a recent example, we worked with a medical device company that was highly dependent on China for specialized, molded parts. They saw the risk early, moved to local suppliers, and used automation to reduce labor costs. They’re in a much stronger position now.
Changing suppliers can be disruptive – any pro tips for how firms can manage that tricky balance?
It comes down to the best-laid plans. Good, thoughtful planning is the key, and we approach the process in three general phases – assess current risk, identify alternatives, and build a phased execution plan. This includes things like planning inventory buffers, establishing timelines for transitioning suppliers, and ensuring continuity of service to customers. It’s not about cutting off a supplier overnight. It is all about transitioning seamlessly and minimizing risk throughout. Clear communication with internal teams and suppliers is critical during this process. There is no such thing as over communicating.
What metrics should companies be tracking to stay on top of sourcing health?
In addition to traditional KPIs such as on-time delivery and order fill rate, companies should be tracking supplier-specific metrics: Are they hitting lead times? Do they have recurring quality issues? Is their inventory aligned with demand? The goal is to integrate sourcing KPIs into your larger management system; not to just monitor them in isolation. That allows for faster issue detection and resolution. Just like investments in a financial portfolio, regular performance checks are essential.
Are certain industries more vulnerable than others right now?
Truthfully, there aren’t many places to hide – most industries are exposed in some way. Many that we work with rely on overseas suppliers, particularly in the Asia-Pacific region, for components, sub-assemblies, or finished goods. Electronics, for example, are particularly vulnerable due to the concentration of chip manufacturing in a few regions. But even industries like building materials or healthcare devices are affected. You could say it’s system wide.
Let’s shift to looking ahead – any emerging trends manufacturers should be preparing for?
Always. Moving forward, the increased geopolitical tensions and shifting trade policies mean companies need to prepare for more sudden disruptions. Second, tools that give you end-to-end supply chain visibility are becoming incredibly valuable. Companies that adopt and make wise use of advanced analytics and AI can model risks and make smarter decisions. And third, companies must evolve their Sales, Inventory, and Operations Planning (SIOP) processes to manage both internal operations and external supplier relationships holistically. We just helped a client with operations in two different regions – with two different demand cycles – build a unified 12 to 18-month SIOP plan across the sites. This gives the company a better view as to when production needs to shift and gives suppliers time to respond or act. The ideal mindset should be around cultivating a partnership.
How about a final takeaway – what three actions should mid-markets firms be taking right now to future-proof sourcing?
- Diversify – reduce risk by sourcing from multiple suppliers and regions.
- strong>Invest in visibility and smart technology – use tools and data to track your full supply chain, not just your tier-one vendors.
- Strengthen supplier relationships – treat your suppliers as equal partners. Good relationships help both sides adapt faster when things change.
