Bill of materials | Manufacturing, your supply chain and COVID-19
This series looks at manufacturing supply chain challenges and opportunities resulting from COVID-19. See the full list of topics covered at the bottom of this article.
In the first instalment of our series on supply chain challenges while manufacturing during COVID-19, we emphasized the importance of re-evaluating forecasting to allow for uncertainty and changing demands.
In this instalment, we focus on your bill of materials (BOM).
Bill of materials: What’s changing?
Given the uncertainty at present, it’s critical to keep an active dialogue with your suppliers and stay informed of any capacity changes, such as delays or shortages in raw materials or parts. (Is your supplier aware of substitute materials?)
Review these components of your BOM:
- Minimum order quantities (MOQ): Can they be reduced?
- Order lead times: Have they increased or decreased?
- Prices: Are they up or down?
- Economic order quantities (EOQ) and freight charges: Are they up or down?
- Substitute components: Are these needed? Which would be fine and which absolutely won’t work? Check it out.
- Single-sourced components/sub-assemblies, or ones manufactured by one OEM: If these are critical to your product, will a disruption be detrimental? (Sometimes these components are upstream of your supplier, so look carefully).
Bill of materials and COVID-19: An opportunity to reassess
Many ventures can take this opportunity of the many changes forced by COVID-19 to retune their BOM. Look for possible favourable supplier changes to MOQ, lead times to order, and pricing. All of these may have shifted to the advantage of small ventures, with both lower costs and shorter time frames.
Tip: Ask if you can renegotiate with your current suppliers. They may have more flexibility right now (price, quantities, lead times). If they still require a big order, ask if they can deliver over multiple timed shipments.
Tip: Check alternate suppliers. They may have higher or lower (or more flexible) order quantities, lead times and pricing.
Tip: Try negotiating more favourable payment terms—e.g., 60–90 days, or an extension to your usual terms. Much is on the table right now and big companies want orders post-COVID-19 too.
Tip: Consider finding equivalent parts or pre-purchase critical components.
Tip: If another industry player needs to liquidate, see if you can inexpensively source machinery or materials, or hire skilled staff.
Tip: Take advantage of any current manufacturing downtime to review your overall efficiency and test alternate components.