Before working at Doe & Ingalls, I was a Buyer/Planner in Global Strategic Sourcing for a well-known pharmaceutical company. During my time in this role, I was very fortunate to have strong distribution and supply chain partners to help buffer my company from raw material issues that could negatively impact production.

As we face the tightening of the Hydrochloric Acid market, I am brought back to George Santayana’s words, “Those who cannot remember the past are condemned to repeat it.”   In keeping up with our day-to-day activities, it is extremely challenging to detect supply issues in a timely fashion.  Unfortunately, sometimes we also do not have an appropriate alternative source to fall back on when these situations occur. 

We have faced numerous situations over the recent years that impacted supply of raw materials.  The strike at Potash Corporation in 2008 haunted us for months.  In 2009, we faced Acetonitrile shortages that drove pricing through the roof - if you could even find products available.  Then there were the countless times that a particular supplier had production or testing issues,  resulting in a panicked rush to find another source of material and the need to qualify it with countless deviations.

To ensure uninterrupted raw material supply, time and resources need to be actively allocated to support second sourcing.  In addition to the usual criteria for second sources such as grade, specifications, facility/process certifications and appropriateness of packaging, I’d like to share some often overlooked criteria:

1. Is this a true second source or is the material simply being repacked by a different outfit?  Furthermore, how far back do we need to uncover the supply chain trail (i.e. mines, wells, etc.)?
2. Are the manufacturing processes of the proposed second source comparable to your current source?  Are there any potential differences in the starting raw materials?  If so, will any of these differences affect your process or your product quality? If there is a difference, are your qualification systems and practices robust enough to uncover any potential issues?
3. Does the proposed second source have the capacity to support your full demand if your primary source goes offline for an extended period of time? 
4. Is the proposed second source financially stable (i.e. not at risk of going out of business)?
5. Will you need to allocate a portion of your order each year to the second source to ensure they will support your needs in a time of crisis as well as support your Change Notification expectations?

In my role today at Doe & Ingalls, I’m part of a team that helps our customers find the right raw material sources and avoid supply issues. Our Smart Sourcing™ program helps customers identify and qualify effective primary and secondary sources. Then with MOR™ (Management of Risk), we continually monitor the market for the key chemicals our customers purchase. If an issue comes up that would require activation of an alternate source (or other planning), we let customers know, ideally before the rest of the marketplace makes a grab on available supply.

While it is important to source critical materials first, remember recent years have proved that this is not enough.  A rule I live by, imprinted in my head by a friend, is this: it only takes a ten dollar item to shut down production.