What Manufacturers Need To Know About Supply Chain Evolution in 2022
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How can I improve ROI while lowering the threat of worldwide market disruptions?
Major manufacturers have begun moving away from their home countries to take advantage of lower costs for offshore manufacturing while, at the same time, increasing their returns on investment (ROI). More goods and services are made in other countries and not just in one industry.
Globalization has helped stimulate world trade, increasing international production chains and encouraging companies to move into new markets that were previously too expensive or difficult to reach with traditional business models.
The Manufacturing value chain consists of three main parts:
- The upstream activities such as R&D, engineering, procurement
- The midstream activities such as manufacturing
- The downstream activities such as sales and marketing
The statistically biased decision to attribute the whole commercial value to a single country of origin or supplier within that country may result in misleading conclusions.
To achieve long-term success, an organization’s manufacturers must understand the evolution of the supply chain trends within these interconnected global market forces. They need to understand better how changes may affect their operations through the entire supply chain – from the supply chain management strategies employed in this article.
Why do I need supply chain evolution to support my manufacturing needs?
A supply-chain failure occurs whenever the product or process has been disrupted in production or distribution. Supply chain disruption includes disasters, regional conflicts, and epidemics.
The COVID Pandemic has delivered an unprecedented and broad value chain shock to the global economy. The latest disruption was not the first. In 2011 a major earthquake destroyed Japan’s electronics manufacturing plant. Supplies from it had been halted globally after failing.
The accident shattered the world’s largest manufacturer of high-performance silicon wafers. Several weeks later, flooding destroyed manufacturing plants in Thailand which produce nearly half of all hard drives on Earth, leaving computer manufacturers scrambling.
So, disruptions will always be with us. But, it’s up to us to mitigate the risks.
Supply chain disruptions exploit vulnerabilities within companies and value chains
The shift toward just-in-time global manufacturing systems has improved efficiency and reduced the need for working capital. But now, the pendulum may be swinging in the other direction. The presence of adequate backup stock is critical to reducing the costs of disruption to supply.
It also positions businesses positively if a sudden high demand occurs after experiencing the shock of rerouted components across multiple sites. This continuity requires robust digital systems and analytical power for running scenarios that depend on answers.
Supply chain disruptions exploit weak spots of a wider value chain or a particular company. Supply Chain activities within a company are vulnerable or resilient depending on its capability to monitor risk, implement mitigation strategies, and establish a business continuity plan.
This vulnerability exists in certain industry segments: Perishability of agricultural products, for example, means the associated value chains are highly susceptible. An industry with variable seasonal or cyclical demands can also face particular problems.
What tools can I use to reduce my exposure to supply chain disruptions?
Using the right precautions to prevent supply chain disruptions can help reduce recovery times. Although businesses depend on multiple vendors, those vendors can be concentrated at different sites. Identifying, qualifying, and involving backup vendors is expensive. Nevertheless, this is useful in light of potential crises.
A supply chain firm must use risk management software to improve the team’s efficiency.
- Machine learning and big data analytics can be used to help manage risks, such as weather events that could reduce agricultural yields in a given region. These tools can also help identify unknown or unlikely threats.
- A supply chain solution should include features that allow businesses to scan for strengths and weaknesses across their global operations and prioritize remediation strategies based on priority level and associated cost benefits. It also helps with early warnings associated with imminent disruptions while they are developing.
The supply chain must understand its whole ecosystem.
- For any retail or manufacturing business, supply chains must evolve to adopt a holistic approach: understanding what impacts your supply chain and understanding where you sit within the value chain. The ability to understand what is happening in your own business and look outward to see how other businesses are interacting with them (and vice versa) becomes crucial.
- Supply chain technology can deliver an end-to-end view of the enterprise activities that allows for real-time monitoring of all key business processes across multiple sites; display data on performance measures; monitor inventory levels; track delivery schedules; determine variances against the plan (e.g., is demand exceeding or falling below expectations?); detect changes in order patterns, resource requirements or material movements; flag security issues such as fraud or theft; and so on.
The latter point is vital since unforeseen events can rapidly alter the supply chain. Only by closely monitoring your supply chain can you spot any changes in demand or supply.
A true supply chain guide will consist of several components working together to deliver an end-to-end view of the operational activities across the whole business. These may include:
Customer Relationship Management (CRM)
- Segmenting and tracking all client requirements
- Communicating process status in real time
Project management tools
- e.g., Microsoft Project for supply chain planning, forecasting, replenishment, and operations management
Warehouse management software (WMS)
Transportation Management System (TMS)
Voice Over Internet Protocol (VOIP)
- e.g., Zoom factory tours
- to increase communication and collaboration with other audio and video solutions
Team & collaboration software
- e.g., Microsoft Teams with multiple ways of staying connected, accessing content from anywhere, and even being able to invite other people into meetings via video call or screen share
Global employees & offices
- to streamline workflow with those savvy in local industries, languages, politics, etc.
Design For Manufacturability & Assembly (DFMA) experts
- Lower part count
- Reduced assembly time
- Better understanding. Reduced design iterations. Fewer surprises.
- Product to market faster
Quality Control Department
- e.g., supplier quality engineers
- to provide accurate measurements (i.e., to certify conformance to all dimensional requirements and mechanical properties)
- read about Optical Measurement Innovation here.
Excellent supplier relationships
- Working with a supply chain expert with excellent supplier relationships gives you peace of mind, knowing that they are there for any issue or problem.
- They’ll also help out when disruptions arise because their knowledge can provide additional resourcefulness and flexibility in those tough situations.
- e.g., electric trucks
- Some regulatory agencies will require it, plus it’s the right thing to do.
Analyzing global trade data
- to publish global trade data reports for clients
- evaluate suppliers
- monitor competitors
- research markets
Managing these activities provides additional insights into the broader supply chain ecosystem, helping manufacturers avoid expensive disruptions.
How can I use the supply chain to minimize disruptions to my manufacturing operation?
Disruptions to the manufacturing operation can be costly.
The supply chain can minimize disruptions by using a global sourcing strategy. This type of strategy allows the supply chain to source parts and materials from around the globe. And ensures a steady flow of supplies, even if there are disruptions in one region.
For example, while China has been and continues to be a significant source of products to the supply chain, there always exists a possibility of disruption due to politics, natural disasters, etc. Therefore, India is a trending region being developed as a strong source of low-cost, high-quality components to mitigate risks.
Another way the supply chain can minimize disruptions is by using manufacturing collaboration between suppliers and manufacturers. This process helps increase communication, which can help both parties better manage disruptions in supplies and the flow of materials.
Working together to communicate and understand what needs to be shared also builds trust and relationships between all parties involved in production and bringing goods to market.
FAQs (Frequently Asked Questions)
What is the value supply chain?
The value chain is when an organization adds value to raw materials and ultimately sells them to customers. The supply chain represents each step needed in a customer’s supply chain.
The global value chain is a way to organize companies around their core competencies. Manufacturers often work alongside suppliers and customers to build products that meet customer needs with lower costs while creating further innovation and customization opportunities.
What are supply chain constraints?
The constraints in supply chain development consist of three main types: the production constraint, the flow constraint, and the storage constraint. The following constraints must be identified over the entire length of the supply chain to achieve optimum possible supply planning.
What are the five phases of a value chain?
The five primary business areas that make the greatest profit are:
- inbound shipping
- outbound shipping
What are global value chains, and why do they matter?
As production becomes fragmented and networked across numerous regions, it causes consequences on industrial development. Global value chains break up the production process into activities in multiple countries (e.g., China, Taiwan, India, etc.). This division-of-labor concept dates back to Adam Smith‘s time—where pin manufacturing was divided into various operations in the same manufacturing facility that dedicated employees executed.
Why is a global value chain important?
Trade liberalization is critical for the promotion, innovation, and growth of global trade. Global Value Chains (GVC) are clear proof of the potential benefit of generating and exporting products. A value chain analysis can help companies evaluate and identify opportunities.
Get sourcing solutions, not disruptions. Learn more…
Whether you’re exploring options for a new product or you have an existing one that you’d like to put into production, The Federal Group USA will give you the data and the tools you need to make an informed sourcing decision for your next product—optimized for your manufacturing operation.