COVID, shipping and haulage issues, semiconductor shortages, changing workforce demographics, and Brexit are all hitting today's complex global supply chain, Fleur Doidge reports.
With supply chain disruption ongoing in a multitude of sectors, exacerbated by multiple factors from COVID to workforce demographics, the question has to be asked: how can manufacturing mitigate similar problems in future?
Jan Burian, Research Director at IDC Manufacturing Insights, says building in alternative options in defined, precise manufacturing is tricky. “As a first step, the supply chain might look at how it cooperates with research and development. It’s not just about being less dependent on certain materials or components,” he suggests.
Technology is already disrupting supplier and OEM relationships in favour of online networks of certified partners. Trust and standardisation can be key here, as well as innovative vision, coupled with attention to people, processes and culture as well as technology, beyond simply identifying ROI opportunities.
Burian says: “It requires a lot of data and outside access to data.” He notes that some of this is already happening. IDC analysis suggests that 90% of global manufacturing supply chains had invested in technologies and business processes for resiliency by December 2021.
Data on hand for better decisions
“Generally speaking the value comes from better enabling humans with information to make decisions,” Burian says. “It’s about sales, logistics, production, planning and R&D, and it’s anything but one-solution-fits-all.”
Emile Naus, Partner at consultancy BearingPoint, pinpointed long-term poor performance across the shipping industry, resulting in cuts to costs and capacity. But for Naus, the largest challenge is people. “Countries have ageing populations; youth is coming in with varying views on locations, hours and so on – hitting transport, warehousing and factories,” he says. “Put everything together and it becomes quite a big mess.”
Looking through a sustainability lens should help shorten supply chains, rather than offshoring to lower costs. Shorter chains typically have fewer links to go wrong, are more predictable and can be fixed more quickly because lead times are shorter too. This should favour UK strengths in high-value products, and riskier products with a “real impact” if something goes wrong – although redeveloping skillsets and capacity is challenging.
De-risk your sourcing
His prescription? Take a good look at sourcing, not just the cost per item but the amount of inventory required, and think about the risks, the sustainability impacts and “the smaller things” like ease of visiting, understanding the environmental footprint and overall visibility.
Naus’ advice is to look at digital twinning. A digital copy of your supply chain offers all the data needed to tell what’s going on – from inventory to the pipeline of purchase orders, to components of supply via suppliers, contractors and sub-contractors.
Nitin Dsouza, Supply Chain Head at consultancy Publicis Sapient, adds that investment in intelligent ports will matter. “Today, you don’t have a fully IoT-driven force telling you about congestion – although it will tell you there will be lots of ships waiting.” Dsouza agrees with Naus on a fresh workforce focus too – giving HGV driver shortages as a symptom.
Skills require investment, and driving, for example, needs to hold appeal. “So take the employee lens and make sure you’re pivoting as an employer of choice. That has to be an industry-led effort,” he says. Within the technology stack – the collection of computing hardware, software and services that supports an entire organisation – manufacturers should look at deploying flexible, composable setups to empower decision making across global supply chains.
For instance, if systems are interconnected and a logistics manager doesn’t have to go in on weekends because data is available remotely, this can boost efficiencies and reduce unsustainable pressures on staff. Manufacturers must think further ahead to solve future supply chain challenges. Richard Parkinson, Director at the port of Solent Gateway, notes that solving the supply chain requires accurate triage across workforce availability, at key air, land and sea nodes, looking too at governance and regulation.
If fewer ships are operating, and this means higher prices, incentives for more vessels might shrink shipping and container costs, improving volumes and delivery times, and international cooperation may be key, Parkinson points out. Richard Eglon, Chief Marketing Officer at inventory-as-a-service provider Agilitas IT, agrees that sustainability and corporate responsibility should drive change, helping extend product cycles, incorporating product recycling and reworking where possible.
“Industries are based around selling ‘new product’,” he says. “Only 30 years ago, a domestic appliance might have been more expensive but when something went wrong you had it fixed. This is the world we need to return to.” Eglon says that buyers are now better informed about their choices, competitive landscape and the provenance of product.
Collaborate to increase visibility
Future inventory management requires vendors, suppliers and end clients to work together more closely and make supply chains transparent – digitising, automating and streamlining legacy manual processes and changing behaviours. “Firms taking a more collaborative and holistic view will succeed in coming years,”
Eglon predicts. Paul Crutcher, Operations Director at Bisley, emphasises the criticality of reducing single points of failure across supply chains. “You’ve got less of an opportunity for the physical logistics side of things to interfere,” Crutcher explains. “A resilient supply chain or distribution system has multiple nodes.” He points out that partly because China has become such a massive global node, even if Chinese supply is cut for a couple of months, with no Plan B the resulting knock-on effects can be enormous.
“There’s an argument for reshoring where it’s economically sensible,” he agrees. “And apparent foes actually have a lot to gain from collaboration. Often they’re competing for part of the same supply chain. Together, you can find ways to mitigate instability.” Rivals may often have different core differentiators when it comes down to creating value. Pinpoint these, then resist the natural tendency to be parochial about data, and work out how to collaborate in other areas, he suggests.
Also, although lean favours a one-piece flow, companies have a tendency towards batching – ultimately hurting the supply chain as a whole. Doing things in batches is less efficient, Crutcher notes. “What you want is to have truth at the point of consumption, all the way across the supply chain so everybody is aligned with the same rate of demand.” Dr Jagjit Singh Srai, Research Director at the Institute for Manufacturing (IfM), says reconfigurations might harness ecommerce platforms to draw in third party logistics providers from different resources, for example.
“Those who are more modular in their products can flex their resources much more effectively – responding quickly, in a more agile way, to changes in demand,” he adds. “The issue is that nobody wants to pay for an idle factory, waiting for a crisis. And the reality is that if the crisis hit, you wouldn’t have any people to run that factory.” What then is the answer?
Consider all pinchpoints and segments
Srai suggests careful triage of pinchpoints where some slack can be introduced. Segmenting a supply chain into multiple tiers at a significant distance from the consumer introduces vulnerabilities. This means designing shorter supply chains where possible, Srai explains.
“Understand the potential decoupling points where stock can be held that can be quickly used to serve a particular demand. And some of those need to have business in normal times for them to be able to respond and ramp up in extraordinary times,” he says. Will prices rise? Not necessarily, Srai says, because people are already “paying through the nose” due to supply chain failures and slowdowns.
Correcting failures is costly too, while supply chains are generally reconfiguring at some level all the time. Sometimes interventions can have unintended consequences – like when personal protective equipment (PPE) was being procured by different UK regions competing with each other, he says.
Strategies to stabilise supply might include collaborative reduction of port bottlenecks for haulage. Sharing of fleets and warehouses among organisations may also help build resilience. Public-private partnerships could be looked at, and deeper infrastructure investments are crucial. Formulate predictions and take action, he urges. The fact that forecasts are often wrong doesn’t mean you shouldn’t make the attempt. “And you can’t really wait for a crisis.”
Money, laws and licensing
Tony Lock, Distinguished Analyst at Freeform Dynamics, notes that politics, differing restrictions and licensing regimes globally are also problematic. Less often considered: the role of financial services. If you don’t have access to raw materials – an obvious example being rare-earth metals for batteries – you not only have to bring them in but convince accountants and financiers in Wall Street, the City of London, Singapore or wherever.
“Not having stock should no longer be seen as a real positive,” says Lock. “I’m worried about convincing financial markets of the need to rebalance away from just-in-time, from having nothing on the books until you’re producing, and then getting it out the door as quickly as possible. The whole accounting side is a big issue that needs addressing.”
Governments could potentially implement some form of legislation that requires industries to have stocks onshore to buffer price spikes – helping avoid UK situations like being caught without enough gas. Legislation can shift industries towards recycling, looking at what they’re making and how they’re making them, increasing collaboration and more.
“Sustainability and green footprint can be legislated for and there’ll be more requirements on organisations to improve their supply chains from that side,” says Lock. “I just hope that those financial people that really control everything can recognise those changes in the wind.”
For more articles like this, visit The Manufacturer’s Leadership & Strategy page