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Supply chain executives dealt with a variety of headaches over the past two years. Disruptions, delays, workarounds and all-out stoppages became all too familiar as COVID brought the fragility of the world’s supply chains into full view. Even consumers are now experts in supply chain woes. As 2022 draws to a close and 2023 waits just around the corner, what can supply chain executives expect from the coming year?
Unfortunately, challenges still lie on the road ahead. Disruption is still with us. Those headaches haven’t gone away. But, hang in there. We see reasons for optimism, too.
Supply chain trends for 2023
Here are some of the trends we’re seeing, and challenges supply chain executives will likely be experiencing in 2023.
Backlogs and logjams
Shortages and congestion at ports worldwide are expected to continue into 2023. If you didn’t see this coming, you’re not alone. In October 2021, economists said supply-chain bottlenecks would be the “biggest threat to growth” for the next 12 to 18 months, but predicted those bottlenecks would ease up during mid-2022, according to the Wall Street Journal.
That didn’t happen. Shortages will continue to make product more difficult to get. Similarly, port congestion remains an issue, but not due to the COVID restrictions that kept cargo ships floating in the harbor, unable to dock. With the exception of China and its zero-tolerance COVID policy, this time, the cause of that congestion will be the lack of trucks to take that cargo where it needs to go.
Lack of skilled workers
Speaking of the shortage of truck drivers … all industries are experiencing problems recruiting, hiring and retaining employees, and jobs all along the supply chain are no exception. Unemployment rates are at historic lows, but talk to any hiring manager and they’ll tell you they can’t get people in the door. The U.S. trucking industry estimates it is down some 60,000 drivers. Warehouses and manufacturing facilities are experiencing labor shortages, too, as a result of an aging workforce and high turnover rates. All of this directly impacts the supply chain, causing manufacturing and delivery delays and creating a ripple effect that extends all the way out to the end user.
Unsteady global relationships
The war in Ukraine doesn’t show any signs of resolving soon, and its impact on the supply chain will continue until the situation there improves. According to Consultancy.eu, the continued war will have an “impact on the costs of raw materials, energy, logistics and digital services.” The report further stated that oil and gas prices in Europe have skyrocketed, due to the high dependence on imports from Russia.
But the war in Ukraine isn’t the only geopolitical cause of disruption to the supply chain. China is continuing with its zero-tolerance COVID lockdowns. If you saw reports of the recent closure of Shanghai Disney, with thousands of guests trapped inside and unable to leave for days until they showed a negative COVID test, you’re aware of this ongoing situation in China. It will undoubtedly affect the manufacturing industry there, even potentially shutting down factories and ports.
Extreme weather events
Are you noticing that we seem to be having a “100-year flood” or the worst hurricane on record or extreme droughts and wildfires regularly? All of these can contribute to a situational supply chain backup, affecting not only manufacturers and truckers in areas that are hit by extreme weather, but those relying on that delayed supply down the line. Climate woes in the U.S. are also contributing to issues like historic low water levels. In October 2022, the water level was so low in the Mississippi River, it resulted in a jam of more than 2,000 barges carrying corn and soybeans.
There is a kind of chicken-and-egg scenario with inflation and supply chain disruption. Prices spiked because of supply chain disruption, helping to increase inflation, which in turn feeds price hikes … which in turn affect the supply chain. According to U.S. Bank, the cost of living in the U.S., as measured by the Consumer Price Index, rose by more than 9% from June 2021 to June 2022. The November 2022 rate hike by the Fed, the sixth this year, is intended to mitigate inflation in an effort to help solve the problem.
Bottom line: Hang in there
While these challenges persist, signs point to an easing in supply chain woes in 2023, especially in the area of port congestion. Sea-Intelligence reported in October 2022 that 50% of congestion issues have been or are being resolved. The report predicts the industry being back at “normal” capacity in early 2023. When the logistics industry can get product to where it needs to be on time, that’s half the battle.
At USC Consulting Group, we’ve been helping our clients up their efficiency, deal with supply chain disruption and create more profitable operations for more than 50 years. We’re here to help. Give us a call today.
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Disruptive supply chains cause uncertainty. This leads to disjointed internal functions and frustration. And although there have been significant improvements with technology, supply chain disruptions are still managed by people.
Having good relationships with your strategic suppliers will help ensure someone will answer your call regarding delayed delivery dates, but that’s not enough to ensure supply continuity in our increasingly complex and disruptive supply chains.
There are five types of solutions supply chain managers can employ to decrease uncertainty and to improve reliability in their supply chain. We have compiled them into this infographic:
Each type of solution can be effective, however each has its downside to watch out for.
Expediting freight or delaying order fulfillment are commonly used tactics.
What to watch for: If your customers have other options and low customer loyalty, delaying delivery dates can significantly reduce your revenues. If you have a low margin product, premium freight can wipe out profits.
Prices for hard-to-get commodities skyrocket during times of uncertain supply, contributing to cost inflation.
What to watch for: If inflated material costs can’t be passed on to customers, margins suffer.
Production solutions to supply disruptions include flexible manufacturing and quick changeover practices, having alternative suppliers and substitute materials, reducing quality rejects in order to have more saleable product, and improving the source, make, and deliver cycle times.
What to watch for: Production solutions often take time to develop, which is why they are effective during times of certain supply, but when dealing with surprising disruptions, they’re often too little, too late.
Stocking up on inventory is a common response to disruptions, however warehouse and storage space can be a constraint requiring investment in facilities and equipment.
What to watch for: Excessive inventories drain cash and tie up working capital. A better practice is to use statistical analysis to evaluate how changing lead times are affecting the reorder points and order quantities in your ERP system.
Uncertainty is caused by lack of information. Embed a strong SIOP process — Sales, Inventory, and Operations Planning. Conduct value stream maps to understand the tiered network of the supply chain. Implement strong supplier scorecards, and have a robust risk register process where there are early warning systems, contract optionality, and redundancies in the supply base.
What to watch for: Information solutions are sometimes viewed as expensive, however they are rarely more expensive than increasing investments in facilities and equipment, or habitually discounting obsolete inventory, or perpetually incurring premium freight.
If your company needs help reducing supply disruptions, turn to the supply chain experts at USC Consulting Group. We have been empowering our clients’ performance for over 50 years.
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Manufacturers have had an uneasy past two years. Disruptions early in the pandemic nearly brought production to a halt in some areas, and now, supply chain shortages plague the industry.
Building materials have seen some of the most dramatic shortages, with 94% of surveyed builders struggling to find framing lumber. Electronics manufacturers and those relying on them have struggled, too. The automotive industry stands to lose $61 billion this year due to semiconductor shortages.
Other materials and parts in short supply include palm oil, plastics, corn, steel, and chlorine.
The Causes Behind Manufacturing Supply Shortages
There are many factors behind these shortages, most of them sprouting from the pandemic. Economic downturns and worksite restrictions have stopped or slowed many processes like farming, mining, and parts production globally. Even as these obstacles fade, these producers of materials and parts find themselves with considerable backlogs, leading to ongoing shortages.
A surge in demand has compounded these supply issues. General manufacturing demand was already increasing, with U.K. consumers alone spending more than $1.6 billion online weekly in 2019. E-commerce skyrocketed further amid the pandemic, and on the commercial side, many manufacturers rushed to meet previous production levels, outpacing their still-struggling suppliers.
International travel restrictions have also made shipping slower and more expensive, exacerbating the crisis.
Strategies for Mitigating Supply Issues
While there is no silver bullet for these supply shortages in manufacturing, several steps can mitigate their impact. Manufacturers can also take this opportunity to prepare against future disruptions, avoiding similar situations. Here are three leading strategies for navigating these supply issues.
1. Improving Visibility
One of the most crucial changes to make is to increase visibility across the supply chain. Internet of things (IoT) technology and data analytics programs can give manufacturers more insight into stock levels and developing situations. They can then predict shortages and take steps early to account for them.
Real-time visibility can also help track shipments to give customers a better idea of when they can expect their end products. Over time, this data can inform more accurate predictions and reveal needed workflow changes. Manufacturers can then become more resilient against supply chain issues.
2. Diversifying Sources
In manufacturing, many facilities tend to source from a single supplier. While this minimizes costs, it also intensifies shortages when disruptions arise. Manufacturers can lessen the impact of slowdowns and other unexpected issues by diversifying their sources.
Much like how Amazon uses artificial intelligence (AI) to keep merchandise close to consumers, manufacturers can analyze data to find ideal nearby sources. Domestic or near-short suppliers will produce fewer disruptions in a crisis as there’s less distance and fewer regulations involved. Using multiple suppliers will further reduce shortages by removing dependencies.
3. Turning to Alternatives
Some manufacturers have found relative success in using alternative materials to account for shortages. For example, some construction material companies have switched to unconventional insulation materials in the face of petroleum shortages. Manufacturers may be able to adjust processes to use novel or less-common materials to maintain production.
If facilities take this route, being transparent with customers is crucial. End products may have different qualities or incur higher prices with new materials, so manufacturers must be upfront about these changes. They may cause initial disruptions but can mitigate persistent issues with conventional parts.
Manufacturing Must Adapt Amid Widespread Shortages
Given the prevalence and severity of these shortages, they won’t likely go away soon. It will take time for production to fulfill backlogs and meet demand. On the positive side, this increased demand indicates healthy industry growth, but manufacturers must prevent similar crises in the future.
Since these shortages are multifaceted issues, no one solution will fix them. Adopting a multi-step approach, including implementing new technologies for visibility and adjusting sourcing methods, is essential. The industry faces significant obstacles right now, but these will inspire positive change for the future.
*This article is written by Devin Partida. Devin is a tech writer with an interest in IIoT and manufacturing. She is also the Editor-in-Chief of ReHack.com.
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Most of the challenges supply chain players face in today’s market are related to the pandemic and economic shutdowns. Even so, they’re no different than what companies have dealt with in the past, or what will come after.
Understanding what those challenges mean for the greater market calls for a brief look at current events and existing obstacles.
1. Improving Resilience
The only thing constant in the market and supply chain operations is, interestingly enough, a wave of change. Whether it involves the shifting demands of consumers, raw material and supply shortages, or a global pandemic, something is always changing or evolving.
Despite this, many trends have skewed towards lean processes and a boost in agility. The problem is that in eliminating excess, many of the redundancies that would boost resilience have become less of a focus.
Until now, the tradeoff has been lucrative. By cutting many of those redundancies, operators have been able to conserve funds, reduce operating costs, and speed up mission-critical processes. If there’s less inventory on hand, there are fewer goods to sort, worry about, or waste. Unfortunately, the pandemic stomped hard on the entire economy, and not having those extra resources compounded all of the other problems.
The entire supply chain has learned an invaluable lesson about proper balancing, as opposed to leaning heavily on a single paradigm or strategy. Going forward, everyone will be focused on building strong supplier relationships, with multiple access points and opportunities. The goal is to bring some of those redundancies back, without destroying agile processes.
2. Building Out Flexibility
To keep up with market changes, supply chain operations need to be flexible. They need strong alternatives, with clear processes and sourcing adaptations.
How does this differ from resilience? Resilience involves creating a more secure operation, while flexibility is about developing alternatives and fostering relationships to support them.
If one supplier is experiencing delays, then an immediate shift to another, with a reliable supply, may be necessary. Taking that a step further, if that shortage is impacting an entire lineup of suppliers, then it’s time to find alternative resources — like a comparable raw material. A move like that cannot always happen quickly or in-the-moment.
Having those avenues in place before an event is the proper solution. The same could be done with regular operations, like a spike in product demands.
3. Unprecedented Visibility
Long before COVID-19, consumers were growing more aware of the environmental impact of their actions, and of the companies they’re doing business with. This has led to many operators moving not just to more sustainable practices, but also making more transparent moves in the market, and sharing them. The pandemic has certainly amplified that need, to ensure safe and healthy practices.
But end-to-end supply chain visibility is challenging, to say the least. That’s where modern technologies come into play, thanks to Industry 4.0. IIoT devices, supply-related blockchain applications, machine learning, and big data all have a role to play, and they’re already being used in the industry to great effect. They also provide a host of benefits, which affect even some of the other challenges like resiliency, flexibility, security, and so on.
More visible practices will become commonplace as supply chain operators work together to create a sustainable, open, and secure network.
4. Data-Driven Operations
The supply chain has always been powered by data, but digitization takes it to a whole new level. Successful management improves planning in operations, materials-sourcing, production, and distribution.
Machine learning and advanced analytics will highlight new trends, opportunities, and decisions directly related to the market. A predictive model might help account for a demand shift or shortages, before signs of change rear their head. Similar data might empower leaner processes that don’t sacrifice mission-critical redundancies.
That’s what Industry 4.0 is all about: smarter and contextually driven processes that utilize real-time market details to bob and weave with incredibly precise actions. It’s safe to say that no industry has ever seen anything like this before, which is why these technologies have taken root so deeply and rapidly in the modern world.
Many operators have already adopted and deployed data-driven practices in regular operations, so it’s more about discovering new ways to leverage the related solutions. Digital twins have become almost pervasive in the industry, but with the help of artificial intelligence, they can become so much more valuable.
5. International Relations and Trade Agreements
Without touching upon specific events, political or otherwise, the past few years of tumultuous global relations and trade agreements have posed some unique challenges.
In November 2020, 15 countries came together to ratify one of the largest free trade agreements in history — the Regional Comprehensive Economic Partnership (RCEP). While the United States and India withdrew, the agreement still has a significant impact on foreign trade and the supply chain. It should help strengthen the economies in North and Southeast Asia.
Supply chain operators must remain mindful of these changes, along with any on the horizon, and how they might impact the market, relations, and partnerships. Parsing some of these events is a challenge by itself. There is no straightforward answer, unfortunately, but it does highlight the need to maintain a team of experts for understanding and dealing with them.
6. Trade Disruptions
Despite being a mission-critical component of the modern supply chain, the trans-Pacific trade lane has been disrupted in various ways. From ocean rate spikes due to trade tariffs to physical disruptions, much like the Suez canal mishap, there’s an ever-growing need to plan for these events and make up for when they do happen.
It’s impossible to predict some of these events, which is why resilience and flexibility are so important. Supply chain operators will need to form strong partnerships to resolve issues quickly and create new opportunities.
Looking to the Future
The entire supply chain faces formidable challenges, and there are no guaranteed solutions. But that doesn’t mean there’s no way forward. Modern technologies like IIoT and advanced analytics, alongside data-driven operations, can certainly alleviate some of the growing pressure. So can the improved resilience and flexibility of all parties.
Preparing for the future will keep everyone on their toes. But the good news is that there is a light at the end of the tunnel. As the pandemic hopefully winds down, many challenges will become more manageable, as well.
This article is written by Devin Partida. Devin is a tech writer with an interest in the IIoT and manufacturing. She is also the Editor-in-Chief of ReHack.com.
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In 2020, business as usual was thrown out the window. Companies in all industries needed to make changes on a dime.
For manufacturing, that meant slowdowns in production caused by various factors including delays in getting workers on and off the shop floor due to COVID-19 protocols, and socially distant spacing resulting in fewer people on the floor at one time. COVID-closed borders disrupted supply chains industrywide, forcing manufacturers to look outside the box for new supply sources and causing further delays getting product to consumers. Outright shutdowns. Layoffs.
There were other sorts of changes that didn’t involve production. People who could work at home, did. Business travel ground to a halt. And companies started thinking more and more about automation.
As 2020 drew to a close and the COVID-19 vaccine became a reality, we began to see light at the end of this socially distanced tunnel. It’ll be awhile until we can get out from under this pandemic, but manufacturers are already looking at what the landscape might be once the dust settles and the pandemic is over.
Some of the changes brought about by COVID will surely be permanent. In our whitepaper, The State of Manufacturing Operations: Then, Now and What Comes Next, we analyzed where manufacturing is today, and where it might go in the future. Here’s what our crystal ball, based on our half-century in the business, found:
If companies brought in automation, it’s here to stay. The efficiencies realized by automating manufacturing tasks will boost companies’ bottom lines. AI will help speed production and guard against the downtimes and downturns that manufacturing experienced because of COVID if another pandemic hits our shores. These changes aren’t just affecting people on the production lines. Office tasks will increasingly be automated, too.
Less business travel
Why take days to travel across the country for a meeting, incurring expenses like gas or plane fares, hotel rooms and meals on the road, when you can accomplish the same thing with a Zoom meeting before lunch? The savings companies will realize by limiting or eliminating business travel are enormous and will have a substantial effect on their bottom lines. We can see the end of the “road warrior” era on the horizon.
More working from home
People’s lives and structures have changed because of COVID-19. Employees who never worked at home before were suddenly forced to do so because of the lockdown, and it opened a lot of eyes. Employers who previously required “face time” in the office found that employees were just as productive, or even more so, at home. And employees found they like working from home. The lack of the daily commute alone is a great benefit, reducing people’s stress levels, giving them more time in their day, and increasing happiness. Working at home increases work/life balance. Why go to the office if you’re not physically using a wrench?
Changes in operations
COVID has forced everyone to put a laser focus on safety and efficiencies. Many of the new safety protocols arose from the need to find new ways of doing the same processes, with new efficiencies emerging as a result.
We will see a resurgence of brick-and-mortar transactions, to be sure. But now that people have been used to buying online, why go back to the old way? The effect is cutting out the middleman.
New sources in the supply chain
Manufacturing has lived through the disruption of supply chains caused by COVID, found new partners, new sources of materials and product, and new ways of meeting the demand. Where can you source products if the borders close again?
Permanent changes in manufacturing after COVID:
- More automation
- Less business travel
- More working from home
- Changes in operations
- Less brick-and-mortar
- New sources in the supply chain
At USC Consulting, we’re boots on the ground for the manufacturing industry, before, during and after this pandemic. Get in touch to find out more.
For more information on The State of Manufacturing Operations, download our free whitepaper here.
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If you’re like most manufacturers, your supply chain has been disrupted by COVID-19, especially if much of that supply came from China or Southeast Asia. Supply disruptions and downright stoppage hit back in February 2020, and demand dried up when the economy shut down shortly thereafter. Many manufacturers felt that one-two punch deeply. The U.S.-China trade war and other trade restrictions didn’t help matters, either.
Harvard Business Review predicts that, when the dust settles, this situation is going to shake out in the following ways:
- It will be a competitive advantage for manufacturers to increase their domestic production and domestic jobs.
- Manufacturers may face pressure to reduce or eliminate suppliers that are perceived as “risky,” like China.
- Manufacturers may want to consider cutting down the inventory in their global supply chains.
That sounds about right to us. We would add “look for hidden opportunities for efficiency” to that list.
But no matter how your supply chain looks when we emerge from this pandemic (and we will emerge from it) one thing will be certain. Consumers will still want a fair, if not low, price for whatever it is you’re manufacturing. Just because their supply chain is different than it was before February 2020, it doesn’t mean prices can soar. That’s going to be the biggest challenge. Moving forward, it will be vital to focus on supply chain improvement to ensure the success of your operations.
The Institute for Supply Management agrees, saying purchasing managers at some of the largest manufacturing companies expressed ongoing unease about future shocks to their supply chain while they scramble to remedy current shortages.
If your company is in a similarly tenuous situation, we have some recommendations for you to help shore up your supply chain risks and mend a broken supply chain.
1. Enhance communication with both customers and suppliers
Touching base with partners more frequently to avoid any confusion or misunderstandings is one of the best things you can do now in this uncertain supply chain environment. This is true for your customers as well as your suppliers. Customers who have low switching costs will find alternatives to your product if competitors are able to more promptly satisfy demand. Customer service level expectations have been lowered for many hard-to-get items during the pandemic, but if your product isn’t prompt, communication should be. Courteous responsiveness goes a long way to ease customer impatience.
2. Focus on strategic sourcing
It’s about enhancing transparency by leveraging intelligent data to more effectively forecast shortages. Strategic sourcing focuses on the development of long-term supply relationships for operationally critical products and services. Start by assessing the reliability of your current suppliers. Understand your relative importance to them as a customer, as well as the risks they are experiencing with their suppliers. Assess alternative vendors and your readiness to pivot quickly to a new supplier. If there are multiple vendors for a key material, inquire regarding their capability to handle increased supply requirements. This will help you affect supply chain improvement.
3. Stop, look and listen
No supply chain is perfect. Take time to walk the floor to see what could use some fine-tuning. Simply using your senses — looking and listening — can quite literally be eye-opening. Your employees and your machines can tell you a great deal about your current state of operations.
4. Increase your inventory
Lean manufacturing and Just-in-Time (JIT) inventory principles have enabled manufacturers to significantly reduce operating expenses and increase profitability. However, JIT inventory inherently comes with increased risk of supply outages. During times of uncertainty, perform cost-benefit analysis by assessing the holding cost of increased inventory levels versus the likelihood and cost of production disruptions.
[While you should increase your inventory to mitigate risks, here are 5 Reasons Why You Need to Stick with Lean Manufacturing Principles]
5. Look for ways to automate
Identify opportunities to automate certain work processes, diminishing cycle time and enhancing throughput. It’s about ferreting out those hidden opportunities for greater efficiency in your processes. That’s our wheelhouse, enhancing a company’s operational efficiency working with their current assets.
6. Keep an eye on maintenance
This isn’t the time to let machinery run on autopilot. Keep a regularly occurring maintenance schedule to head possible equipment breakdowns off at the pass. You can significantly reduce the effects of machinery snafus on production output if you’re on top of maintaining those assets.
At USC Consulting group, we’ve spent more than 50 years focusing on supply chain improvement and optimization. We can help you reduce your risks and vulnerabilities, which will lead to a more resilient and solid supply chain. Get in touch today.
[For more information about supply chain management, read our blog, 4 Ways Manufacturers Can Perfect Their Supply Chain]
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If you’re in the metals industry, you don’t need us to tell you what your challenges are. You’re living them every day, whether it’s your supply chain, the ability to keep up with increasing demand, operating inefficiencies or COVID turning the world upside down. While these may be common, across-the-board challenges, no two companies in the metals industry are being affected by the same issues in exactly the same way.
That’s why we are not a cookie-cutter consulting firm.
When companies come to us, 9 times out of 10, they already have a pretty good idea of the challenges across their company workflows. Most are looking to us to help break bottlenecks in their operation, find ways we can help them do more with what they have, and many times, do more with less.
We roll up our sleeves and work with you to find the hidden opportunities within your operation that will allow you to minimize or eliminate bottlenecks leading to greater efficiency.
Download our eBook Challenges for the Metals Industry: How USC Consulting Group Can Help to learn the strategies USC is applying to help our clients overcome obstacles, like:
- COVID-19 safety protocol challenges
- Supply chain disruptions
- Demand management decisions
- Excessive cycle time or time for changeovers
- Fluctuating inventory
- Supplier uncertainty
We will help you find hidden opportunities to bolster your operational efficiency.
If you are experiencing any of these challenges in your operations and would like to consult with our team about your specific issues, contact us today.
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It’s been a bumpy ride for the automotive industry this past year. Back in November and December when the economy was running full speed ahead, automotive manufacturers had high expectations for robust sales activity in 2020.
Then, COVID-19 happened.
With frightening speed, the economy ground to a halt as states, employers, and officials implemented various measures to slow the spread of the virus, which ultimately resulted in layoffs and reduced buying activity. In a typical year, the number of motor vehicles sold runs between 17 million and 20 million. But the sudden decline in car sales has analysts forecasting an overall light vehicle sales total of 14 million nationwide by this year’s conclusion, CNN reported. Perennial leaders in auto sales — such as General Motors, Ford and Chrysler — witnessed double-digit declines in quarterly sales compared to 2019. In response, automotive manufacturers slowed down output, a consequence of declining demand, assembly worker absences caused by COVID-19, and other supply chain disruptions.
Yet defying the odds, automakers appear to be back in the driver’s seat. As some of the coronavirus lockdowns and restrictions have lifted, the economy is in growth mode, with gross domestic product soaring at an annual rate of over 33% in the third quarter, according to the Bureau of Economic Analysis.
While car sales during this same period were lower than this time last year, they finished far better than experts anticipated, including Cox Automotive Senior Analyst Michelle Krebs.
“It’s coming in better than we thought,” Krebs told CNN.
Here’s the problem: Consumers may be back in a buying mood, but automakers still aren’t operating at peak capacity. As Car and Driver magazine reported this past summer, in response to the effects caused by the pandemic, numerous nameplates pushed the pause button on several all-new or upgraded product reveals. During the average year, the upcoming year’s car models start arriving on dealer lots in the late summer. In 2019, for example, 11% of motor vehicles available for purchase were 2020 models. Today, the latest models represent just 2%.
“Consumers may be back in a buying mood, but some automakers aren’t operating at peak capacity.”
“They’re just sort of behind,” Cox Automotive Senior Economist Charlie Chesbrough told Car and Driver. “The white-collar workers are behind in planning the model-year rollovers; the factories have had a difficult time getting the supply chain up to speed.”
The same is true for used and preowned automobiles. As Edmunds.com’s Jessica Caldwell pointed out in a press release, used vehicle parking lots had few to any buyers in them initially, but now, what was unsold is going fast.
The question becomes, then, what strategies and planning can automotive manufacturers implement to ramp up production so inventory issues don’t show up in 2021? The following recommendations may help:
Keep an ongoing maintenance schedule for equipment
While assembly workers is critical to increasing output, the equipment leveraged are the workhorses of auto manufacturer factories, increasing and streamlining production seamlessly. But when they’re not working or encounter repair issues, everything slows down. That’s why it’s important to adhere to a maintenance schedule so equipment is well lubricated and bolts are properly fastened. From semi-automated lifting machines to die gripper cranes, preventive maintenance is critical to avoiding issues that can prevent assembly teams from reaching their production goals in a timely manner.
Review current systems and processes
When it comes to solving problems, you first have to recognize exactly what those are and why they’re happening. When it comes to output for automakers, it’s really been a confluence of events brought on by the pandemic, economic instability that resulted and how manufacturers responded. However, with slight or significant tweaks on the factory floor, teams may be able to maximize how much they produce. By mapping current production processes, crews may be able to isolate where the problems exist and uncover bottlenecks. This type of review may all help identify potential bottlenecks so they can be resolved before they occur.
Consider developing new protocols to keep teams healthy
One of the issues that automotive manufacturers encountered throughout the pandemic was absenteeism. The virulence and contagiousness of COVID-19, the symptoms of which often are similar to influenza, led to fewer people on assembly lines, leaving others to pick up the slack. While most people fully recover from the illness, a lack of personnel naturally leads to a slowdown. Firms may want to think about installing measures that can help workers avoid the potential for becoming sick. Whether it’s daily health screenings like temperature checks, social distancing measures, personal protective equipment, or more regularly scheduled deep cleanings between shift changes, a healthy workplace is a productive workplace.
Perform investigation into more automation
Automation is already a standard part of many automakers’ production processes, given it helps to maximize output, reduce costs and virtually eliminate mistakes that result from human error. But as technology is in a constant state of advancement, there may be systems out there that are better than what you have now. None of this is to say you should invest in more automation, but smarter machines can not only increase the speed of output but improve quality control and give crews the ability to handle issues that automation can’t solve.
Using automation as a supplement to your personnel can help you identify quality control issues that they may miss. As IndustryWeek points out, numerous quality control studies tracing back to the 1970s show human inspectors find 80% of the defect in manufactured parts. Leveraging automation can pick up the difference to increase efficiency, consistency, and — above all else — productivity.
Just like a major motion picture is more than the actors on screen, an automobile is made up of thousands of pieces, parts, metals and components. A supplier is bound to encounter supply chain issues at some point. Instead of relying on one, aim to diversify them so if one is out of what you need, you can pivot to a supplier that has the items necessary. Strategic sourcing is a discipline that is crucial to ongoing supply chain management.
From throughput to quality improvements or supply chain optimization, USC Consulting Group can help your company resolve issues and rev up your operations using the right methodologies. Contact us today to learn more.
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The driving drum beat in the popular rock tune “The Chain” by Fleetwood Mac is reminiscent of production’s TAKT time drum beat set by customer demand. When a company’s demand or supply is disrupted, the disorganized supply chain might sound like a band without a beat. Disruptions such as COVID-19 reinforce that disrupting events occur more frequently, tend to last longer, and result in greater loss than most companies assess during traditional risk assessments. Disruptions make abundantly clear the need for accelerated information for rapid responses, resiliency, and optionality in the supply chain.
If recent global disruptions are affecting your company’s typically steady supply chain drum beat, there are strategies that can help you get back on pace. Pairing over 50 years of experience with analytical data from recent research, USC Consulting Group has compiled the below infographic with five tried-and-true techniques for supply chain optimization to mend your operations and improve your processes to be as efficient as possible.
- Enhance transparency by leveraging intelligent data to more effectively forecast shortages.
- Use strategic sourcing by partnering with multiple suppliers to ensure a consistent flow of products.
- Identify opportunities to automate certain work processes, diminishing cycle time and enhancing throughput.
- Coordinate and collaborate with channel partners to enhance communication.
- Maintain a regularly occurring maintenance schedule to reduce the effects of equipment breakdowns on production.
Supply chain optimization is our specialty at USC Consulting Group. We can make sure your operations Don’t Stop and your Silver Springs are humming like a Songbird. You can Go Your Own Way, but then we may not be able to stop making Fleetwood Mac references and all of your Dreams may not come true. Contact us today to ensure that you’re Never Going Back Again to a broken supply chain and instead keep your driving drum beat steady.
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After a highly tumultuous beginning to the new decade, the economy is taking an unanticipated turn for the better. Economic experts forecasted joblessness as high as 15% nationwide well into 2021. Remarkably, the unemployment rate is back to single-digits as small, mid-sized and large businesses seem to have gotten their groove back. Leading the way — and defying the odds — are manufacturers. Yet with COVID-19 and product shortages still a reality, some manufacturers are wondering what they can do to improve their supply chain resiliency to prepare for present and future disruption.
“After the coronavirus (COVID-19) brought manufacturing activity to historic lows, the sector continued its recovery in August, the first full month of operations after supply chains restarted and adjustments were made for employees to return to work,” said Timothy Fiore, chair of the Institute for Supply Management (ISM) in a press release. “Survey Committee members reported that their companies and suppliers operated in reconfigured factories, with limited labor application due to safety restrictions.”
In a separate poll conducted by the ISM, purchasing managers at some of the largest manufacturing companies expressed ongoing unease about future shocks to their supply chain while they scramble to remedy current shortages. If your company is in a similarly tenuous situation, below are a few recommendations to help you shore up your supply chain risks.
1. Enhance communication with both customers and suppliers
Institute for Supply Chain Management CEO Thomas Derry said organizations that have been able to mount a comeback did so by touching base with partners more frequently to avoid any confusion or misunderstandings. This is true for your customers as well as your suppliers. Customers who have low switching costs will find alternatives to your product if competitors are able to more promptly satisfy demand. Customer service level expectations have been lowered for many hard to get items during the pandemic, but if your product isn’t prompt, communication should be. Courteous responsiveness goes a long way to ease customer impatience. Additionally, sales forecasts will require more frequent attention if customer loyalty, and backlogs, falter.
A strong Sales, Inventory, and Operations Planning (SIOP) process and culture will provide the information you will need to communicate quickly changing demand and depleting inventory levels to your supply base. Don’t just rely on what your MRP screen is telling you about supply timing. This is an opportunity for your purchasing team to make frequent, personal communication with key suppliers, to identify supply risks as early as possible and call in favors if needed. If product is delayed in log-jammed logistics channels, work with freight forwarders, customs brokers, and expedited freight carriers who specialize in simplifying and accelerating delivery.
2. Focus on strategic sourcing
Strategic sourcing focuses on the development of long-term supply relationships for operationally critical products and services. Start by assessing the reliability of your current suppliers. Understand your relative importance to them as a customer, as well as the risks they are experiencing with their suppliers. Assess alternative vendors and your readiness to pivot quickly to a new supplier. If there are multiple vendors for a key material, inquire regarding their capability to handle increased supply requirements. If a material is sole sourced, or otherwise considered very high risk for supply disruption, consider negotiating purchase options with credible alternative suppliers. Options might cost a fraction of lost down-time and provide your company a place in line ahead of competitors who might also be scrambling for material if a key supplier goes down.
If a component involves manufacturer owned tooling, identify alternative suppliers who can operate with your tooling and assess the lead times needed to restore supply. In the long-term, study pros and cons of investing in additional tooling and dividing production between suppliers. While sole sourcing minimizes investment and supplier related costs, it increases vulnerability to disruption.
Derry noted that firms are essentially learning from their mistakes by being more proactive in this regard and if not adding more suppliers, seeking alternative ones who haven’t come through for them in the past.
3. Stop, look, and listen
This is a common phrase heard in kindergarten and grade school classes as teachers seek their students’ attention, but it applies to manufacturing settings as well. No supply chain is perfect. Take time to walk the floor to see what could use some fine-tuning. Simply by using your senses — looking and listening — can quite literally be eye-opening.
Monitoring the shop floor can help you determine where and when maintenance is necessary. For example, perhaps you have equipment that’s making an odd noise, which is typically the first sign of a performance issue. Maintaining a services schedule can help you avoid sudden breakdowns where you have to stop everything to fix whatever happens to be the problem.
4. Increase your inventory
“Firms are also mitigating risk by carrying more inventory as a buffer against disruption,” Derry explained based on results of the poll done by ISM released in July.
Lean manufacturing and Just-in-Time (JIT) inventory principles have enabled manufacturers to significantly reduce operating expenses and increase profitability. However, JIT inventory inherently comes with increased risk of supply outages. During times of uncertainty, perform cost-benefits analysis by assessing the holding cost of increased inventory levels vs the likelihood and cost of production disruptions. How much you increase your inventory will depend on the response time to acquire new supply as well as your ability to delay customer orders without losing sales. How long you need to hold higher levels of inventory will depend on the expected duration of the heightened supply risk. During times of increased uncertainty, inventory is a first-stop insurance policy for production continuity that may yield a competitive advantage allowing your company to continue production while competitors falter.
At USC Consulting Group, we can help you build a better supply chain by applying lessons learned and instituting impactful change that lasts. If you are ready to move your supply chain from a position of vulnerability to resilience, contact us today.
This article was co-authored by USC Consulting Group’s Manager of Supply Chain Practice, David Newman.
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