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The COVID-era supply chain disruptions are slowly but surely easing up for manufacturers around the globe. While the worldwide market is not yet fully recovered, signs point to a strong resurgence in 2023, with a return to normalcy by 2024. Even though good news is on the horizon for manufacturers, there are still a number of challenges to be aware of that will impact day-to-day operations. Here’s an overview of a few of the top manufacturing challenges for 2023, and how to handle them.
Challenge: Legacy technologies
Many manufacturers operate with legacy technologies — outdated hardware or software systems. These outdated systems can cause disruption for an organization in a few key areas.
The first problem: Legacy technologies can cause efficiency issues. Since these systems can be years (and sometimes decades) old, they simply don’t have the same features and capabilities of newer software on the market. Additionally, these legacy systems can pose a security risk. Older technology doesn’t have the same safeguards as newer systems, and cybercriminals have a much easier time infiltrating outdated software than one that is up-to-date.
Despite these problems, manufacturers can be hesitant to change systems due to familiarity, not wanting to enact a full system overhaul, or a mix of the two.
Strategy: Invest in new technologies and smart warehouses
Investing in emerging technologies should be a priority for manufacturers heading into the new year.
It’s a wise strategy, not only to become more efficient and protect systems from infiltration, but newer technologies can increase safety in the workplace and free up employees to handle more productive tasks. A recent survey from Deloitte found that 85% of manufacturing executives think that some form of robotics on the production line could increase employee safety, and 78% agree that updated technology can minimize repetitive work, empowering employees to focus on more productive and impactful tasks.
Starting in mid-2022, inflation across all essential goods prompted public backlash, not to mention squeezing the wallets of consumers and businesses alike. Bearing the brunt of the blame was the global supply chain, and the bottlenecks and scarcity it caused in markets across the world. Although those pressures are easing headed into the new year, inflation will still be a factor in 2023.
Strategy: Re-evaluate costs during design
For manufacturers, inflation means more careful planning to ensure operations remain lean, mean and profitable.
One way of doing this is by implementing Design to Cost — a method in which a manufacturer combines cost management with decision-making during the design stage of a product. Rather than the normal method of thinking about costs after a rough design of a product is made, the unit and material costs are fully integrated during planning to ensure products are profitable.
This type of thinking seems to be the reality for manufacturers in 2023, as a recent Forbes survey found that 87% of manufacturing CEOs plan to increase prices in the new year. Therefore, it’s important for all manufactures to think ahead, and integrate material costs into their design process as soon as possible.
Challenge: Inventory uncertainty
Inventory uncertainty remains one of the manufacturing challenges in 2023. Despite the healing global supply chain, manufacturers still need to strike a proper balance between stockpiling inventory and buying just-in-time. Striking that balance can be tricky. Not getting it right can cause businesses to become over- or under-leveraged at a moment’s notice — affecting the bottom line in the process.
Sales, Inventory & Operations Planning, SIOP, takes the normal sales and operations planning process and makes inventory just as important of a variable and a strategic tool. Following this methodology helps manufacturers eliminate waste, increase efficiencies and achieve an optimal level between not enough and too much.
We recommend that the SIOP horizon be a minimum rolling 14-month period that gets updated monthly. The aim is to look ahead multiple quarters to make sure inventory is available exactly when you need it. Involving a wide range of departments such as sales, marketing, engineering and finance, SIOP is a system that involves the entire organization to ensure yearly goals and objectives are met.
If you would like to learn more about SIOP, download our (free) eBook, “Sales, Inventory & Operations Planning: It’s About Time.”
Keep moving forward
There will be manufacturing challenges in 2023 and beyond. By addressing your legacy technologies, adjusting to inflation fluxes, and taking the uncertainty out of your inventory management, you will be able to fine-tune your operations for optimal performance.
If your business could use some horsepower to power up your team on improvement initiatives, contact USC Consulting Group and we will put our over 50 years of experience to work for you.
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In many industries, globalization has resulted in the consolidation of suppliers and increasingly interdependent Supply Chains. Globalization has increased efficiencies and economies of scale, but it has led to decreased diversity of sourcing and supply options.
Increasing geopolitical tensions, pandemic related lockdowns, and ideological polarizations have increased supply chain disruptions for many products and materials.
Supply Chain Risk Management System
An active Supply Chain Risk Management System cannot ensure continuity of supply, however, it can provide a playbook with options when sources of supply are threatened.
Download our free eBook “The Supply Chain Risk Management Playbook: Navigating Through an Uncertain Supply Chain Future” as we advise how to identify and respond to the unique risks that affect your business.
This Playbook details the various concepts that will secure your operations, including:
- Planning the Risk Management assessment
- Conducting the Risk Management assessment
- Checking your findings
- Acting on your findings
Planning the Risk Management Assessment
During the planning stage you will define the project charter and assess your organization’s Risk Tolerance.
Conducting the Risk Management Assessment
Once management has defined success and risk tolerances, it’s time to take action and conduct the assessment.
Check your findings
This step must be tailored to the risk being assessed. Here you will build the risk models and validate the assumptions with your stakeholders.
Act on your findings
Once all appropriate stakeholders have agreed to the change, put the risk mitigation strategy into action.
For full details on each of these critical stages, download the complete Playbook below:
Installing a well-functioning Supply Chain Risk Management Operating System is a journey, not an event.
Enhancing responsiveness to risk provides competitive advantages, especially in industries where competition for key vendors, access to resources, and logistics constraints are prevalent.
USC Consulting Group’s Supply Chain experts have over 50 years of industry experience with the latest risk management practices and can help you with your unique challenges. Contact us to remove the risks and start driving operational improvements in your business.
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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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Since Covid people who never heard the term “supply chain” have become painfully aware of what it means and how deeply it impacts their lives. It doesn’t take a viral pandemic to create supply chain disruptions. A factory fire, a natural disaster, or resource scarcity — everyday occurrences — can all lead to items disappearing from shelves.
The recent formula shortage was largely due to a single factory being temporarily shut down.
Product shortages can be a significant hardship for families all around the world. In this article, we talk about how data mining can add stability and predictability to supply chain management.
First, What is Data Mining?
Data mining is the practice of looking at large quantities of information already stored in a database to retrieve new insights from it. Basically, it’s the process businesses use to create actionable knowledge. In the context of supply chain management, the data could pertain to anything from consumer habits, transportation routes, product development, or resource excavation.
Every single action that takes a raw resource out of a mine or jungle and turns it into a product on your shelf creates information. More information than any human (or, for that matter, any room of humans) could ever examine in two lifetimes.
With data mining, data processing, and data analysis, that information can be tamed and channeled toward productive means.
Supply Chain Threats
What variables currently threaten supply chain management? Because there are so many steps taken to turn raw material into a physical product, many variables can interrupt the process. Perhaps there is a storm that halts excavation. A viral outbreak that pauses work at a factory.
Disruptions in the transportation sector. Maybe the demand for a product is so much higher than anticipated that it becomes impossible to manufacture it at an appropriate pace.
All of these scenarios can lead to supply chain disruptions. Through data mining, however, many of them can be mitigated or avoided outright.
Let’s say (with unfortunate accuracy) that there is a recession projected to sweep through the country in the not-so-distant future. Naturally, financial downturns can have a significant impact on the way people shop.
But how can stores and supply chain managers use this information to make sure that there is plenty of the things people need and a relatively modest amount of things that will go largely ignored?
Using historic shopping data, supply chain managers can get a vivid forecast of how people are likely to behave during the next recession. This might mean deemphasizing the production and supply creation of luxury items and focusing more on putting staples on the shelves.
The transportation industry is an enormously important component of supply chain management. Using IoT (internet of things) and data, fleet managers now enjoy unprecedented control over their routes. Maps, even GPS-driven maps, tend to be relatively limited in how granular they get. Route recommendations mostly factor in distances. Even programs that account for speed limits, etc. do so for the benefit of personal vehicles.
Trucking is a different animal. Does this route include a short overpass that the truck will need to detour to get around? Maybe the road winds, requiring a large vehicle to slow down to a crawl.
With historical route data, mined through telematics technology (sensors, mostly) fleet managers now get automated reports that recommend the best routes for their trucks. These recommendations not only factor in arrival times, but can also be calibrated to make recommendations most likely to preserve the condition of the vehicle.
Transportation companies run more efficiently. Products arrive at their destinations on time. It’s a win for everyone.
Adjusting the Chain
In a post-Covid world, one needn’t stretch their imagination to imagine a scenario where something could go wrong within a supply chain. Delays and shortages can happen after only a single break in the chain.
With data, supply chain managers can make reasonable forecasts about potential disruptions, and plan accordingly. Already, the supply chain management industry has moved toward keeping a healthy supply of alternative production lines — often closer to home — so that they can pivot immediately into new solutions when problems arise.
With robust access to data, supply chain managers can receive quicker insights as to when they should reach for these solutions.
The result? Fewer disruptions, and significantly more consumer stability. No more months and months of waiting for a new refrigerator or oven.
*This article is written by Andrew Deen. Andrew has been a consultant for startups in almost every industry from retail to medical devices and everything in between. He implements lean methodology and is currently writing a book about scaling up business. You can follow him on Twitter @AndrewDeen14.
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The global supply chain is a delicate framework in which every participating business needs to stay nimble and adaptable — because, as we saw during the pandemic, one singular event can throw a wrench into the entire system. Innovation and optimization need to be top of mind.
But what qualifies as effective optimization? Given the complexity of the flow of goods, cash and information between multiple producing, storage, delivery and consuming partners, companies can easily neglect key areas, or focus too hard on others. Disruption anywhere along the supply chain line can (and does) create major headaches, stifle throughput and force manufacturers into a dance of optimizing supply and demand.
We can help with that. At USC Consulting Group, we’ve been helping companies optimize their operations for more than half a century. We’ve learned a few things along the way. Here are some important do’s and don’ts for optimizing your supply chain. It’s about helping your business through the ongoing disruption and preparing it for unforeseen events in the future.
Don’t: Use outdated systems
There’s a tendency for many businesses to take an “if it ain’t broke, don’t fix it” approach. However, just because something is working in real time doesn’t mean there aren’t improvements to be made. In today’s data-rich environment, one of those improvements involves data analytics.
Outdated inventory systems, suboptimal communications and disconnected information are some of the biggest areas that hold an organization back. The limitations of legacy technologies thwart the goal of end-to-end transparency along the line and impede rapid-response decision making. Before you know it, you can end up in a data-rich, intelligence-poor environment. It’s so common a scenario now, there’s even an acronym for it: DRIP. Aptly named, because the potential power of all of that data is dripping down the drain if you’re not equipped to use and interpret it.
Do: Use SIOP
Sales, Inventory, and Operations Planning (SIOP) is a method we use here at USC Consulting Group that emphasizes inventory as a strategic tool to allow businesses to get a better look at their operations and formulate superior strategy decisions.
SIOP takes advantage of the wealth of digital data available to business owners to gain a strategic advantage. Having the ability to capture, analyze, integrate and interpret high-quality data is the key to staying ahead of the market. The aim is to achieve process automation and glean predictive analytics, which allow you a clearer look at your operations to make better-informed decisions.
Don’t: Segregate internal planning and communications
Silos! How often do we hear about the dangers of silos in businesses? It’s the concept of departments working separately, having poor communication and perhaps duplicating or negating each other’s efforts. We like to identify it as “the left hand doesn’t know what the right hand is doing.” Any way you refer to it, segregating internal planning and decision-makers leads to trouble in your supply chain.
These systems separate workers into independent subsections with little to no visibility between external partners. These separate groups work in their own ecosystem, unable to effectively communicate with other departments or relevant groups. This not only slows an operation down, but extinguishes any potential spark of collaboration or innovation that may arise from working in conjunction with each other.
Do: Increase information flow
Uncertainty in the supply chain is caused by disconnected information. A truly effective and innovative workplace allows all relevant personnel to communicate with each other.
Internally, abandoning legacy email and phone methods of communication in favor of end-to-end, 3-way knowledge sharing and open social platforms speeds up collaboration and enhances efficiency. Externally, keeping a concurrent, continuous and completely open demand plan is essential for maintaining healthy, profitable business relationships.
Enhancing communication and information flow internally and externally is another key for staying ahead of the curve and fostering innovation for supply chain businesses.
Don’t: Test out a new system on a limited basis
There can be hesitation for a business to roll out a new system, opting instead to test it out in certain departments or methods of communication. This can be a mistake.
Without full implementation, a business never sees the full power and potential of a new system and will be quick to abandon it in favor of the legacy methods they have been operating with for years. The right system can revolutionize operations on all fronts, from internal communication to vendor relationships to future workplace innovations. Without every aspect of a business running on a new method, a business owner may never see the full payoff.
Do: Find a trusted method and go all in
While there certainly are challenges with implementing a new system, it’s important to find a trusted method and go all-in. For example, let’s look back at our SIOP system.
Different areas of a business have different roles and objectives. Sales is eternally optimistic, operations wants to know precisely what is going to be produced and shipped, purchasing makes conservative commitments to suppliers, and finance has to predict performance and cash flow. Getting everyone pushing in the same direction for a system change can be a daunting task.
We have found that SIOP works optimally if your entire enterprise uses it. If you allow a facility, business unit or a customer team to continue to operate outside of the SIOP process it will undermine your efforts. That is why it’s so important to get everyone on board for a new process to truly see the difference it can make.
At USC Consulting Group, we’re dedicated to helping our clients weather any storm, including the kind of supply chain tsunami we’ve all experienced recently. Give us a call today to talk about how we can put our expertise to work for you.
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Like most industries today, the building products industry is faced with a host of challenges. These uncertain economic times aren’t helping matters any. Here are some of the top challenges we’ve identified, and tactics to combat them.
Challenge #1: Post-COVID demand
As the tumultuous start to the decade began to ease back into normalcy, the industry saw an increase in consumer spending and a boom for the construction and building products industries. What was behind it? Potential customers had time to sit and think. A year or more of being involuntarily secluded in their homes put their current infrastructure to the test. Who thought that kitchen countertop was a good idea? Wouldn’t it be nice to open the wall up and put in a breakfast bar? And… while we’re at it, let’s install that screened-in porch to go with it. The projects consumers had been thinking about for months were finally able to be realized and construction started up again with a vengeance.
Great! But building products manufacturers have been struggling to meet this ever-growing demand.
Strategy: Don’t turn down work — extend your lead time
Many of our clients have more work than they can handle right now. While it may seem unrealistic to take on every project in sight, it’s important to shore up your bottom line that took such a hit during the pandemic. Extending your lead time by a few weeks will allow you to accept more jobs and keep business flowing.
Challenge #2: Supply chain bottlenecks
A post-COVID boom is great for business — until you can’t get the materials you need at a price that makes sense. Supply chain disruptions have been commonplace for a few years now and that disruption is touching nearly every industry imaginable.
The pandemic showed just how vulnerable the current state of the supply chain is across the globe. From shipping and transportation delays to factory disruptions and material shortages, it has never been more important to keep a close eye on where and how you are sourcing your materials.
Strategy: Implement SIOP to keep a careful watch on your inventory
Being mindful and proactive about your inventory is the best way to make sure you have the materials you need, when you need them. We are helping many of our clients implement Sales, Inventory and Operations Planning (SIOP) to do just that.
SIOP is a process that facilitates having the right inventory conversations at the right time by integrating customer-focused demand plans with production, sourcing and inventory. Using this method, companies can get a clearer look at their operations and create better-informed strategy decisions.
Read more about SIOP in our eBook, Sales, Inventory & Operations Planning: It’s about Time.
Challenge #3: Rising Costs
We get it. This problem is everyone’s problem these days. Despite the already razor-thin profit margins in the building and construction industry, material prices continue to rise across the board. Your business isn’t operating for free, and finding ways to complete projects under budget and stay profitable is proving to be a harder challenge with each passing quarter.
Strategy: Include an escalation clause in your contracts
There are a few strategies you can employ to combat rising costs, but each has its pros and cons. Should you finance material purchases? Raise your prices? Will these strategies help your bottom line, or will it cause customers to look elsewhere?
Ultimately, the wisest strategy seems to be including an escalation clause in your contracts, stating that if prices increase by a certain percentage or more during the duration of the project, you have the right to adjust your costs accordingly. This provides the most flexibility for your business without risking losing customers to cheaper alternatives.
At USC Consulting Group, we’re here to help you through these uncertain economic times. And the good times, too! If you’d like to learn more about these common industry disruptors and our solutions, download our free eBook, “Constructing the Building Products Industry: An Outlook of Challenges and Solutions.”
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It’s a double-edged sword for the building products industry today.
The production and demand slump during the pandemic has turned into a boom. Residential and commercial building is on a high.
Yet, challenges still exist for the building products industry as it navigates these uncertain economic times.
While each company has its unique issues, our team of subject matter experts have compiled the most common challenges we’re seeing for the building products industry today, and share productive solutions we’re recommending to our clients to tackle them.
Download our free eBook “Constructing the Building Products Industry: An Outlook of Challenges and Solutions” as we advise on tactics to deal with the boom and optimize your operations.
In this eBook you will learn how to overcome the following:
- Rising costs
- Supply chain bottlenecks
- Understaffing & skills gap
- Post-COVID boom
These strategies will help you get started on combating industry challenges and carry you through these uncertain economic times. If you need more in-depth help or would like to discuss specific issues you are experiencing, give us a call today. We listen first and then advise on how we can make your operations more efficient.
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What’s keeping manufacturing CEOs up at night? From supply chain disruptions to a disengaged workforce and growing skills gap, there are challenges aplenty plaguing leadership teams. Here are the top five manufacturing issues along with solutions from USC Consulting Group that will help them sleep a little easier.
Problem: Retiring workforce
My best shift supervisor is retiring next month! He knows everything there is to know about the line. How can I possibly replace him?
“The median age of manufacturing workers is 48 and continues to grow older.”
Solution: Capture that knowledge!
Before your seasoned vets retire, create mentorship programs, have roundtable discussions and update manuals with their hard-earned know-how.
Problem: Skills gap + Jobs gap
I have positions to fill but I’m not finding any qualified candidates! How am I supposed to get the job done?
“Manufacturers will have 2 million jobs to fill by 2030. But there’s a skills gap out there. A sea of open jobs and few skilled people to fill them is a one-two punch.”
Solution: Build training into your budget
Skill them up yourself! Invest in training for new hires and partner with a local trade school or community college to target new grads.
Problem: Disengaged employees
Are my employees happy? It’s like they’re just going through the motions. Are they going to quit?
“Only 36% of U.S. employees are engaged at work and 74% are actively looking for a new job at any given time.”
Solution: Walk the shop floor
Talk to the team, ask how things are going and how you can help. If they’re short-handed, roll up your sleeves! Also, promote from within and invest in career development! It’s a proven way to build morale and engagement.
Problem: Supply chain disruptions
My line was down AGAIN because our overseas supply was stuck at a port. Again! We have high customer demand but can’t meet it because we can’t get the supplies we need!
“A 400% increase in shipping costs from China and a 45% increase in ocean freight wait times is expected to continue for 6 to 12 months, if not longer.”
It has long been suggested as idealistic and beneficial for the country, yet unrealistic. That is, until now. It’s time. Reshoring is a way for U.S. manufacturers to invest in the country and claim valuable subsidies, while also shielding themselves from any potential global supply chain issues.
Problem: Inventory management
All of my departments have a different view on inventory management! Some want excess inventory. Others want it just in time. Do we have enough? Too much?
Solution: Sales, Inventory & Operations Planning (SIOP)
SIOP expands on S&OP by adding a crucial component: Inventory. It helps you wrangle your inventory management and achieve the optimal supply balance.
Want to learn more? Read What’s Keeping You Up at Night? The Main Concerns of Top Executives.
These aren’t the only challenges keeping CEOs up at night. At USC Consulting Group, we have more than 50 years of experience helping manufacturers find opportunities for greater efficiency and productivity. Call us today to talk about how we can help you get a good night’s sleep.
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From supply chain disruptions to fluctuating demand, the past few years have caused a ripple-like wave of challenges throughout businesses across the globe, including the oil and gas industry.
Fortunately, with oil prices bouncing back, the oil and gas industry has nearly recovered from the issues to pre-COVID operations. That being said, there are a considerable number of concerns on the forefront of the industry that will shape the course of operations for years to come.
So, what’s the state of the oil and gas industry today? Let’s look at some of the issues and opportunities they’re facing.
Production capacity concerns
For months, we’ve been seeing news reports about the Russia and Ukraine conflict. Many of us have been seeking updates on the conflict itself, but those in the oil and gas industry have no doubt kept a keen eye on how it is affecting the global oil and gas market.
The sanctions placed on Russian oil have caused strain on a U.S. refinery system that, like so many manufacturing industries, was already overwhelmed and under-staffed following the COVID pandemic and the Great Resignation that followed. Demand for gas plummeted during a time when the majority of the country stayed in their homes for months on end, which left a large number of refineries with no other choice but to close their doors.
Refinery numbers still have not yet rebounded, which has resulted in a refining shortage of roughly one million barrels of oil a day compared to pre-COVID numbers. Add in sanctioning one of the world’s biggest oil producers, and the increased demand coupled with reduced refining capabilities combines into the perfect storm for shortages and increased prices.
Mergers & acquisitions opportunities
Despite the recently tabled climate bill, this country (and the world at large) is moving toward a renewable energy future. Even if it’s at a snail’s pace.
This has caused leaders in the oil and gas industry to evaluate operations and find ways to meet renewable and decarbonization efforts in the next few decades. One option is partnering with or purchasing renewable energy companies.
Companies like BP, Equinor, Respol, and PKN Orlen are leading the charge in renewable energy investment opportunities, and are reaping the financial and ecological rewards of doing so. Expect many major players in the oil and gas industry to continue to expand their portfolios and increase their outreach with strategic mergers and acquisitions into renewable energy.
Appeasement of investors
Despite incredible year-over-year growth, the oil and gas industry as a whole has been plagued with cash flow issues that have caused investors to reconsider their financial plans.
There are a host of reasons why investors have turned their focus toward other industries in recent years: Some have been leaving due to increased concerns over carbon-mitigation and ecological issues, some have left due to oil and gas’s tendency to overspend cash flows in the name of company growth and continued investment, while others have been scared away due to plain uncertainty.
Whatever the case may be, oil and gas companies are seeking to attract investors again, while investors want to see predictability and consistent returns to shareholders. The aforementioned increase in renewable mergers and acquisitions opportunities is a step in the right direction for the oil and gas industry, and that coupled with an inevitable stabilization will no doubt cause investors to flock back to the industry.
Outdated infrastructure & opportunity for innovation
Across the board, oil and gas infrastructure is aging.
In the off-shore sector, oil platforms are becoming old, deteriorated and increasingly at-risk for operational failures and natural disasters. This, of course, poses a problem not only for oil and gas companies meeting the ever-growing demand of the marketplace, but also risks ecological disaster in the form of oil spills and other malfunctions. Equipment and structural deterioration is no doubt due to saltwater and other environmental factors that come with operating in the ocean, and improvements to such facilities come at great expense, leaving some executives to employ a “we’ll-fix-it-when-it’s-broken” approach.
On land, plants and refineries across the country are aging, too, with many having outdated control loops, absences of updating engineering controls, and lack of complete computerization. This, of course, doesn’t even touch on the efficiency potential that technological aspects like robotic automation, artificial intelligence and IoT advances could bring to these facilities.
We can help
No matter the challenges, issues or opportunities facing the oil and gas industry, one solution is getting the job done more efficiently. That means looking at supply issues in new ways, casting an eye toward structural improvements and ensuring your day-to-day efficiency in the refineries and out in the field. We can help with that. At USC Consulting, we’ve been working with companies in a wide range of industries to up their efficiency game for more than 50 years.
Contact us today if you’d like to talk about how we can help your business.
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Supply chain disruptions were the cause of significant chaos during the early stages of the pandemic. Product shortages and price hikes made shopping for things like cars, appliances, and even some grocery items next to impossible.
It seems that the worst of the pandemic is behind us, and yet the lessons it taught remain crucial for avoiding future disruptions. In this article, we look at what the pandemic has taught us about supply chains.
Global Supply Chain Management
Global supply chain management is the responsibility of overseeing raw materials as they transition into products and make their way onto store shelves. The job of the global supply chain manager is to reduce costs, eliminate risks, and increase efficiency.
During normal times, the overwhelming number of variables that go into the process of product development make global supply chain management difficult. Covid, however, completely changed the world’s understanding of how vulnerable supply chains were.
Supply Chains are Endlessly Connected
A look at the numbers shows that supply chain disruptions occurred across the board following the first wave of the pandemic in 2020. It’s true that supply chain disruptions were up almost 700%–a startling though not particularly surprising statistic.
However, some of the stats aren’t as easily explained. For example, factory fires went up almost 150%. Prices soared. Almost 30% of businesses said they needed to find new suppliers altogether.
When one thing goes wrong in a supply chain, it’s very easy for others to get out of sync as well. Factory fires rose because of employee shortages. An absence of one raw material, or, for that matter, processed goods, can have significant ramifications for a wide range of different industries.
To that end, the pandemic showed just how vulnerable supply chains really are.
Does the Made Just in Time Model Still Work?
For decades, manufacturers have worked to be very precise in how much product they generate, creating just enough at exactly the right moment to supply immediate needs. This is done mostly to guarantee that they achieve their bottom line and avoid waste.
From certain perspectives, including a focus on sustainability, it is a good model of production. But what about in times of crisis? Covid-19 showed that unexpected supply chain disruptions can lead to shortages that last months, or even years.
While producing a significant surplus is not practical, manufacturers need to consider advancing their strategic sourcing and SIOP methods. Minimizing waste and improving efficiency is the key to it all. That way, they can protect their margins in the future and avoid shortages.
Think Small Picture
While the pandemic was a big picture problem, many supply chain disruptions are very local. A strike in one village, power outages, bad weather. Highly localized Covid spikes. In the world of supply chain management, it is very possible for something small to have major ramifications.
Supply chain managers are now equipped with technology that makes it easier to anticipate even minor disruptions, pivoting quickly into solutions that will provide relief.
Not only is this beneficial for future situations, but it can also help businesses navigate what is left of the pandemic. While the proliferation of vaccines has significantly diminished the worst Covid-19 outcomes, there continue to be spikes and variants that can lead to worker shortages and other forms of supply chain problems with potentially debilitating consequences. The right technology makes these situations easier to anticipate and react to. Speaking of which…
Data is King
Data processing and implementation can have a significant impact on the future of supply chain management. Data-driven technological solutions can be used to anticipate probable disasters, and help supply chain managers find solutions quickly.
In the context of a pandemic, data might be used to predict viral spikes which then result in employee shortages and subsequent supply chain disruptions. Even in run-of-the-mill operations, however, data implementation can have a significant impact on how products find their way onto store shelves.
Fleet management technology is a good example of this. Using IoT sensors and data algorithms, fleet management technology can analyze routes, economize fuel, and improve vehicle maintenance automatically, making it easier for manufacturers to guarantee on-time deliveries.
Not only does this save money, but it can also improve the efficiency of the entire manufacturing process.
Finally, the Covid-19 pandemic illustrated the importance of having alternatives for our supply chains. To ensure minimal disruptions, supply chain managers should consider multiple streams of production, ideally finding localized or nearby solutions for manufacturing that can be tapped quickly when the need arises.
Globalization has allowed manufacturers to shop around anywhere, looking for the most affordable option for their production needs. While this remains appealing, having contingencies, even if they come with a higher sticker price, can be an invaluable component of avoiding disruption.
* This article is written by Andrew Deen. Andrew has been a consultant for startups in almost every industry from retail to medical devices and everything in between. He implements lean methodology and is currently writing a book about scaling up business. You can follow him on Twitter @AndrewDeen14
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