Tag Archives: Supply Chain

 

Effective risk management, strategic planning, and operational excellence are crucial for minimizing NPV losses and maximizing project value.

Recent studies and industry reports suggest that a significant portion of mining projects may face challenges that impact net present value (NPV) negatively. Estimates range from 20% to 60% or more, highlighting the inherent risks and complexities involved in the mining industry. These challenges may include cost overruns, schedule delays, geological uncertainties, regulatory changes, and market fluctuations, among others.

In fact, in other reports, McKinsey says as many as 4 out of 5 mining projects come in late and over budget by an average of 43%. EY found that 64% ran over budget or schedule with the average cost overrun sitting at 39%, after studying 192 global mining and metals projects worth more than $1 billion.

How can mining projects improve project execution when it comes to budgets and timelines? Mining companies must grapple with many pain points – cost overruns, schedule delays, operational risks, supply chain disruptions, and geopolitical uncertainty.

One of the most critical areas involves owner-contractor relationships and creating a “culture by design” right from the beginning. Many owners outsource their projects to EPCMs that have historically operated in mining and are typically very engineering focused on getting the design as accurate as possible to maximize outcomes and benefits. While important, it only represents 35% or 40% of the total cost of a typical project and that’s not where we tend to see issues. The other 60%-65% of the scope is construction.

Organizational culture can significantly impact projects in several ways:

  1. Risk Management: prioritizing safety, compliance, and responsible resource management can lead to better risk identification and mitigation strategies, reducing the likelihood of costly incidents and delays.
  2. Employee Engagement: creating a positive and supportive culture to foster employee engagement, morale, and retention, leading to higher productivity, better teamwork, and lower turnover rates, which are critical for project success.
  3. Decision-Making Processes: promoting transparency, collaboration, and innovation can lead to more efficient decision-making processes, enabling quicker responses to project challenges and opportunities – maintaining “single source of the truth”.
  4. Adaptability: encouraging flexibility, learning, and continuous improvement enables organizations to navigate changing market conditions, regulatory requirements, and technological advancements more effectively.
  5. Stakeholder Relations: valuing relationships with stakeholders, including local communities, governments, and investors, can enhance trust, collaboration, and support for mining projects, reducing the risk of opposition or regulatory challenges.

In summary, positive mining capital project performance, characterized by effective organizational culture, cost management, revenue generation, risk mitigation, and optimal capital expenditure allocation, can enhance NPV by increasing cash flows and reducing project risk.

USC partners with your organization and coaches your people to significantly impact performance outcomes and get your capital projects over the line on-time and within budget.

USC works with Owner Teams to execute capital projects and prepare for operational readiness during the early stages of the capital project development process, typically prior to the start of the construction phase. Operational readiness activities should be integrated into project planning and execution to ensure early adoption of the desired project culture while building buy-in from the various project stakeholders. There are three key elements to successful projects and capturing NPV.

Culture: Corporate culture is the shared values, attitudes, and practices that define the owner’s project, operation and interactions with its employees and various stakeholders. Culture clashes often occur when people from different backgrounds are assembled.

In capital projects, this often occurs when stakeholders are not aligned around a common set of goals and priorities, potentially resulting in the creation of an unsafe environment and/or low productivity and poor-quality execution. The imperative in this situation is to align stakeholders and define a “culture by design” at the top and instill the culture from the bottom up – deliberately starting at the work activity level.

USC works with successful owner teams to begin this journey from the outset of the project, and usually with a high sense of urgency.

Governance: While most recognize the need for establishing a robust governance framework, with a measurable set of metrics, many fail to execute. Typically, governance frameworks include everything from policies, regulations, functions, processes, procedures, and responsibilities, as well as how project progress and execution performance are tracked and reported.

It is not uncommon for EPCs and sub-contractors to use their own processes and systems to track performance – leading to various versions of the truth on the project. Inconsistent and inaccurate information results in inaccurate project execution planning, ineffective execution, and inaccurate status reporting which in turn results in schedule slippage and costly overruns.

USC works with project stakeholders to ensure governance goes beyond the decision-making of a single project, by developing a “Truth Center” where priorities are set, planning is done, performance is integrated, measured and communicated. By creating a single source of the truth and defining detailed work activities, including who is responsible for what and when, stakeholders can avoid the typical project execution pitfalls. By providing consistency, certainty and coordination, owner teams add to the stability of the project.

Readiness: How many projects are delayed due to poorly defined feasibility studies, engineering delays, late recruitment of key personnel and/or procurement delays? These early delays are difficult to overcome during the project and have a severe impact on NPV.

Many organizations are unclear when to start working on operational readiness – long ramp up times and slow operational start-ups are NPV killers, even for well executed capital projects. Key operations personnel should join the project early in the engineering phase to ensure the operability and maintainability of engineering designs. Additionally, they should play a role in defining and designing the culture for the project. Initiating the design of the operational processes and defining operational system requirements no later than the beginning of the construction phase and completed before starting the commissioning phase.

USC brings 55+ years of experience in shaping organizations and designing and implementing management operating systems and processes to assist owner teams in mitigating start-up risks and unlocking hidden-value to accelerate ramp-up success.

USC Helps You Tackle Key Challenges

Do you want to understand how prepared your company is to manage project risks while accelerating work execution and operational ramp-up and what the key focus areas that will contribute to improved net present value?

Want to find out more about how USC can help you uncover the hidden-value lurking in your capital project?

For more information, let’s talk it through with a no obligation meeting with one of our executive team members. Email info@usccg.com to arrange a call.

Download PDF of this article

Back to top ↑

 

The energy and utilities industry is in the midst of change.

Businesses are facing pressure from the government and consumers alike for more renewable energy while also balancing that with grid reliability and traditional energy sources. Meanwhile, electricity demands are expected to skyrocket. Other wild cards are supply chain disruption, labor shortages and more.

But within those challenges, we always see opportunities. Let’s take a closer look into the outlook for energy.

Continued focus on renewables. The demand for clean energy will continue to rise. Governmental regulations are mandating the focus on clean energy and decarbonization, including enacting green-friendly legislation and incentives for companies to transition to cleaner sources like solar and wind. The industry made great strides in solar power and the energy storage it necessitates in 2023, but more is needed and the focus will continue in 2024 and beyond. Consumers are demanding it as well, with climate change among people’s top concerns. All of it has led many companies to push the timeline to cut carbon emissions by 80% from 2050 up to 2030.

Energy storage. The push for solar requires an enormous amount of battery storage capacity to, in very simple terms, store all of that energy for times when the sun’s not shining. It means innovation in battery technology, and 2023 saw much of that, with storage capability doubling in 2023 and set to nearly double again in 2024.

Electricity surge. According to industry sources, the demand for electricity is expected to triple by 2050. It means planning now for this increased load on what is likely aging infrastructure, resulting in costs to shore up that infrastructure to ensure grid reliability. It’s also necessary to consider expanding the grid to meet that demand.

Aging grids + extreme climate.  We all saw the worst-case scenario play out in Texas when their grid failed when the state experienced a rare deep freeze. But weather extremes are becoming the norm, with heat, wildfires and drought on the one hand, floods and record snowfall on the other. The industry is modernizing the grid, and made progress in that area in 2023, but reliability is still a large concern.

Supply chain uncertainty. The recent geopolitical unrest in Ukraine and the Middle East has underscored the need to reshore this nation’s oil supply.

Labor shortages. Like many industries today, energy is battling a labor shortage and facing the double whammy of their most experienced workers retiring and taking institutional knowledge with them, and having too few younger people in the pipeline to pick up where they left off.

It’s a full plate for the energy sector in the coming years, that’s clear. But within these challenges, we see opportunities to bolster processes, making operations more efficient and guard against supply chain snafus. Reducing operating costs, improving productivity and increasing efficiency will help the industry navigate these challenging times.

This is where USC can help

Management Operating Systems. A solid Management Operating System is a must for efficiency, time savings, employee productivity and so much more. For a real-world example on how USC helped an energy producer save time and money by implementing an MOS, read “Energy Producer Generates Savings with Smarter Labor Practices.”

Reskilling employees. All of this innovation and growth in renewables, not to mention AI entering the mix, requires more workers with new skills. This can be very good news for your current employees, who can move up the food chain with new training, and the ability to attract highly qualified workers.

Resource planning. If you know anything about our company, you know we are great proponents of SIOP – Supply, Inventory and Operations Planning. It gives companies a roadmap to the future, so they’re not reacting to events, they’re anticipating them. With the exponential growth of the energy and utilities sector in the coming years, solid planning for the resources needed for that growth, like increased storage capacity and grid strength, is a must.

Bottom line, delivering reliable, affordable and sustainable energy is the goal for the energy and utility industry. It takes efficient operations, a handle on resources, and a clear eye toward the future. Contact us today to find out more about how USC Consulting Group can help.

How reliable is your asset maintenance program

Back to top ↑

 

The rise in food prices is all over the news these days. The USDA and the Consumer Price Index tell us that, in 2023, grocery store purchases were up 5% from the previous year, while eating out cost an average of 7.1% more. This year, those costs are set to bump up another 1.3%. But, if you work in food manufacturing, (or buy groceries for your household) you don’t need the government to tell you those prices are rising.

It’s the trickle-down effect. Challenges facing food manufacturers mean higher production costs, which are ultimately influencing everyone’s grocery bills.

Here’s why, and what food manufacturers can do to save money on the front end to stop that trickle down.

Challenges affecting food prices

Some of the issues food manufacturers are navigating through that can ultimately show up in prices at the grocery store include:

Supply chain disruptions. Whether it’s geopolitical tensions, droughts, wildfires, strikes, or other events, it can disrupt the supply of raw materials food manufacturers use to get the job done. This can and does create delays, backlogs and other costly challenges.

Price inflation. Before price increases hit the grocery store shelves, the rising cost of things like grain, meat and dairy affects manufacturers who use those raw materials to make their goods.

Shipping costs. Rising fuel prices affect how much it costs to get those raw materials to food manufacturers, whether it’s coming from across town or across the world.

Labor shortages. The continuing battle to hire and train good people, and retain the ones you have, contributes to labor costs at the plant, which contributes to rising costs for the end user.

Evolving demand. Consumers are ever changing in their preferences and expectations. People are increasingly demanding sustainability, ethical sourcing, friendly practices like free-ranging and more. And dietary trends shift too, with plant-based alternatives growing in popularity on the one hand and minimally-processed meals on the other. This makes it difficult for manufacturers to forecast to accommodate the demand.

Regulations. Compliance with FDA regulations can be complex at best and lead to inefficiency and higher costs for manufacturers at worst. It’s especially prevalent in yield, when manufacturers are trying to hit the “wiggle room” the government allows between what the package label says and how much product is actually in the package. Not wanting to be out of compliance, manufacturers often overfill packaging to reach that sweet spot, but it means they’re actually giving away product… and profits.

All of these challenges can have a direct impact on manufacturing costs and will inevitably trickle down to their customers. It boils down to:

Higher production costs. This is by no means unique to the food manufacturing industry. Higher production costs on things like raw materials, labor, transportation and more mean higher costs to the customer – that’s a fact of life for most every business.

Supply and demand uncertainty. Supply chain disruption leads to shortages, which cause prices to rise.

How food manufacturers can tackle these challenges

In the short term, agility is key. But strategic planning, process improvements, and a focus on efficiency can shore up food manufacturers for the long run.

Sales, Inventory & Operations Planning which we call SIOP, takes the sales and operations planning (S&OP) process that most manufacturers use and adds inventory to the mix. At USCCG, we find inventory is often left out of the planning process, but it can be 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.

It’s also an unparalleled tool for inventory management, which is a tricky business today given all of the challenges this industry is facing.

If you would like to learn more about SIOP, download our (free) eBook, “Sales, Inventory & Operations Planning: It’s About Time.”

Sales Inventory and Operations Planning eBook

Process improvements. One way streamlining and refocusing your processes can help manufacturers now is in the area of yield. Getting a handle on yield — improving processes so you’re not giving away product — can save millions of dollars. To learn more about how one food distributor saved $2.3 million per year by improving their yield, read “Food Distributor Masters Management by the Numbers to Improve Yield.”  And speaking of management by the numbers…

Implement a Solid Management Operations System. Many manufacturers, whether food or other industries, tend to manage on the basis of what has worked in the past, a gut feeling by seasoned managers, and other methods. At USCCG, we like hard numbers, streamlined processes and everyone doing the same job the same way. And about that…

Focus on training. It’s crucial to have all shifts, all facilities and all employees working in tandem, doing the same job the same way. It’s how you create the proverbial well-oiled machine.

None of these tactics will stop challenges from happening, but they can and do make your operations more efficient, and in turn, save you money. Not only will it improve your bottom line, but you might just be able to trickle the savings down to your customers, too.

Looking for ways to improve your bottom line

Back to top ↑

 

The automotive industry is driving automation by having the largest number of robots working in factories around the world — operational stock hit a new record of about one million units, according to the International Federation of Robotics (IFR). With the prevalence of automation rising in the automotive industry, the benefits associated with its use in manufacturing cannot be understated. With advantages that work to bring productivity and efficiency all around, advancements in technology such as the integration of artificial intelligence underline the many innovative applications to come.

Exploring the current advantages of automation

“The automotive industry effectively invented automated manufacturing,” notes Marina Bill, the President of the IFR. “Today, robots are playing a vital role in enabling this industry’s transition from combustion engines to electric power. Robotic automation helps car manufacturers manage the wholesale changes to long-established manufacturing methods and technologies.” The IFR goes on to highlight the recent density of robots in the automotive industry — in the Republic of Korea, 2,867 industrial robots per 10,000 employees were in operation in 2021, while Germany had 1,500 units followed by the United States with 1,457 units.

Automation plays a variety of roles in automotive manufacturing, including taking on tasks such as screw driving, windshield installation, and wheel mounting. Automate highlights one example of a valuable role that automation plays in the manufacturing process, via an automated vehicle floor plug insertion system developed by FANUC for General Motors. As a result, the system effectively helps relieve workers from “the ergonomic strain of the manual process and improves production time.” Apart from assembly, Robotics and Automation News notes additional uses for automation in manufacturing include car painting, welding, polishing and material removal, and quality inspection. Regarding the benefits, automation in automotive manufacturing is known to have a wide variety of advantages that heighten productivity in immense ways — including lowering costs, improving accuracy and safety, and amping up efficiency.

Increasing automation highlights a productive future

According to CBT News, automakers are “likely to introduce more robots and other forms of automation over time.” Currently, CBT notes that many robots on production lines are called ‘cobots,’ as they work alongside workers in order to complete tasks that are physically demanding or more challenging to do — Ford, for example, has “at least 100 of these cobots across two dozen of their plants around the world.” Automakers are already planning for increased automation in the future in order to achieve various goals. Tesla is a pioneer regarding factory automation and robots; Elon Musk, for example, has said that introducing more automated equipment at Tesla as part of a goal to cut the costs of making future models by 50%, according to CBT News.

To further underline the presence of automation in auto manufacturing, a 2021 article from The Korea Economic Daily Global Edition highlights the use of robots and artificial intelligence (AI) by Kia Corp., South Korea’s second-largest automaker. According to the article, the company had released a video “showing a highly automated production line of the all-electric mid-size crossover utility vehicle (CUV) at a smart factory powered by artificial intelligence and robot technology.” Crossovers have risen in popularity in the US, with the vehicle featuring an SUV-style body based on a car (rather than a truck platform), therefore using unit-body construction. Today’s crossovers offer a variety of features, with top-rated crossovers offering those such as a spacious interior and a smooth engine.

Innovation foreshadows advancements to come

In addition to simply expanding automation efforts throughout auto manufacturing, ‘smart manufacturing’ employs technology in addition to automation. Also called Industry 4.0, RT Insights notes that data-driven decision-making and predictive maintenance are just the beginning of the advantages associated with smart manufacturing, with benefits extending to areas such as energy efficiency and supply chain optimization. “The resulting factors of having a smart manufacturing set-up are efficiency, production optimization, trackability, quick turnaround during downtime, safer working conditions, and responsible manufacturing,” notes Mobility Outlook.

AI and machine learning (ML) are both components that are driving the future of smart manufacturing, with Mobility Outlook explaining that AI systems analyze data sets and historical records of Internet of Things (IoT) devices. As a result, AI can identify patterns and trends which would otherwise go unnoticed by workers. ML algorithms, on the other hand, can “learn from data, make predictions, and make suggestions to improve manufacturing processes.” Predictive maintenance can also make a major difference in the future of automotive manufacturing, with the analysis of data allowing for minimized repair costs and proactive maintenance. Furthermore, Mobility Outlook highlights the value of quality control systems powered by AI — with this technology, defects can be detected in real-time, allowing for waste reduction and improved product quality across the board.

Automation brings a variety of benefits to automotive manufacturing. While automakers are already making use of the technology, technological advancements like AI are driving the future of ‘smart manufacturing,’ effectively foreshadowing a range of advantages to come.

*This article is written by Lottie Westfield. Lottie spent more than a decade working in quality management in the automotive sector before taking a step back to start a family. She has since reconnected with her first love of writing and enjoys contributing to a range of publications, both print and online.

Back to top ↑

 

All roads are leading most industries to adopt increasingly more sustainable practices. The pressure for manufacturers to go green is growing in the face of climate change, supply chain challenges and especially consumer preferences.

A report from the Roundup, “Environmentally Conscious Consumer Statistics,” paints a pretty clear picture.

Consumers are opting for products that are sustainable, but that’s not the only headline for manufacturers. Because, it’s not just products. It’s the companies, too. Some 29% of consumers said they are “often or always” influenced by a company’s commitment to adopting more sustainable practices.

Sustainability challenges: It’s not easy being green

Many in the manufacturing industry are undoubtedly feeling some kinship to Kermit the Frog these days. Despite the pressure to adopt more sustainable practices, as the Muppet so famously lamented: “It’s not easy being green.”

It’s all well and good to work toward shoring up the environment (and we need to) but it’s a challenging lift for manufacturers. Some obstacles include:

High upfront costs. New technologies, processes and materials come at a price. It’s especially tough for manufacturers in industries like food and beverage, which has razor-thin margins.

Long wait for return-on-investment. ROI from major expenses can take years to come to fruition.

Supply chain challenges. Even if your company has shifted to more sustainable practices, what about your suppliers?

Skilled labor shortage. It’s difficult enough to find warm bodies to work on the line. But new technologies come with new skills requirements.

Opportunities are emerging

At USC Consulting Group, we help companies look for the opportunities within challenging situations. We always find the silver linings. Here are a few:

Cost reduction. Yes, there are upfront costs. But sustainable practices can lead to reduced energy and water consumption, the possibility of lower regulatory compliance costs, and lower materials costs by using recycled materials.

New partners, suppliers and revenue streams. The sustainable marketplace is an ecosystem all its own. It’s possible to find new partners, customers and even suppliers.

Attract and retain top talent. Yes, there is a labor shortage. But the companies with strong sustainable practices are attracting the best people out there. Companies that care for the environment also find their employees are more engaged and involved.

Governmental tax breaks. The government is committed to rewarding companies for adopting more sustainable practices with tax breaks and other financial incentives.

Strategies for manufacturers

One of the best ways to adopt more sustainable practices is to first look in the mirror. It’s not necessarily about investing in new technologies and turning the world upside down. First, look at your processes and operating systems. You’ll likely find efficiencies you didn’t even know were there. Places to start:

Minimizing waste. Lean Six Sigma methodologies can find hidden wastes and lead to more efficient operations. Not only will it save you considerable money, but minimizing waste is a key principle in sustainability. That’s a win-win.

Operations improvements. How efficient are your operations? A solid management operations system, which is a structured approach to your operations, creates much greater efficiency. The best MOS focus on processes, systems, roles and structures to map out how the job gets done, and by whom. Learn more about it in our short video, Stop the Firefighting Mentality to Improve Your Bottom Line.

Sales, inventory and operations planning. You’ve heard of S&OP. We added the “I.” We find inventory to be a key piece of the operations puzzle. When doing sales forecasting and planning for demand and supply, adding inventory elevates the process a notch. It makes inventory a strategic tool. Learn more about it in our free eBook, “Sales, Inventory and Operations Planning: It’s About Time.”

Training. About that skilled labor shortage. A way to combat that is by training and upskilling your people. And solid training for not just employees on the line but managers, too, will get everyone on the same page, creating greater efficiency organization-wide.

By moving toward more sustainable practices, manufacturers can ultimately reduce costs, find greater efficiencies, attract both consumers and employees and help the planet in the process. But it’s not easy. At USC Consulting Group, we’re the experts on helping companies become more efficient, effective and profitable. With more than 55 years behind us, we’ve seen trends come and go. The key is turning challenges into opportunities. Get in touch to find out more.

Contact USC Consulting Group

Back to top ↑

 

How’s your supply chain running these days? If you’re like most manufacturers, you’re still experiencing challenges. Big challenges. The pandemic threw the worldwide supply chain into chaos and it hasn’t yet recovered, but the truth is, there have always been supply chain issues bedeviling the industry. The pandemic just exacerbated what already had the potential to go wrong and uncovered new problems lurking just below the surface.

Just-in-time strategies, which were (and continue to be) popular methods of having just the right amount of inventory on hand at any given time, left manufacturers vulnerable to supply chain disruptions. The increasing complexity of global supply chains didn’t help the situation, nor did the pervasive lack of visibility into supply chains themselves.

What are manufacturers facing this year in terms of their supply chain? Let’s take a look at these issues, and examine some ways USC can help.

Manufacturers supply chain challenges for 2024

Materials shortages. Global instability, the lingering effects of the pandemic and other factors are leading to shortages of raw materials and components. Production delays, increased costs and unhappy customers are the result. And speaking of costs…

Rising freight costs. As fuel prices ride the same roller coaster we’re all seeing at the gas pump, and labor shortages and ongoing congestion at ports collide, it means costs to get those components and materials are going up, eating into your profits. And speaking of labor shortages…

Labor shortages. This problem is ongoing, and we have to say, it’s one thing that wasn’t caused by the pandemic. Manufacturing workers are aging and retiring, and there isn’t a large pipeline of younger people with the skills to replace them. It means reduced output and productivity, dwindling motivation and drive, and the loss of institutional knowledge.

DRIP. It stands for data rich, information poor. When you’re talking about the supply chain, it means you need to use data to its fullest. Outdated inventory systems won’t cut it.

Tactics that can help

Diversifying supply chains. Having too many eggs in one basket has proven costly when that basket falls apart. Reliance on any one supplier, especially if that supplier is overseas, is becoming yesterday’s strategy that is just not working in today’s market.

Reshoring. Supply chain disruption, ongoing global instability, higher costs (including higher labor costs in China), increased lead times and more hassles are leading companies to reconsider foreign sources. Many are already doing it. Yahoo Finance reported in June 2023 that 80% of manufacturers are now considering or acting on reshoring some or all of their production. A couple of quick examples: General Motors invested $7 billion in production facilities in Michigan to not just manufacture electric vehicles but the batteries that power them. Intel invested $20 billion in a new semiconductor manufacturing plant in Ohio, and is investing $30 billion for a similar facility in Arizona. Some manufacturers are “nearshoring,” bringing production closer to home, from China to Mexico, say. Not only will this reduce lead times, improve quality control and leave companies less vulnerable to global unrest, it will also create jobs here at home.

SIOP. We laud this tactic often because it really does improve efficiency, but in the age of supply chain disruption, it’s crucial. Sales, Inventory and Operations Planning (SIOP) is a collaborative process that aligns all departments. It involves using inventory as a strategic tool, demand management and supply planning, giving you the ability to capture, analyze, integrate and interpret data to give you a strategic advantage.

Learn more about SIOP in our free eBook, Sales, Inventory and Operations Planning: It’s About Time.

Solid training. The labor shortage isn’t going away, and we’re finding that many manufacturers are investing in training, ensuring that everyone is doing the job the same way, with rock-solid operating procedures. It’s a powerful way to keep institutional knowledge within your facilities, instead of losing it when people retire.

At USC Consulting Group, we have over 55 years of experience helping manufacturers ramp up their efficiency, production and operations. It’s especially crucial to be firing on all cylinders during challenging times… and we’re in them, right now. Give us a call and let’s talk about how we can help.

Looking to optimize your supply chain

Back to top ↑

 

Has the trend passed about caring for the environment and preventing harmful emissions?

Despite the fact that GMC is touting its new, 2024 Hummer EV SUV, starting at a cool $80,000 with a 329 range on a full battery charge, Reuters is reporting that the demand for electric vehicles isn’t keeping up with expectations. In October 2023, Honda and General Motors announced they were ending a $5 billion partnership to develop lower-cost EVs. GM says it’s to “enhance the profitability of our EV portfolio and adjust to slowing near-term growth.” Ford, too, just announced it pushed back its EV production timeline because of slower customer demand. Investors are taking notice. Automakers are thrown for a loop.

It’s not for lack of desire for electric vehicles by consumers, auto manufacturers and climate activists alike. Reducing the sting at the gas pump while helping the environment? Bring that on. Indeed, Cox Automotive Report tells us EV sales exceeded 300,000 units in the U.S. in Q3 2023. That’s record numbers.

So, what’s going on?

There are vexing factors swirling around this marketplace, colliding into a miasma of toil and trouble for auto manufacturers.

High interest rates = slowing demand

The current demand slowdown reflects the uncertain economy and the looming shadow of high interest rates (Will they go higher? Will they come down?) driving up the price of the already-expensive EVs. It’s a one-two punch. For most people, the decision to buy a car depends on the affordability of the monthly payment combined with other factors affecting their household budget. The vast majority of us are not rushing out to spend $80K on that Hummer. Maybe a more affordable model? Sure, but with sky-high interest rates driving up the monthly payment of already-expensive vehicles at the same time a pound of ground beef costs upwards of $8, people are taking a wait-and-see attitude. Maybe a gas-fueled car is a better bet right now.

Raw materials shortages for batteries = supply chain issues

As The Buzz EV News recently put it so succinctly, the raw materials that power EV batteries, namely lithium and cobalt, “aren’t exactly littering the landscape.” This, coupled with the fact that 90% of the supply chain for EV batteries runs through China, makes it difficult for U.S. auto manufacturers to realize efficient, profitable production. No one in the industry wants a repeat of the auto microchip shortage during the pandemic.

How is it all affecting auto manufacturers, and what can be done about it? At USCCG, we have a half century of experience dealing with the effects of supply, demand and the economy on many different industries. We work across the entire battery supply chain from mining to metals to battery manufacturing plants. Here’s how we see the issues playing out currently.

Auto manufacturers are doing a 180 (for now), so…

Based on the changing demand, automotive manufacturers are pulling back from EV investment right now and putting it back into traditional auto manufacturing. Even though the industry’s goal is still moving towards a 2030-2035 conversion to EVs, consumers are still buying gas-powered vehicles. Automakers need to maintain production to satisfy the demand.

…Demand and schedule planning is crucial, but…

Automakers’ backlogs need help — they have the orders and demand for gas vehicles, but are struggling to fulfill this demand and fill those orders. At USC, we happen to be the specialists in wrangling schedules, planning for demand when those sands keep shifting, and adding horsepower to teams just when they need it the most. It’s an all-hands-on-deck situation for auto makers, except…

…The skilled labor shortage is real

The new UAW contracts are driving labor costs throughout the industry, even in non-union facilities.  Couple that with the ever-shrinking skilled workforce, and it puts auto makers behind the eight ball just when they need to find and retain quality, reliable employees. At USC, we’ve been focusing on this issue, helping employers train their people on best practices and optimal processes. It’s crucial now, like never before.

EV issues aren’t going away. It’s time to reshore now

Yes, the demand is slowing. For now. But auto makers are still on track for conversion to electric vehicles, and the public still wants them. But these battery and supply chain issues are still plaguing the industry.

A few facts entering into this mix: The current Inflation Reduction Act included billions of dollars in government loans to fund EV battery plants in the U.S., and also included a $7,500 tax credit to people who buy U.S.-made EVs. It also allocated $7.5 billion to fund a network of charging stations around the U.S. (That, in itself is exciting for logistics nerds like us.)

Gov. Brian Kemp of Georgia is taking advantage of this trend, creating a push for EV jobs, major manufacturers including Hyundai and Kia located in the state, and pledges to make Georgia the “electric mobility capital” of the country.

TechCrunch+ says the U.S. is in an EV battery factory construction “boom” as a result of these initiatives. In 2019, there were just two battery factories here in the U.S. Today, 30 are either planned or under construction.

What does it all mean? It means auto manufacturers need to meet current demand while keeping an eye on the future. USC can help you do that. Contact us today.

Looking to optimize your supply chain

Back to top ↑

 

The 2024 forecasts for the oil and gas industry include some conflicting speculation about supply and demand. It’s leading to confusion for U.S. companies… not to mention dismay as people everywhere scowl at the gas pump when they’re filling up.

Reuters reported in August that OPEC+ expects to see supply cuts that impact oil inventories, which will drive prices potentially higher than the $88 per barrel of crude in August 2023, the highest price since January. OPEC+ is confident, however, that demand will rise markedly.

But… the International Energy Association (IEA) doesn’t quite agree with those numbers, noting that the fluctuating economy will impact manufacturing businesses, and coupled with the tsunami of electric vehicles, will shake out in the form of falling demand.

Those clear-as-mud speculations boil down to one thing: Uncertainty is ahead for an industry that has already had its fair share.

All industries have been weathering uncertainty for the past few years, starting with the pandemic and, once we thought we had that handled, continuing with a shaky economy, a cried-wolf recession and ever-rising interest rates, putting consumer confidence on shifting sands.

At USC Consulting Group, we specialize in helping companies through uncertain times by optimizing their processes, becoming as efficient as possible and positioning themselves on solid ground to handle whatever is coming down the pike.

Preparing the Oil & Gas industry for an uncertain 2024

Here are seven ways the oil and gas industry can shore up for an uncertain 2024. Though separate goals, all work together to make companies as efficient and productive as they can be.

1. Reducing costs

Is there ever a year when companies in any industry shouldn’t focus on reducing costs? That’s a given, 24/7/365. But, it’s especially important for oil and gas going into 2024, when the economy continues to be volatile and uncertain. Buttoning up costs is a good strategy for the industry to get through that storm. It’s about optimizing production processes in the field and reducing extraction costs in order to offset costs involved in finding new sites.

2. Managing supply chain risks

After the supply chain bottlenecks most every industry experienced during the pandemic, it’s vital to mitigate supply chain risks. It’s a burr under the saddle of the entire industry. Fluctuating costs and supply uncertainty can impact the entire operation. Oil and gas companies need a little breathing room, predictable lead times and a more secure footing going into next year. Securing your supply chain is one way to achieve that. It can help avoid the market roller coaster we’ve seen in the recent past and may help ease pressure from inflation as well. The bonus here is, it can save about 15% on costs.

Developing a solid risk assessment plan that takes into consideration what’s happening at the supplier level will secure your supply chain and prevent any surprise shortages.

3. Focusing on yield

Maximizing yield, like reducing costs and managing supply chain risks, brings solid benefits in any economy, but especially now. It means making sure extraction techniques are as efficient as possible, utilizing methods like Enhanced Oil Recovery to extract more oil from reservoirs that may have been underutilized, managing those reservoirs carefully and by the numbers, and making sure employees across all facilities are on the same page.

4. Closing the how-why gap

In an organization the front line often does not understand the “why,” and the executives don’t understand the “how.” It means, the top brass do not fully understand how the job gets done and the frontline workers don’t fully understand why the job needs to be done. Closing that “how-why gap” is critical for optimal performance all the way up and down the organizational food chain.

5. Standardizing daily and weekly instructions for front-line managers

Going hand in hand with closing that how-why gap is increased training for managers. Many industries like oil and gas rely on frontline training, but some people would say that supervisors need even more. Training trickles down, but efficiency does, too. And the key to that is making sure everyone, across all departments and facilities, is on the same page, doing the job the same way, with a standard set of operating procedures. It’s a vital component for optimal efficiency.

6. Consolidation and acquisition = increased need for communication

New talent, ideas and perspectives can breathe life into a company. Mergers and acquisitions in the oil and gas industry exploded in Q2 2023, according to Enverus Intelligence Research. After $8 billion M&A in Q1 2023 (nothing to sneeze at) we saw $24b in Q2. It’s in line with increased consolidations, as reported by Forbes, with the goal of lowering costs, raising inventory and in the end, boosting investor returns.

All of that M&A activity can put a strain on employees of affected companies. Especially during this flurry of M&A, it’s important to find solutions to help them with the complexities of combining two “legacy” groups, which have their unique set of standards. Finding ways to combine both schools of thought into one set of “best practices” after a merger is paramount to its success. To learn more about it, read our recent case study: “Creating Harmony When Merging Two Companies.”

7. Performing scheduled maintenance

The goal is zero unplanned downtime. Pros in the industry know that’s not so easy to achieve. It starts with asset monitoring, including wells but also pipelines, processing facilities and other equipment to maximize operational efficiency. Scheduling downtime for maintenance ensures a shutdown, but it also ensures you’ll know when it’s coming and can plan accordingly. Unplanned failures or glitches can be costly problems at best but dangerous threats to workers at worst.

At USC Consulting Group, we’ve been working with the oil and gas industry for decades. If you’re interested in optimizing your company’s efficiency in this uncertain economy, give us a call.

How reliable is your asset maintenance program

Back to top ↑

 

Strikes have been in the headlines lately, with the writers’ strike bringing Hollywood to a standstill and President Biden making history as the first sitting president to ever walk a picket line (he did it in Michigan in support of the United Auto Workers strike), and most recently healthcare workers are threatening to walk out as well. The average Joe is certainly impacted by these disputes between management and workers. The writers’ strike, which was recently resolved, means no new scripted programming this fall season (say it ain’t so, Law & Order!). The auto workers’ strike means new car prices are expected to rise… as if inflation and interest rates hadn’t handled that already. And a nurses’ strike will certainly impact the care people receive.

So, it’s easy to see how everyday people are affected by strikes. How do labor strikes impact the business side of the manufacturing industry? They can wreak havoc in many facets of operations, obviously bringing production to a screeching halt during the strike itself.

But those effects, and others, can linger when employees exchange the picket line for the production line, impacting operations long after the strike is resolved. Here’s how.

Decreased output. Obviously, production is brought to a stand-still during the strike itself. So, when employees get back on the job, the entire operation is behind. It affects everything from hitting forecasted numbers to earning revenue.

Inventory snags. Other parts of the industry, like the supply chain, can be unaffected by a strike, so inventory can accumulate. Getting inventory just right is a core principle for efficiency, and it’s a delicate balancing act between too much and not enough. Strikes can throw that balance off in a big way.

Delivery delays. Product isn’t being produced during a strike, period, so obviously it’s not going to be delivered on time. But even after the strike is over, delays can continue as companies play catchup. Those delays and shortages have a ripple effect, first hitting your partners and clients, but then rippling out to their partners and clients.

Damaged relationships. Employee morale is like gold in any industry, but after a strike, especially if it’s a prolonged one, relations between employees and management can sink to an all-time low. Distrust of higher-ups can seep onto the production line, disputes may not be completely resolved to both parties’ satisfaction, collaboration can suffer. With the battle for qualified, experienced workers in manufacturing, this is a tough setback.

Bottom-line woes. All of those production delays can result in fewer orders, distrust among your clients and vendors, stock prices could even take a tumble. All of it will eat away at your profits.

How manufacturing can bounce back after strikes

When the negotiation is done and the workers are back on the job, management’s next steps can mean the difference between bouncing back quickly from a strike or feeling those nagging, lingering effects. At USC Consulting Group, we’re the experts in helping management streamline operations, become more efficient, create effective training and more — all crucial elements in the next steps after a strike.

Careful scheduling to increase production. This doesn’t mean piling on the work to make up for the shortfall. But it might mean adding additional shifts, giving people extra hours or even hiring temporary help to close that gap.

A laser focus on employee relations. Now is the time for the C-suite to get out on the production line, if they haven’t already been walking that floor. Employee relations can be at an all-time low after a strike, so it’s vital to focus on employee retention efforts, additional training and other methods to make your employees feel valued and needed.

Involve employees in the fix. Items may have been hammered out at the negotiation table, but it doesn’t mean all employees will be on board with what the union agrees to. The old adage, if it ain’t broke, don’t fix it, applies here, only in reverse. It was “broke.” Involving the people on the front lines in the “fix” in terms of streamlining operations can go a long way.

Strive for operational excellence. This means efficiency and ease all the way down the line. When your shop is running on all cylinders, it’s not just good for your company’s bottom line. Employees like their jobs better when snags, delays and other frustrations aren’t happening.

Have labor strikes affected your manufacturing operations? Need some help improving your processes to please your employees and bottom line? Contact us today and we will walk you through the steps.

Contact USC Consulting Group

Back to top ↑

 

Last year, the London-based Collins Dictionary named “permacrisis” as the word of the year. It means an extended period of instability caused by an onslaught of seemingly never-ending crises — wildfires, pandemics, hurricanes, floods, inflation, air quality alerts, the highest heat ever recorded in some regions of the world, economic instability, wars… the list goes on. Sound familiar? You name it, we’ve all lived through it. And it shows no signs of slowing down.

In the immortal words of Gilda Radner on Saturday Night Live: It’s always something.

The way we see it here at USC Consulting Group, it IS always something. That’s called life. While the world may be going through an unusually rocky stretch, there is no perfect time to be running your business. Whether it’s external crises like the ones we’ve described, or internal upheavals like layoffs, mergers, unforeseen difficulties or the myriad hiccups that can occur, things are going to happen. When they do, companies can thrive, not just survive, with a mix of focusing on process improvements and operational excellence, optimizing your supply chain, and implementing standard operating procedures, along with a dash of the old-fashioned notion that “this too shall pass.”

Here are a few tactics for making sure you’re on solid footing, even during the rockiest of times.

Process improvements

The goal is operational excellence, right? But is that ever truly achievable? Yes, but it can also be a moving target. It means continuous improvements to processes, becoming as efficient as possible. We find that it’s about eliminating bottlenecks, waste and other snags that can impede productivity. Getting the right people in the right jobs and empowering them to get that job done. Developing standards and key process indicators that will tell you when you’re on target and when you aren’t, and using data to “manage by the numbers.”

Optimizing the supply chain: Don’t DRIP!

What’s DRIP? It’s a popular acronym when talking about supply chain. It stands for data rich, information poor. The fragility of the supply chain, no matter the industry you’re in, has become crystal clear in recent years. Optimizing your supply chain needs to be top of mind to make sure you don’t get caught short, and as DRIP suggests, it starts with making sure you’re using data to its fullest. Outdated inventory systems can impede that. Supply, Inventory and Operations Planning (SIOP) is a method we here at USC utilizes that emphasizes inventory as a strategic tool to allow businesses to get a better look at their operations and formulate superior strategy decisions.

SIOP gives you the ability to capture, analyze, integrate and interpret high-quality data, which is the key to staying ahead of the market. The aim is to achieve process automation and glean predictive analytics, which give you a strategic advantage… so you don’t DRIP.

Learn more about SIOP in this free eBook

Standard operating procedures (SOPs)

Much is being written in the news lately concerning “institutional knowledge,” and how the loss of it can be devastating to companies. What is it? It’s what’s NOT in your training manual. It’s what the person you think is “irreplaceable” knows. The ins and outs of doing the job that your best people learn through years of experience. When they retire, or leave the company for whatever reason, that knowledge walks out the door with them. That’s why it’s so important to develop standard operating procedures for every job in your company, and write those procedures down on stone tablets if necessary.

Comprehensive training

When you have those SOPs down, that’s just the first step. Training your people in exactly how to do the job, so everyone across all of your facilities is doing it in the same way, is vital.

Sound like a tall order? It can be. That’s where we come in. At USC Consulting Group, we have 55+ years of experience helping companies optimize their efficiency, ramp up their production, solidify those SOPs and operate to the max. If you’re wondering if now is the right time to hire an operations consultant, download our aptly named eBook, “When is the Right Time to Bring in Operations Consultants?” It’s free, and it will give you more information about how we can help your business.

Right Time to Bring in Operations Consultants eBook CTA

Back to top ↑