Today’s environment has created an extraordinary set of challenges for supply chains globally. What can manufacturers do to turn these challenges into opportunities, and prepare for a more resilient future?
Manufacturing companies are experiencing disruptions to their supply chain and manufacturing operations, including accordion effects with both suppliers and consumers for products and services. In a global environment, factories and ports will be at various levels of shutdown and recovery for the foreseeable future, so companies can expect continued impacts on supply lead times. For those companies that have a high dependency on a few key suppliers and/or commodities, the risk may be even more pronounced.
And no matter what products and services companies produce, the new normal has a high likelihood of impacting those products and services, potentially even making them obsolete. Companies should expect that current changes to consumer behavior patterns will continue. Restrictions (social distancing, mandatory use of personal protective equipment, etc.) and new learned behaviors (remote learning and working, self-quarantining, online shopping, etc.) are having a long-term effect on consumer demand. Moving forward, companies that can assess and adapt quickly to changing market demand will be best positioned for success.
Tactics to Reduce Your Risk
A business’ end-to-end supply chain practices must be agile enough to make faster changes, and resilient enough to recover from a lack of raw materials, product, or capacity. Agility will ensure the right cost, service and quality given external market factors. Resilience will mitigate the impact of disruption where there’s potential points of failure.
There must be balance between the two because:
- Agility is offense. This is how customers are supported when there is unplanned demand and unforeseen constraints.
- Resilience is defense, that is, protecting supply and capacity. One of the methods can be manufacturing redundancy. This plays a major role as most organizations think about localization or reshoring initiatives for faster response times.
Here are some actions that companies should consider to counteract the instability caused by supply chain uncertainty:
- Conduct an evaluation of suppliers and distributors across the value chain
Identify alternative sources and locations that may be less impacted by disruptions now and in the future. Be sure to include available inventory of raw materials, WIP and finished products as part of the evaluation to assess your immediate needs. Companies that expand and diversify supply chain options will be best positioned to meet a volatile market demand.
- Use a strategic foresight approach
The pandemic has pushed manufacturers into a new realm of supply chain scenario planning. By considering various situations, companies can take a fresh look at existing products and service portfolios and consider cutting those that are underperforming or redesigning those that are susceptible to supply disruptions. Businesses can also use scenarios to evaluate what kind of investments will be best and what can be better optimized.
- Reevaluate operating models for the future state
Manufacturers that can add flexibility to manufacturing operations and become less susceptible to supply risks will be able to adapt quickly to changing constraints and fluctuations in demand in the future. This should include optimizing production capacity for sudden changes in commodity supply or customer demand and assessing the company’s ability to change inventory management and distribution models.
Leaders across the manufacturing industry should take the opportunity to rethink the way they do business and evolve to become a more resilient company. Many of the changes happening today will influence the way organizations operate in the long-term. When thinking about the new normal, there are two areas that companies can focus on to be better prepared for the future:
An Optimized Digitally Transformed Supply Chain
From an agility perspective, the convergence of Information Technology (IT) and Operations Technology (OT) fits into an overall digital manufacturing strategy. A digitally transformed organization is faster to the right decision and can more easily achieve the right balance of agility and resilience in the supply chain.
With our strategy to bring the Connected Enterprise to life, Rockwell Automation helps organizations solve daily manufacturing challenges. As a manufacturer with our own integrated supply chain, we understand the evolving industry challenges confronting global manufacturers.
A solid digital transformation strategy and technology deployments will allow manufacturers to meet commitments and even create a competitive advantage through their supply chain.
Supply chain professionals will need to contend with these disruptions and the complexity of vast amounts of data and insights; and use the latest processes and technology solutions to balance agility with speed, efficiency, and capacity.
Often, manufacturers are plagued by a lack of visibility throughout their supply chains, leaving them with little insight to anticipate any issues or opportunities. This is where advanced digital enablers can help businesses boost visibility, reduce risks, and improve efficiency via technologies such as the Internet of Things (IoT), advanced analytics, and moving to Software as a Service in the cloud.
Recently, Rockwell Automation acquired AVATA, a leading services provider for supply chain management, enterprise resource planning, and enterprise performance management solutions to significantly improve end-to-end supply chain visibility and management for customers. AVATA will be integrated into Kalypso, which is a part of our Lifecycle Services business.
AVATA is a consultant and systems integrator for Oracle cloud software applications and can help customers solve critical problems and deliver operational excellence across the supply chain via digital transformation initiatives.
Equally important is inventory forecasting and optimization. Manufacturers can tap on supply chain planning and management digital tools to dynamically plan in near real-time, optimize, and better sync with suppliers to ensure that the right inventory is available at the right time to meet customer demands.
For instance, Plex, a SaaS cloud-based smart manufacturing platform, offers applications in supply chain planning, advanced manufacturing execution, and quality management across discrete, hybrid, and process industries to improve visibility into end-to-end production systems. Via the cloud, process can be easily integrated across teams, giving companies a better overview of their supply chain operations so they can better enable disruptions and proactively address any issues.
As consumers are increasingly exposed to more options, they too, are seeking greater visibility in terms of product traceability, particularly in the Food and Beverage (F&B) sector. Concerned whether the food they are ingesting is safe to consume, F&B companies are increasingly pressured to delivery full transparency of their production chain. They are recognizing the need for automated infrastructures that can enable traceability and accountability for each product. Learn how Dutch dairy company FrieslandCampina utilized digital traceability solutions to give customers the peace of mind they deserve.
Ultimately, leveraging digital technologies will help companies optimize their asset utilization and increase the quality and delivery of products throughout their value chain. But it’s not just about implementing new technology. Becoming more digital is best achieved with a digital strategy and roadmap in place that includes the application of emerging technology areas, disruptive business models and new markets, and building digital skills and culture to raise the competitiveness of the company.
Diversifying Products and Operations
After staying home and working remotely for months, people will have either used products and services in unexpected ways that they will want to continue, or they will have identified new needs that will have to be met. Organizations should monitor these behaviors and expand their offerings to leverage new or existing sales avenues. Manufacturers should implement a product portfolio diversification strategy to quickly meet these expectations and bring in new revenue or, at the very least, help compensate for revenue loss from other products.
Larger manufacturing companies that are geographically concentrated should consider expanding their capabilities across their facilities to serve specific regions. By producing goods closer to the markets where they are consumed, manufacturers will create redundant manufacturing capabilities that can be leveraged when or if one of the production sites are impacted. This also limits the effect to just the markets served by the impacted sites. In addition to diversifying supply chain dependencies, organizations should continuously manage sourcing risk by mapping and monitoring their value chain.
Regardless of which scenario occurs, adopting digital and diversifying products and operations are safe bets to help prepare for any outcome.
The silver lining of any crisis is the opportunity for companies to learn about and adapt to uncertainty. And as manufacturers recover and seek to build resiliency and adaptability across the organization, they should also solidify the foundation of their digital transformation and product diversification efforts.
Manufacturers that can be flexible and can make changes quickly to their supplier base, partnerships, and operations will be best positioned to meet the demands of the new normal, whatever that turns out to be.
