Supply Chain Trends, Part 1

By: Tori Ung, Location Analyst with Austin Consulting

Manufacturers are facing many trends and challenges these days, including those from both the supply chain and transportation sides of their business. This two-part series will examine these issues, so companies can be better prepared to address them.

Risk Management

Managing risk is a key component to running a sound business. It is also a key component in managing supply chain. Many businesses were affected by the West Coast Ports labor standoff, which is estimated to have cost retailers as much as $7-billion. To manage risk successfully, shippers need to ask themselves a few questions:

  • How many potential problems can our company actually account for?
  • Do we have adequate back-up supplies to help keep our production moving, should the need arise?
  • What is the correct inventory level to prepare for reasonable risk? Too much and you’ll lose money with carrying costs. Not enough and you could miss a crucial deadline.
  • Are we using safe and reliable carriers?

With anything, no plan is 100% fool-proof. Taking a good hard look at how much risk your business can afford is crucial to staying ahead of supply chain challenges.

Procurement

All businesses deal with procurement challenges, and this is no different with supply chain. Lately, however, it appears that ‘procurement’ has become a new buzz word in the industry. Companies are focusing a lot of attention on obtaining the best quality products and services. There has been a shift in the industry due to cost, new service providers, and a focus on lean supply chains. A continuous focus on this area will help ensure that companies are maximizing their efforts.

3D Printing

The advent of 3D printing is a robust topic with great potential and the possibility of becoming its own industry. Imagine a world where a line is shut down because a part is needed. Don’t wait to have one shipped, have the manufacturer send you the drawing of the product and print one yourself. 3D printing can shorten supply chain and help reduce risk.

On-Shoring

Companies are bringing manufacturing – and jobs – back to the US. Developing countries are seeing labor rates increase, while the 2008 recession saw an adjustment to decreased labor rates in the US. Fuel and production costs in the US have reduced as well. This is the best example of reducing risk and shortening the supply chain. Manufacturers are no longer waiting for the long lead time of ocean shipments and can quickly react to customer needs. Also, there is once again a positive connotation to having “Made in the USA” stamped on products.

Changes in Customer Shopping Behavior

Consumers are buying things differently now than before. The internet has completely changed the purchasing process. Online retailers are doing everything they can to have you buy their products over the internet instead of in stores. This has caused a change in retail as a whole. “Brick and mortar” retailers are doing all they can to get you in store – coupons, “door buster” deals, sales, etc. The internet allows consumers to determine the best price for goods and determine the fastest way to get what they want. Also, take into account that the cheapest product isn’t always what consumers are looking for. Consider products like Beats headphones and the $17,000 Apple Watch. Consumers aren’t always looking for the best deal. Balancing what the consumer wants and is willing to pay for has become a challenge for many retailers.

These considerations are just the tip of the iceberg when it comes to trends that affect a company’s supply chain, and are being discussed more and more. Check back next month to learn more about transportation trends that are affecting manufacturers.