Lisa Anderson, a supply chain expert and president of California-based LMA Consulting Group, says that the Chips Act “has spurred on certainly quite a bit of investment” in the US electric car sector. And Mexico is also booming through ‘friend shoring’.

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Read the full article at the BBC website. 

The post BBC: Why firms are bringing their manufacturing back home appeared first on LMA-Consulting Group, a supply chain consulting firm.

Status of the Medical / Healthcare Supply Chain

The supply chain has calmed down since the height of the pandemic; however, smart manufacturers are thinking ahead to changing conditions. Geopolitical risks are at an all-time high. The Russia-Ukraine war rages on and Israel and Hamas are at war which has spilled over to the Iran-backed Houthis rebels attacking container ships in the Suez Canal, disrupting a major shipping lane.

Additionally, China continues to threaten Taiwan which produces 90% of the advanced computer chips for the world and an important component in medical devices. China is also being very aggressive in the region which could impact shipping lanes through the South China Seas, manufacturing in China and manufacturing in countries in the region. Since China dominates the medical device supply chain, this is concerning. Thus, proactive manufacturers are moving towards regional manufacturing. This trend started following the pandemic (refer to our quote in a MPO Medical Products Outsourcing article) and has been picking up steam.

Reshoring & Expanding Manufacturing Capabilities

According to Xometry’s Medical Industry Survey, medical device manufacturers are rapidly reshoring operations to strengthen their domestic supply chains. In fact, 67% of medical device manufacturers are in the process of reshoring operations within the next 12 months. There is a focused effort in rethinking supply chain strategies.

Although many companies are reshoring, executives remain concerned about the cost impact of expanding production in the USA. The good news is that labor costs have decreased as a percentage of total cost dramatically since the offshoring craze while other costs have increased, making reshoring more attractive. For example, transportation costs were heightened during the pandemic and have been impacted by the Panama Canal drought, the diversions of the Suez Canal, and other supply chain disruptions. The cost of capital has increased significantly with the increase in interest rates which has made the cost of carrying inventory much higher. And there are many other costs to consider in the total cost to produce. In fact, the total cost of product can be equivalent or even less in the USA in some non-commodity situations.

Many advancements have been made in manufacturing and technology. Companies are automating and digitizing their manufacturing and supply chain. For example, they are using 3D printing/ additive manufacturing, robotics, artificial intelligence with IoT, and other advanced technologies to improve efficiencies and enhance visibility. As manufacturers expand their manufacturing footprint, source new regional suppliers and reshore production, these advanced technologies maximize operational performance and minimize cost while maintaining and improving customer service levels with lower inventory levels. Thus, margin concerns are mitigated depending on the upgrades and improvements to the manufacturing process.

In the medical device industry, companies are starting to expand regional manufacturing in the USA. For example, Ascential Medical & Life Sciences is reshoring to Minnesota. Their new state-of-the-art facility has highly innovative automation solutions, making reshoring financially viable. Certainly, they are not alone. Companies are expanding operations in the USA.

Manufacturers are also nearshoring to the region. Mexico has expertise in medical devices and the ability to scale. Since customer requirements are significant in North America, the ability to scale in the US and Mexico is a relevant factor. The availability of advanced manufacturing and technical skills is also an important factor. Medical grade material supply can be sourced nearby, and the USA is ramping up computer chip manufacturing capabilities. For high labor component products, Mexico provides an excellent option because their labor rates are lower than China, and they benefit from the USMCA agreement between the two countries.

Although the USA and Mexico are great options with scale, there are additional medical device manufacturing hubs in other nearby countries. For example, Costa Rica has advanced skills, computer chip manufacturing, and therefore a thriving medical device manufacturing concentration. The Dominican Republic has medical device manufacturing, and Puerto Rico is known for pharmaceutical manufacturing.

Manufacturing Resurgence

There is no doubt that the successful companies will mitigate risk and manufacture regionally. Thus, the USA, Mexico and business friendly countries will experience a resurgence in manufacturing in the next decade. It will require investments in manufacturing, tooling, and other resources although there are opportunities to keep costs intact or even reduce total product cost.

The most successful companies will upgrade their processes, ERP systems, utilize advanced technologies, maximize customer and product profitability and proactively manage these opportunities with a SIOP (Sales Inventory Operations Planning) process. Assess your supply chain to learn how you stack up. Take our complimentary supply chain assessment. Upgrade, innovative, get ahead of the competition, and thrive.

If you are interested in reading more on this topic:
Why Manufacturing Matters and Will Thrive in the Next Decade

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Manufacturing Matters – Safety & Security

Manufacturing promotes safety and security and mitigates risk. Controlling your supply chain and mitigating geopolitical risk can become paramount overnight as geopolitical events occur, natural disasters emerge, and supply chain challenges arise (strikes, disruptions, shortages). These types of issues have been increasingly concerning with recent events.

For example, the war in the Middle East has caused disruptions in the Suez Canal. Container ships are being diverted and traveling around the southern tip of Africa, adding 10,000 miles and 7-10 days. This situation delays critical supplies and causes further inflation with increased costs. Additionally, the reason China has been threatening Taiwan is partially to gain control over 90% of the world’s advanced computer chips that go into everything from medical devices to critical infrastructure.

During the pandemic, the U.S. discovered it was dependent on China for critical supplies and everyday necessities. Not only can a worldwide pandemic cause disruptions of these supplies, but country specific policies can dictate whether your supply will be cut off. For example, China rolled out zero COVID policies, directly impacting production and shipping to the U.S. China could prioritize who received limited supplies.

China also wants to control the Red Sea and could decide to cut off supplies produced in other Asian countries in the region. Clearly China thinks manufacturing is essential to national security. For example, their shipbuilding capabilities are over 200 times greater than the U.S. According to the Maritime Executive, China produces more than half of all new tonnage in the world. These types of statistics are gravely concerning and the proactive will build capabilities.

Manufacturing Will Thrive in the Next Decade

As companies realize they must gain control over their supply chain to better support customers, reshoring and regional expansion of manufacturing capabilities will soar. Additionally, the cost has come into alignment for non-commodity products if you evaluate the total cost to produce, ship, store, protect, etc., China won’t have the advantage. Piles of inventory tying up cash unnecessarily are no longer acceptable, especially as customer needs change rapidly, increasing the risk of obsolescence. As interest rates soar, this situation is untenable.

Customers are not willing to accept prolonged periods of delays and stock outs. Thus, they are taking control of their supply chain and focusing on manufacturing capabilities. In addition, companies must prioritize customers and address proactively with strategic pricing and capacity decisions. Thus, smart companies are utilizing a SIOP (Sales Inventory Operations Planning) process to proactively navigate these changing circumstances to maintain high levels of customer service, profitability, and working capital results. SIOP will bring visibility to customer and product profitability, sourcing decisions, make vs buy alternatives, capacity bottlenecks and more.

The proactive will thrive and have more opportunities than ever expected. In fact, they will be in the catbird seat. The rest will continually struggle and weaken. With the significant skills gap (refer to our recent article on where the talent has gone), the proactive executives are hoarding the “best of the best” (employees, trusted advisors, suppliers, etc.). Are you prepared to thrive?

If you are interested in reading more on this topic:
SIOP/ S&OP: Proactive Approach to Maximizing Production Output and Capacity

The post Why Manufacturing Matters & Will Thrive in the Next Decade appeared first on LMA-Consulting Group, a supply chain consulting firm.

Supply chain optimization must remain a priority as disruptions continue. For example, although the Panama Canal started experiencing issues in the summer (refer to our article for details), it has been worsening lately. 40% of the goods movement from Northeast Asia to the U.S. East Coast go through the Panama Canal, and so the Panama Canal issues are driving shortages, late deliveries, and re-routing of goods.

Panama Canal Issues Worsen

Drought conditions are creating a new round of disruptions:

• Reduced container ships: by > 50% (from 40 to 32 earlier in 2023 to 25 Nov, 20 Jan & 18 Feb). 
• Restrictions on ship draft: to a maximum ship draft to 44 feet (vs. 50 feet) – requiring larger ships to sail light or unload, rail across & reload 
• Capacity restrictions: Neopanamax locks (handling larger ships) restricting to capacity by 50% (from 10 to 5 per day)
• Gas container ship impacts: LNG and VLGCs (very large gas carrier) will experience the greatest impact since deprioritized 

Inflation impacts: Creating inflationary pressures, shortages and delays. Some ships paying up to $4M to go to the head of the line

The China Risk

In addition to the disruptions to the Panama Canal, there are other risks associated with the Panama Canal. Hutchison controls the terminals at both ends of the Panama Canal. Thus, if China wants to “control” the flow through the Panama Canal, they can do so via Hutchison. It is an important risk to consider.

Responses to the Panama Canal Issues

Proactive executives are not waiting to see how this turns out. They are pivoting. Several of the actions include the following:

• Alternate routes: Depending on the start and end point, companies are pursuing different routes. These include the Suez Canal and sailing around the southern tip of Africa or South America.  
• Alternate modes of transportation: Depending on urgency, and start/ end points, companies are using air freight, rail etc.
• Alternate routes & modes of transportation: Companies are also going to an alternate U.S. port and sending product via rail or truck to its destination.
• Moving and/or reallocating manufacturing: Companies are certainly pursuing reshoring, nearshoring, and expanding manufacturing to minimize risks and shorten lead times. In addition, if they have multiple facilities and/or contract manufacturers, they are proactively moving manufacturing to support customer needs and mitigate risks.
• Forward position inventory: Depending on the manufacturing and distribution network, clients are also positioning inventory close to customers so that they can absorb additional disruptions without impacting customers.
• Change distribution network: Clients are also moving and expanding their distribution networks to better support customers. They are doing this in creative ways, sometimes partnering with customers, suppliers, and competitors.

The key is to proactively address these issues to mitigate the impacts to the customer and cost, and longer term, to revise your manufacturing and supply chain footprint and network to best support profitable growth and mitigate risk.

If you are interested in reading more on this topic:
Supply Chains are on the Move

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CLAREMONT, CALIFORNIA – December 20, 2023 –  Manufacturing and Supply Chain Consultant Lisa Anderson, MBA, CSCP, CLTD and President of LMA Consulting Group Inc., emphasizes the critical necessity of prioritizing supply chain optimization as global disruptions continue. Key issues, such as the worsening conditions at the Panama Canal, have been highlighted as significant contributors to the ongoing supply chain crisis. LMA Consulting Group specializes in supporting manufacturers and distributors in strategic planning and comprehensive supply chain transformation, focusing on enhancing the customer experience and robust business growth.

The Panama Canal, a critical passage for 40% of the goods moving from Northeast Asia to the U.S. East Coast, is experiencing severe disruptions that are intensifying supply chain challenges globally:

• Drastic Reduction in Container Ship Capacity: A decrease in container ships by more than 50%.
• Draft Restrictions: Limitation of the maximum ship draft to 44 feet, necessitating larger vessels to sail light or undergo complex reloading processes.
• Capacity Cuts at Neopanamax Locks: A halving of the daily capacity, now limited to 45 ships per day.
• Impact on Gas Container Ships: LNG and VNLCs face significant operational challenges and delays.
• Inflationary Pressures: These disruptions are contributing to inflation and causing delays, with some ships incurring costs of up to $4MM for expedited transit.

In addition, the control of the Panama Canal terminals by Hutchison, a company with connections to China, presents a potential geopolitical risk. This, coupled with the most recent challenges for ships going through the Suez Canal, will impact the flow of goods, posing additional layers of risk for global supply chains.

“There are proactive measures that companies can take,” noted Ms. Anderson. “Alternate routes, diverse transportation modes, manufacturing and distribution adjustments and inventory strategies can proactively address challenges and minimize impacts on customers and costs.  In the long term, revising the manufacturing and supply chain footprint is essential for sustainable growth and risk mitigation,” she said.

For deeper insights into navigating the complex landscape of global supply chains, download Ms. Anderson’s special report The Road Ahead: Business, Supply Chain & The World Order and her eBook SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., specializing in manufacturing strategy and end-to-end supply chain transformation.  Ms. Anderson is a recognized Supply Chain thought leader by SelectHub, named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, in the Top 10 Women in Supply Chain by Warner PR, in the top 55 Supply Chain & Logistics Experts by flexport, and a woman leader in Supply Chain by RateLinx.  Her primer, I’ve Been Thinking, provides strategies for creating bold customer promises and profits. An expert on the SIOP process (Sales, Inventory Operations Planning), advancing innovation, and making the supply chain resilient, Ms. Anderson is regularly interviewed and quoted by publications such as Industry Week, Bloomberg, Fox News and The Wall Street Journal. For information, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.

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Media Contact Kathleen McEntee | Kathleen McEntee & Associates, Ltd. | p. (760) 262 – 4080 | KMcEntee@KMcEnteeAssoc.com

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Lisa Anderson was quoted in an article on the American Express website discussing why local sourcing can help benefit your business in a big way!

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As risks multiply on the world stage and with increasing economic and logistical disruptions, a local supply chain will prove critical for most businesses, according to Lisa Anderson, an expert in manufacturing and supply chain management and president of LMA Consulting Group, Inc. 

Local supply chain sourcing, she says, improves efficiency and quality control by enabling quicker responses to customer needs, optimizing production processes, reducing waste, and increasing operational efficiencies between manufacturers and distributors. Below are more advantages, with insights from owners of two growing businesses, and ways that sourcing local can help benefit your business in a big way. 

1. It Gives You Greater Control Over Your Materials

Through simple local sourcing and networking, Kim Talebi sought out local farms and foragers for ingredients. The Minneapolis-based CEO and owner of Kaskaid Hospitality – which owns and operates The Butcher’s Tale and other restaurants and catering businesses across the U.S. – loves having access to farm-fresh tomatoes and other produce all year long through working with a local greenhouse. “This makes a huge difference versus using mass-produced, under-ripe tomatoes shipped from South America in the wintertime,” she says. 

2. It Reduces Minimum Buys

When you have a local supplier, you can reduce minimum buys because you eliminate the need to fill a container ship, train, or truck. Shipping can be less expensive when your product is being delivered from a local source, so you can offer better prices to customers due to minimized transportation costs and optimized production runs.

3. It Allows for More Flexibility 

“For my handbags and jewelry, I work with suppliers and manufacturers based in New York City, which is only a two-hour drive from my studio in upstate New York. I can travel to the city as needed to meet with my factory contacts in person, as well as source materials,” says Emily Li Mandri, founder-designer of MLE. The company’s statement accessories have been sold by high-end U.S. retailers and are carried in more than 200 stores worldwide. “I can make the decision to go the same day if I need to; it’s really nice to have that kind of flexibility.”  

4. It Reduces the Pressure to Offer Discounts 

Since local suppliers can respond to changing conditions more quickly, less inventory may be needed in the end-to-end supply chain. The inventory required to cover for volatility will likely be less if the supplier and manufacturer can work together on win-win solutions to increase agility and flexibility, according to Anderson. 

5. It Means a Win-Win for Supplier and Customer 

“Local suppliers provide a distinct advantage in getting products to market faster. Product development designs and trials can be done collaboratively for rapid prototyping, testing, and trialing. Additionally, the feedback loop can be direct, speeding up the entire process,” says Anderson. “As problems arise, the appropriate resources can be brought together rapidly to collaborate and overcome bottlenecks. Thus, the new product lifecycle can be dramatically shortened, incorporating additional customer feedback and generating greater growth and a smoother product launch.”

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To read more, click here.

Originally published on the American Express website, September 12, 2023

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Globalization is no longer working

Globalization is not working. Geopolitics abound. For example, the war in Russia and Ukraine ravages on. There are concerns around the nuclear power plant in Ukraine, occupied by Russia. And that is aside from the impact on oil, food, commodities and much more. China continues to threaten Taiwan and has already changed Hong Kong. It is no longer the same for business. There are countless risks throughout the world. Read our recent article on geopolitics, natural resources, and the supply chain to learn about the larger scope of these risks. The bottom line is that globalization is no longer working. Use SIOP to devise a new path forward.

SIOP to Devise a New Path Forward

SIOP (Sales Inventory Operations Planning), also known as S&OP is a process that will help you navigate changing business conditions (such as the fall of globalization). It provides a proactive view into your demand plan (sales forecast) so that executives can evaluate changes required to your manufacturing and supply chain footprint to successfully and profitably supply the revenue forecast. If you are dependent on China, Russia, Ukraine or other risky countries for manufacturing or anywhere in your supply chain (ie. your suppliers’ suppliers’ supplier) or if your customers are dependent, you should reevaluate. SIOP is a process/ tool that will help you with this process.

Will reshoring and nearshoring suffice?

In our recently released special report, “The Road Ahead: Business, Supply Chain & the World Order“, reshoring, nearshoring and friend shoring are discussed. Every executive should be evaluating these strategies to regionalize your supply chain if you want to have a sustainable business for the long term. A few of the key points include:

• Reshore: Certainly, smart companies are moving manufacturing closer to customers (which typically is bringing it back to its country of origin if that is where the customer base is located). Extended lead times and delays were unacceptable during the pandemic; however, much worse than that is the fact that executives can no longer “count” on reliable sources of supply in today’s risk ladden environment.
• Nearshore: If your product requires a significant amount of labor to produce, you might want to nearshore, meaning move manufacturing to a country close to your customers. For example, Mexico has a lower labor rate than the U.S. yet is close (and doesn’t require a container ship to transport), and so several companies are producing in Mexico if they have a high labor content in their products.
• Friendly shoring: Friendly shoring, also known as friend-shoring, is the same as nearshoring except that you have to be careful about where you are locating manufacturing. Is it a friendly nation to your ‘home’ location with the bulk of your customers? If not, if global conflict arises, you will be left with the same geopolitical risks.

Read more about these strategies in our blog category reshoring/ nearshoring. Although reshoring and nearshoring are important strategies, they will not suffice. China produces at scale. There is no way companies can move enough manufacturing to suffice by itself. Many executives think that they will be OK because they diversified to other southeastern Asia countries. That is not enough. Additionally, according to the Economist, China has expanded its influence throughout southeastern Asia, making these manufacturing havens such as Vietnam riskier. The other big powerhouse and hot spot is India. As discussed in our special report, India offers promise; however, it also comes with infrastructure risks, water risks etc.

The bottom line: Reshoring/ nearshoring is not enough.

Expand Manufacturing Capabilities

Don’t just think about moving manufacturing. Why risk your current supply? If your outsourced company finds out you are reshoring/ nearshoring, you will go to the bottom of the priority list immediately. That will not help your service or viability. Why not expand your manufacturing capabilities near your customers so that you can make a seamless transition? Unfortunately, it is unlikely you will get your equipment and other assets out of China. You can always try that after you have sufficient capacity near your customers.

Whether you insource or outsource doesn’t matter. The key point is that you need to expand your manufacturing and supply chain capabilities ASAP. Start by thinking through several questions:

• Equipment capabilities: Do you have any manufacturing presence near your customers? If so, take an inventory of your equipment, assets and infrastructure.
• Talent capabilities: Take an inventory of your talent capabilities. What types of skills do you have? Where are they located? What risks are associated with your talent?
• Industry 5.0 (manufacturing and supply chain technologies): Take inventory of your capabilities, ease of transition to these new concepts, etc. A few of the top technology enablers include industrial blockchain, drones, exoskeleton robots, additive technology, 5G and beyond, and mixed reality to achieve a superior customer experience, hyper customization, a responsive and distributed supply chain, experience activated (interactive) products, and a return of manpower to factories.
• ERP system capabilities: Will your ERP system support your transition and expansion needs? Do you have a supplier that is investing heavily to keep up with the latest technologies and incorporating artificial intelligence (AI), internet of things (IoT), predictive analytics, e-commerce (B2C, B2C), WMS, advanced planning and more.
• Process capabilities: Do you have the appropriate processes to support both strategy and tactics that will be required to navigate the next 10+ years? From a strategy perspective, you should have a SIOP (Sales Inventory Operations Planning) process in place to determine how to best navigate changing conditions to be prepared to supply your ideal customers and achieve profitable growth. From a tactics point-of-view, you will need the execution capabilities to support SIOP which is known as S&OE (Sales & Operations Execution). These processes include demand planning, production planning, replenishment planning, capacity planning, material planning, production scheduling, logistics planning, labor scheduling,
• Innovation culture: The only way to succeed in the next decade is with innovation. Start creating a culture of innovation. It isn’t something you can dictate.
• Supply chain capabilities: In addition to demand and supply planning capabilities, you need to elevate to the SIOP process to make sure your logistics, distribution and transportation capabilities will support your changing circumstances.

There is no time to waste in building your manufacturing capabilities. By performing a quick assessment, you’ll know where to focus.

Innovation: Develop New Manufacturing Capabilities

Beyond simply expanding manufacturing capabilities, develop new manufacturing capabilities. Innovate. Create new technologies and advanced capabilities. The future will belong to those who can manufacture to scale while maintaining resiliency and profitability. When you develop new capabilities, choose to locate your manufacturing next to your customers. For example, additive manufacturing (3D printing) enables for on demand production near the point of use (customer, consumer). Innovate and find ways to utilize this technology, combine with other technologies and capabilities, develop new and you’ll surpass the competition and secure your market leadership position for decades to come.

Refer to our SIOP webpage for more information, our blog (SIOP category) for hundreds of articles and learn more about SIOP and what’s important for a successful implementation in our new release eBook, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth. If you are interested in talking about how to improve profitability, free up cash, and/or improve service, contact us.

Did you like this article?  Continue reading on this topic:
SIOP/ S&OP Playbook: Creating Predictability & EBITDA Growth

The post SIOP / S&OP: Don’t Reshore; Move Manufacturing Forward appeared first on LMA-Consulting Group, a supply chain consulting firm.

As originally published in Cision PR Newswire on May 9, 2023

CLAREMONT, Calif., May 9, 2023 /PRNewswire/ — Manufacturing and Supply Chain Expert Lisa Anderson, MBA, CSCP, CLTD, known as the Strongest Link in Your Supply Chain® and President of LMA Consulting Group Inc., has published a Special Report – The Road Ahead: Business, Supply Chain & The World Order. LMA Consulting Group works with manufacturers and distributors on strategy and end-to-end supply chain transformation to maximize the customer experience and enable profitable, scalable, dramatic business growth.

“While the visible signs of supply chain chaos have dissipated, business volatility and disruptions remain high. With the world order in a state of flux, risk is high. Yet because everything is interconnected, companies have an opportunity to stay ahead of their ideal customers’ needs. They can do this by reconfiguring their supply chains, leveraging technology and attracting and continually developing talent to leapfrog their competitors to secure a lead position in their marketplace,” commented Lisa Anderson.

The Road Ahead: Business, Supply Chain & The World Order is a special report that captures comments from trusted advisors and experts from various disciplines about what their most successful clients are doing and what companies should do to take advantage of opportunities in 2023 and beyond. “In talking with my colleagues, it became apparent that the same challenges, issues and opportunities resonate among business disciplines. Each discipline requires attention. Making required changes is not for the faint of heart. The opportunity in front of companies today is the greatest since the Great Depression,” she said.  

From cybersecurity, logistics, insurance and talent acquisition to nearshoring, reshoring and friendshoring, the tasks are many, but the opportunity is significant. “The only question will be whether your company is ready to take advantage of the opportunities to grow profitably or if you’ll struggle for survival. I hope that our Special Report sheds light on these opportunities,” she concluded.

Ms. Anderson also recently released: SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth to help organizations understand the value of a proven process.  The book is complimentary on the LMA Website. It can also be found on Amazon digitally and on-demand print at:  SIOP at amazon.com and on iTunes: Apple. Ms. Anderson also provides supply chain updates through Supply Chain Chats, a series of short videos that address current topics, issues and challenges related to supply chains.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD
Lisa Anderson is the founder and president of LMA Consulting Group, Inc., specializing in manufacturing strategy and end-to-end supply chain transformation. She focuses on maximizing the customer experience and enabling profitable, scalable, dramatic business growth. Ms. Anderson is a recognized Supply Chain thought leader by SelectHub, named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, in the Top 10 Women in Supply Chain by Warner PR, in the top 55 Supply Chain & Logistics Experts by flexport, and a woman leader in Supply Chain by RateLinx. She has been interviewed by Fox News, published the special report: Thriving in 2022: Learning from Supply Chain Chaos – Insights from 22 Trusted Advisors and the eBook, Future-Proofing Manufacturing & the Supply Chain Post COVID-19, Her primer, I’ve Been Thinking, provides strategies for creating bold customer promises and profits. An expert on the SIOP process (Sales, Inventory Operations Planning), advancing innovation, and making the supply chain resilient, Ms. Anderson is regularly interviewed and quoted by publications such as Industry Week, Bloomberg, and The Wall Street Journal. For information, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com. 

Media Contact
Kathleen McEntee
Kathleen McEntee & Associates, Ltd.
760-262-4080
358715@email4pr.com 

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What is clear is that VUCA (volatility, uncertainty, complexity, ambiguity) is continuing in the forefront and will continue to be our “new normal”. As I recently debated with the Wall Street Journal, we are in an era of non-stop disruptions. Look no further than the escalating war of Russia and Ukraine (with Russia making even more money to fund the war with the higher prices of oil and their increased sales to China and India), China sending spy balloons over US critical infrastructure while Zero-COVID policies disrupted supply during 2022, weather events, strikes, bloated inventories, and much more. The bottom is that if you don’t take control of your manufacturing, you will be at the mercy of these non-stop disruptions.

Ways to Take Control of Your Manufacturing

The good news is that there are many ways to take control of your manufacturing. The key is to stop leaving your ability to fulfill customer demands to chance. If you do, you will continue to be deterred, delayed, and derailed in servicing your customers and have no hope in taking advantage of opportunities as they arise.

Let’s look at a few good options:

• Domestic manufacturing/ reshoring: Expand domestic operations and/or move your operations back to where they came from (assuming your customers are there as well). This is the ultimate in taking control by fully taking control of your manufacturing process. There are several U.S. companies’ reshoring. For example, I was recently quoted in Sports Business Journal about Daktronics on their domestic sourcing strategy. Several big companies like Tesla, Intel, and others are investing in domestic manufacturing whereas mid-market companies are as well but are less likely to promote these moves until complete.
• Nearshoring/ Friendly shoring: Expand your sourcing to nearby countries (to your customer base), and, most importantly, ensure you expand and/or move to countries with friendly relations to the U.S., Europe, and other allies. If you move supply and get turned off at the next disruption, you have wasted an enormous amount of money and given intellectual property and capabilities to unfriendly nations.
• Backup sources of supply: If you cannot quickly reallocate your manufacturing capabilities, it must be a critical priority to develop backup sources of supply. Even if you have control of your manufacturing, you should develop backup sources of supply. The next decade will not be for the faint of heart, but it will be full of opportunities for those who are proactive and forward-looking.
• Build partnerships with regional/ local suppliers: Instead of taking full control of your manufacturing operations, you can source regional/ local supply partners. For example, a client has greater sales opportunities than their existing facilities can supply, and so they are proactively qualifying suppliers and offloading volume to regional manufacturers.
• Outsource a portion of your manufacturing process: Instead of fully outsourcing a product or group of products, you might have an opportunity to outsource a manufacturing operation. For example, a client is outsourcing machine shop work and completing the remaining operations steps in-house. Similarly, they outsource the weld process to a different group of suppliers for certain products. These actions allow them to fulfill their sales volume with high service levels while maintaining control of service and quality to the customer.
• Leveraging technology like 3D printing: For certain types of products, companies are using 3D printing/ additive manufacturing to rapidly produce close to customers and/or next step manufacturing operations.

Priorities to Keep in Mind

As you reevaluate your manufacturing footprint, you should be keeping several priorities in mind:

• Raw material supply: It might be obvious, but as you move or reallocate manufacturing operations, it is important to consider your raw material, component, and ingredients supply base.
• Transportation infrastructure: If anything has become clear since the pandemic, it is that container shipping, trucking, rail, air and last mile delivery must be in sync with the end-to-end supply chain. Otherwise, nothing else will matter as your customer will not receive their product.
• Distribution network: Similarly, to transportation infrastructure, as you reallocate manufacturing capacity, consider impacts and requirements for your distribution network. Is your distribution network flexible?
• Technology: There is no way to succeed if your technology infrastructure is not supporting your end-to-end supply chain visibility and performance. Is your ERP system agile? Do you have business intelligence, dashboards, and reporting? Are you connected to supply chain partners with EDI, Blockchain, etc.? Are you automating as you expand domestic capacity?
• Talent: Certainly, there is no chance for success without the manufacturing and supply chain talent to execute these changes. Have you reallocated responsibilities? Expanded capabilities? Provided training? Supported in-house resources with supply chain consultants, trusted advisors, etc.?
• Capital & cash: Do you have access to capex (capital expenditures) and the working capital to fund whatever actions you need to take? It isn’t free to take control of manufacturing. There will be investments and cash required to support long-term success.
• SIOP / S&OP: Smart executives are rolling out Sales, Inventory & Operations Planning programs to get in front of customer demand, how they will fulfill that demand (reallocating manufacturing capacity, make vs. buy), and whether they should make changes to their pricing, supply chain footprint, cost reduction programs and other execution plans.

Please contact us with stories, issues, and opportunities on what you’re doing to take control of your manufacturing. And please keep us in the loop of your situation and how we can help your organization get in a position to thrive for years to come. Learn more about these topics in our blog and download your complimentary copy of our eBooks including our new release, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Success.

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According to the The Journal of Commerce, the West Coast ports are losing volume. The West Coast share of imports coming from Asia is down from 61.1% in 2021 to 58.8% in 2022 while the East Coast and Gulf Coast ports rose. According to the JOC, the ILWU contract negotiations are causing this change although there are concerns about drayage and rail as well. For example, the inland congestion has created significant service disruptions for customers across the country.

This is in addition to the lower volumes coming from China due to the Zero-COVID policies in place during much of 2022. Although China opened up late in 2022 and should increase after the Chinese New Year, COVID is running rampant, creating additional supply chain complications.

Drayage Concerns Related to the West Coast Ports

There are also concerns about drayage truck shortages due to the clean truck regulations taking affect in CA that requires trucks to have engines from 2010 or newer. This regulation will impact about one-fifth of the existing fleet from California’s ports. Not only has there been a HUGE backlog of trucks (refer to the section Transportation: Unprecedented Backlog of Tractor-Trailers in our eBook Thriving in 2022: Learning from Supply Chain Chaos) so that you would be challenged to purchase a truck if you wanted to purchase one, but most drayage truck owner operators are evaluating whether to upgrade at this point in their career.

Drayage trucks can last 10-20 years and are expensive, and so upgrading sooner negatively impacts returns on this significant capital investment. Additionally, drivers are trying to figure out how to navigate California’s worker classification law known as AB5. Currently, thousands of drivers are operating as independent contractors would have to be reclassified as employees or the way the two parties interact would have to change. Neither side is “happy” across the board as the companies don’t want to incur ongoing costs, and the drivers enjoy flexibility. Companies and drivers are deciding whether to continue in the industry and how to evolve.

Technology & Automation

The US ports are behind the curve when it comes to technology and automation. That is an issue because we will be limited with growth based on people. It is also inflationary when it comes to wages and the union negotiations. Only 4 of the 360 commercial ports in the US have at least semi-automated terminals. That is a sad statistic! Three of the four semi-automated ports rate low for overall efficiency compared to both automated and unautomated ports in other countries. In fact, according to the container port performance index, Savannah, GA, Los Angeles, CA, and Long Beach, CA ports are in the unfortunate category of lowest ranked ports (by total port hours by ship call).

It seems quite possible to stand out from the crowd by taking advantage of automation and technology. We’ll see what happens. What is certain is that it will reshape the future of supply chains.

Manufacturing On the Move

Last but not least, manufacturing is on the move. Executives have figured out it doesn’t make sense to “count on” China for quick deliveries without supply chain disruption, bloated inventories, and /or volatility in service and cost. More importantly, there is significant risk in relying on China for products related to medical, healthcare, and pharmaceuticals. Look no further than the baby Tylenol and Motrin shortages, let alone medications for serious diseases. I recently spoke on a medtech panel about reshoring, nearshoring, and friendly shoring, and there is quite a lot of movement.

Similar to healthcare, there are concerns about items related to national security. These worries can relate to commodities, oil and gas production, computer chips, and food. The proactive are quietly taking control of their supply chain so that they can serve customers and ensure their future.

As manufacturing moves to the US and Latin America if you are located in North America (and similar movements related to Europe), logistics and port volumes will change. Where will your supplies come from the future? You also should consider scale. As attractive as certain countries are in Central and South America to support North American consumption, the scale and scope will make a BIG difference. China has significant scale. You won’t replace China with Costa Rica as an example although Costa Rica has become prevalent in high tech industries.

Production could also move to India; however, there are infrastructure issues in India. As executives figure out what makes the most sense for their situation, manufacturing and supply chains will be reshaping. Get in front of these trends instead of getting rolled over by them!

Impacts on Logistics, Ports

As supply chains change and evolve, the impact on ports will change and evolve. Additionally, what the ports choose as a path forward can impact executive decisions. What certain is that VUCA (volatility, uncertainty, complexity, ambiguity) will be the theme for the next few years. Take control of your future and reshape your business and supply chains before they reshape you.

Please keep us in the loop of your situation and how we can help your organization get in a position to thrive for years to come. Several of these types of topics are included in our eBooks. Download your complimentary copy.

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