There are mountains of geopolitical threats going on with significant impact on the supply chain. Most, if not all of these also relate to natural resources. For example:

• China’s threats to Taiwan: China has gone beyond tensions with Taiwan to threatening Taiwan. In the Taiwan Strait, China has normalized incursions into Taiwan’s Air Defense Identification Zone. The number, frequency, and danger behind these incursions have increased dramatically, and now China is conducting naval operations just outside Taiwan’s contiguous zone. Since Taiwan produces 90% of the world’s computer chips, you don’t have to think hard as to one of the reasons why. Not only is China #1 in the world in manufacturing including several products related to healthcare, other critical industries and national security, but its control over the South China Seas can impact the supply chain in a far greater way than the pandemic. Listen to a Supply Chain Chats video on this topic.
• Russia and Ukraine: The war has been going on for over a year and there is no end in sight. Russia and Ukraine produce many vital items for the U.S. and the world including oil (which relates to countless critical products), food and fertilizer, and several key commodities such as aluminum, nickel, and copper. These are used in products considered critical and related to national security. Listen to a Supply Chain Chats video on this topic.
• China’s Belt & Road Initiative & shopping spree: China has been investing in infrastructure and going on a shopping spree around the world in strategic places with the goal to “control” the world. For example, they are buying terminals at key Latin America ports, investing in infrastructure in places with natural resources, and buying up U.S. farmland at alarming rates. Clearly, these moves are gloomy for the outlook in supply chain.
• China’s water: China has a horrific scarcity of water in their Northern China Plain. Water is required for manufacturing, electricity, drinking and more. If China doesn’t figure out how to resolve these issues while keeping their manufacturing base intact, they might look to the water nearby in India. What will that mean for the robust manufacturing activity going on in India? Read additional details about the China water situation in our blog post.
• The need for natural resources & rare earths: Given advances in civilizations, industry, and consumer’s expectations, there is a ridiculous need for rare earths and natural resources. For example, in rare earths, we will need in next 27 years more than has been mined in the last 3000 years. Regarding copper, we will need more copper in next 10 years than we would have consumed in history of mankind. Not only are there vast shortages with these figures, but the areas related to geopolitical threats are the ones producing/ mining these items currently.

I discuss these issues at length in a recent webinar for Supply Chain Brief: Brief: Geopolitical & Regulatory Issues: The Path Forward in Supply Chain and Logistics (link direct to webinar below).

Action Plans Related to the Supply Chain

Clearly, hiding your head under a rock will not resolve these issues. Instead, we must immediately take action.

• Assess your risk: Rapidly perform a supply chain assessment. Your assessment should include your manufacturing operations (including offload suppliers, outsourced products, contract manufacturers, and internal sites inclusive of their dependency on their supply chain), suppliers (including your suppliers’ suppliers and further into your extended supply chain, your backup suppliers, etc.), your logistics (transportation, distribution, warehousing, e-commerce) partner network, your customers (and their dependencies), your infrastructure, etc.
• Upgrade your processes/ systems to proactively manage your supply chain: Roll out and/or upgrade your SIOP (Sales Inventory Operations Planning) processes, execution planning systems (demand, production, labor scheduling, distribution, replenishment, transportation), manufacturing operations and logistics capabilities, supply chain visibility and related processes/ systems. You will have to stay on top of issues, potential bottlenecks, and current status of your supply chain and be able to quickly pivot to address changing conditions.
• Supply chain control tower: Hand-in-hand with upgraded processes/ systems, you will need a supply chain control tower to understand your footprint and timely status of materials and products in your end-to-end supply chain.
• Find new sources of supply & source backup suppliers: In addition to the clear need to find / expand new sources of supply, ensure you have backup suppliers. Backup suppliers are always critical. These suppliers should not be “in name only”, meaning you need to continuously purchase a small percentage from them. For example, when VP of Operations & Supply Chain for a mid-market manufacturer, we purchased 20% of our needs for a critical raw material from a backup supplier. When that material went on allocation, we were able to source from the backup supplier and beat out larger companies because we had an ongoing relationship.
• Reshore, nearshore, friendly-shore, and expand manufacturing and mining: No doubt about it. We need to increase manufacturing capabilities near our customers and consumers. Producing to scale will be the key to success – in a site and logistics network we can “control”.
• Proactively manage demand and supply: Prioritize your SIOP (Sales Inventory Operations Planning) / S&OP process to not only align demand with supply and Sales with Operations, but, more importantly, to alert your team to strategic decisions that must be made to serve your customers profitably while maintaining your working capital so that you can invest/ expand and take advantage of upcoming opportunities. Learn more about SIOP in our newly released book, SIOP: Creating Predictable Revenue & EBITDA Growth.

Please contact us with stories, issues, and opportunities on what you’re doing to succeed and how these issues will impact your business. 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 recently released special report: The Road Ahead: Business, Supply Chain & The World Order.

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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.

The post Take Control of Your Manufacturing to Wrestle Volatility to the Ground appeared first on LMA-Consulting Group, a supply chain consulting firm.

Lisa Anderson, LMA Consulting President and Founder, feels there is still a great deal of confusion global supply chains. Anderson joined “Bloomberg Markets” with Caroline Hyde and Paul Sweeney on Friday morning.

(Source: Bloomberg)

Click here to watch the video.

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In this episode of the Interlinks podcast I am joined again by my colleagues from the Supply Chain Special Interest Group of the Society for the Advancement of Consulting (SAC) to review some of the events and shocks that have impacted supply chains during 2022 and how these events sit within the context of the overarching long-term trends that are driving supply chain strategies such as demographics, technology, and the energy transition among others.

Shocks and events such as the war in Ukraine, the pandemic and Brexit, among other may feel like they have appeared out of nowhere, but these events are taking place within the context of overarching trends that are unmoved by these short-term shocks and events. This provides us with another perspective on how to react and devise successful supply chain strategies as we look to the future.

Joining me in this episode of the show to discuss all of this are:

• Diane Garcia, president of Lorraine Consulting based in Phoenix Arizona
• Lisa Anderson, president of LMA Consulting, joining us from the Los Angeles metro area in California.

Originally published on Interlinks, November 22, 2022.

Click here to download.

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The Global State of Affairs

The bottom line: It is a mess! What is going on? Unfortunately, there is a lot of volatility, and it will not smooth out anytime soon. For example:

Russia/ Ukraine war:

The Russia/ Ukraine war rages on and shows signs of escalation. There are critical commodities in the region, creating scarcity, shortages, and risks for any industry dependent on oil, computer chips, and certain food supply such as grains. The question isn’t who will be impacted; instead, the question is who isn’t impacted! These issues are widespread and will have long-term implications.

China/ Taiwan

Taiwan produces the majority of advanced computer chips in the world. Now that China’s President Xi has been elected to a unprecedented additional term, his plans to take over Taiwan put the region at great risk. What more is there to say? This situation will have far reaching impacts throughout the world.

California Energy Grid & the War on Energy

Why put California’s energy grid in a section about the world? Well, California is the 5th largest economy in the world, and it is a sign of things to come if we continue down this path. The infrastructure is insufficient, and there is no way industry can meet the regulatory requirements coming down the pike on time and yet still serve customers. There is risk on the energy grid, brownouts and blackouts causing issues for essential industries, and yet energy is vital to fueling our way of life. Look no further than Europe. They are struggling mightily to figure out how they will get through the winter season with limited Russian oil and with natural gas pipelines shut off. Yet Germany is a manufacturing powerhouse. It is a volatile mess.

Natural Disasters Such as Hurricane Ian

Weather events and natural disasters are commonplace around the world. Recently, Hurricane Ian pounded the Florida coast. This is a great example as many agriculture products are grown in Florida, and Florida is home to Mosaic Co., which supplies 50% of North American farmers’ supply of granular phosphate fertilizer and 12% of the global supply. Delays and shortages will persist.

Potential Rail & Port Strikes

Although the US delayed a rail strike recently, there is still not a deal. If there is a rail strike, it will have a huge economic impact estimated at $2 billion per day and impacts 30% of the transportation system. This will impact commodities, grains, and much more. The ports are also still negotiating to avert a strike. The unions don’t want automated terminals; however, the US is vastly behind China and other countries in the ability to automate and use advanced technology.

The Great Resignation

The baby boomer generation is retiring rapidly and leaving a wake behind them. The pandemic made people rethink their life and change careers. The talent and skills gap remains a top concern. Additionally, family-owned businesses are selling off in high numbers. The Great Resignation is changing the talent landscape.

What is the bottom line?

We must reshore and nearshore to friendly countries (also known as friendly shoring) immediately!

Essential Industries

Starting with essential industries such as food, healthcare (products, medical devices, medtech, biotech, etc.), energy, water, computer chips, advanced technologies, and industries related to national security, we need to go far beyond putting our toe in the water. We need to gain capabilities rapidly and produce at scale!

Reshape Your Supply Chain

To reshore, nearshore, expand & upgrade manufacturing and supply chain capabilities, you will need to reshape your supply chain. Think about the following supply chain optimization priorities:

• Manufacturing footprint: Where will you produce and invest in manufacturing capabilities? Reshore, nearshore, friendly shore, expand capabilities, find new partners?
• Your end-to-end supply chain: What risks do you have in your end-to-end supply chain? How can you secure supply of critical items?
• Supplier footprint: Does your supply footprint support your manufacturing footprint?
• Suppliers or partners? Who are you partnering with to ensure your end-to-end supply chain performs? To learn more about developing partners over suppliers, read our article in Adhesives & Sealants.
• Logistics partners: Do you have the appropriate partners in place to support your customers and your supply chain partners? Remember, supply chain is a system of systems and partners.
• Technology: Do you have the appropriate ERP, technologies & data and business intelligence systems to support your business?
• Financials: Do you have the appropriate finances in place to support your path forward?
• SIOP Process: Do you have a SIOP (sales, inventory and operations planning) process in place to support highlighting and making the appropriate strategic and tactical decisions to ensure resilience and success in today’s volatile and risk laden environment?

Talent, Talent & More Talent

Talent, talent, and more talent will be needed to make this happen. The war on talent is real. We recommend leaders act quickly:

• Find your stars: In every client in 17 years of consulting, we’ve found a star. Many are overlooked, and so companies have vast potential with underutilized resources.
• Provide mentoring, coaching & training opportunities: They are all quite distinct. Mentoring provides practical examples and is often the best path forward. Coaching provides proactive support, and training can provide new skills. With the fast rate of retirement of baby boomers, JUMP on this while you can.
• Leadership & performance management: Those companies with strong leadership and performance management processes are at least twice as successful as the rest.
• Project management: 80% of success is not in formulation; it is in implementation.
• Supplement your talent: We have been working with several clients to upgrade their processes while also jumping in “hands-on” to support and supplement their resources. Find partners to help design, upgrade, expand, maintain, source, and more. Leverage your options to upgrade and scale more quickly.
• Automate, Digitize & Thrive: Provide the tools and technologies to support your talent.

Path Forward

There will be more risk – and more opportunity – than at any time in history. The strong will get stronger, and the weak will wind down and exit. Although challenging economic times are ahead, the geopolitical risk is even greater. The smart will invest wisely and thrive for decades to come. Will you be on that path?

Refer to our blog for volumes of articles on these topics and read more about these types of strategies in our eBook, Thriving in 2022: Learning from Supply Chain Chaos. If you are interested in talking about how to reshape your supply chain, get in front of it with a SIOP process, and successfully navigate these waters, contact us. 

Did you like this article?  Continue reading on this topic:
The Case for US Manufacturing

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Lisa Anderson participated on a panel discussion to discuss nearshoring in the Medtech industry with Steven A. Colantuoni, Director of Corporate Marketing, The Central American Group, Yarisol Lopez, Deputy Executive Director, National Free Zones Council of the Dominican Republic, and Carlos Wong, Managing Director, Coyol Free Zone (Costa Rica). The pandemic spawned a good amount of discussion around the concept of nearshoring and reshoring for medical device manufacturers as a way to avoid the shortages and delays seen during the crisis. How likely is this to happen, where might some target locations be for manufacturers, what considerations need to be kept in mind, and what factors should be determined before a company makes the decision. This panel will discuss a number of topics around this possible trend that could reshape the face of manufacturing in the next decade.

To learn more about the MPO Summit, click here.

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