Category: Supply Chain Briefing

Manufacturing is on the Move

August 17th, 2019

 

Reshoring was at record levels in 2018! Manufacturers are starting to return as they see the total costs of offshoring combined with the rising costs in China and improved competitiveness of the U.S.

According to an Industry Week article by Harry Moser, almost 1400 companies announced the return of 145,000 jobs in the last year. This trend was starting to occur prior to the tariffs. Now, the tariffs are expediting the return. Manufacturers are also realizing they can gain a competitive edge with rapid customization close to their customer base.

Additionally, even in commodity products, companies are reevaluating how to remain competitive and diversified. Hasbro is the latest company to look at diversifying away from China. According to Industry Week, Hasbro, the largest toy maker globally, said that it planned to move from 75% to 50% production in China by the end of 2020. They are looking at Vietnam and India.

There is a transformation occurring. Executives are more concerned about relying on any one source of production (China), and are diversifying. Intel is reviewing its global supply chain.  And, there are rumblings that Apple and Amazon are working on a plan B.

What Should We Consider and/or What Impacts Could Arise?
Speed and agility are critical to thrive in today’s marketplace. Start thinking about how you can radically reduce lead times while accelerating cash flow (reducing inventory levels) and increasing profitability. It is no easy task . Yet, it is what is required to thrive in today’s Amazon-impacted world. What can you do to get ahead of this curve?

Like the big dogs from the Industry Week article, should you be thinking about diversification? Or should you be re-shoring? Or should you buck the trend and offshore while everyone else is re-shoring? There are many companies who would be in far better shape if they had taken that approach 10-20 years ago when every Board member wanted to see an increase in outsourcing. There are no perfect answers except to be thinking about these impacts on your industry, your supply chain partners and on your company so that you can take a proactive stance instead of a reactive one. What will you do to successfully navigate these waters?

Certainly, re-shoring, near-shoring and diversifying are topics related to creating a resilient supply chain. If you are interested in an assessment of your situation, contact us. You’ll find more information on these types of topics on our resilient supply chain series.



Do You Have a Resilient Supply Chain?

August 11th, 2019

supply chain strategyThere is extreme volatility in today’s end-to-end supply chain.  Are you keeping up with all the changes?  For example, think about the following:

  • Tariffs & trade impacts
  • Data & security breaches
  • The Amazon Effect
  • New technologies such as 3D printing
  • Natural disasters, port strikes and more

The Resilient Supply Chain
Instead of allowing each of these incidents to impact you, we must create a resilient supply chain.  Are you proactively thinking about these topics?

  1. Agility– Instead of seeing agile as an IT or project management concept, we should be thinking about how to incorporate agility into every step / every piece of our end-to-end supply chain.  If a customer changes his mind, are we flexible enough to handle it?
  2. Speed – Is your supply chain set up for speed?  Customers are unwilling to wait.  I’ve found that I’m unwilling to wait anymore.  If I wait for a trusted advisor, service provider, subcontractor or even a client, it delays LMA Consulting. For us to be on the leading edge with clients, we must be ahead of the curve; not waiting for something that will be obsolete before we get it!  That is one thing we appreciate about our webmaster; he is speedy and understands priorities which is how we are able to announce a major content upgrade (thanks Scott).
  3. Predictive – In today’s complex world, we must also be predictive so that we are prepared from an 80/20 standpoint for the most likely unexpected events, trends and bumps in the road.  Thinking three steps ahead can go a long way in creating resilience.
  4. Collaborative – One of key components to creating a resilient supply chain with multiple partners is to collaborate.  There is no time to establish relationships and find ways to navigate volatility together if you haven’t already set a collaborative tone.
  5. Adaptive team – No doubt; the core to resilience is having an adaptive team where each members understands where he/she is headed and feels empowered to handle obstacles as they arise.

Have you thought about each interrelated partner, piece or parameter in your end-to-end supply chain?  How can you set it up to be resilient?



How Any U.S. Company Can Survive a Trade War with China

August 5th, 2019

 

With all that is going on with China in terms of trade wars, currencies, natural resources and more, it begs the question of what we should be thinking about doing business with China. Is it prudent?

Thanks to APICS Inland Empire and International Business Attorney and expert, John Tulac, we are sharing APICS-IE’s webinar on “How any Company Can Survive a Trade War with China”.

Note: The webinar is about 60 minutes.

What Should We Consider and/or What Impacts Could Arise?
We should be aware and considering potential impacts on our business. Think about any direct ties to China with supply as well as indirect ties with our extended supply chain. Undoubtedly, everyone has at least an indirect tie to China, and so we all better think about impacts and implications!

Stay on top of trends and highlights. Get involved with organizations such as APICS-IE to participate in events and network with resources. For example, make plans to join our semi-annual symposiums where we feature an  executive panel and networking opportunities.  Mark your calendar for our Fall 2019 Symposium on “Collaborating for Advanced Manufacturing & Supply Chain Success“.

Also, contact experts such as John Tulac to help navigate more complex situations. Remember, a penny saved that costs you thousands and hundreds of thousands down-the-line is by no means “a penny saved”.

Certainly, the topic of trade wars relates squarely in the resilient supply chain camp. If you are interested in a resilient supply chain assessment, contact us. You’ll find more information on these types of topics on our resilient supply chain series.

 



Biggest Shakeup in Decades Coming to the Shipping Industry with IMO Regulations

July 18th, 2019

According to Reuters, the biggest shakeup in decades is coming to the shipping industry as the IMO regulations go into force in January. Shipping owners have to cut sulfur emissions from 3.5% to .5% which is a reduction of 85%! This means they’ll have to use low-sulfur fuel, install exhaust gas cleaning systems, use expensive liquefied gas or go slower. None of these are nominal costs. And, certainly going more slowly will exacerbate an already problematic situation where customers’ Amazon-like expectations aren’t being met!

 

Analysts think the container industry could incur an extra $10 billion in costs. That isn’t pocket change! It is expected that there could be a 10-20% increase in operating costs in related companies. Twenty five shipping container executives said they plan to pass along costs to customers. The shipping industry is tired of absorbing costs. Are you prepared for the likely impacts of this massive change?

What Should We Consider and/or What Impacts Could Arise?
Are you keeping up on the latest news such as these changing regulations? If not, you must start unless you want to be run over by your competition! For starters, if you are in an industry related to the container and shipping industry (which almost every company has some relation because no one operates completely in isolation), figure out the likely impacts. Should you be doing what some beneficial cargo owners are doing in moving up shipments so that it is less likely you’ll get ‘stuck’ during the holiday season? On the other hand, last year, when the tariffs caused extra imports, rates increased and containers were held up.

If you are a manufacturer, are you re-evaluating sourcing? Perhaps it is time to re-shore and near-shore as the total cost is no longer compelling to source from Asia in most industries and non-commodity products. This is without considering the dramatic difference in lead times, inventory requirements and associated working capital considerations. Don’t just follow the fads. Find an expert and figure out what makes sense for your situation.

Trucking companies are also likely to be negatively impacted. Now, they’ll have increased competition for low sulfur fuel. According to the Reuters article, it could double the price of diesel fuel. Wow! If there ever was a topic related to the resilient supply chain, this could be it!

What are you doing to build flexibility into your supply chain and your organizational design? If you are interested in a resilient supply chain assessment, contact us. You’ll find more information on these types of topics on our resilient supply chain series.



How Customer Service & Retention Directly Impact Profits & Performance

July 12th, 2019

Since I’ve been speaking to CEOs about “Pricing & Profits”, the true impact of customer service and retention is arising as a game changer. Can you create a situation where you make a “forever promise” to your customers? It certainly will directly impact your customers’ perceptions of your value and your bottom line!

The statistics are staggering:

  • According to Bain & Company, increasing customer retention rates by 5% increases profits by 25-95%
  • According to Harvard Business Review, it is anywhere from 5 to 25 times more expensive to acquire a new customer than to keep a current one.
  • According to Salesforce, 74% of people are likely to switch brands if they find the purchasing process too difficult.
  • U.S. consumers are willing to spend 17% more to do business with companies that deliver excellence customer service
  • According to Newvoicemedia.com, after one negative experience, 51% of customers will never do business again with that company.

Do you know how your company is doing?

 

What Should We Consider and/or What Impacts Could Arise?
Clearly, in reviewing the statistics, we should all be ultra vigilant about customer service and the customer experience.

Where do we start? In our experience, our best clients understand their target customers and what is meaningful to them. The customer experience has to start there. It is easy to get carried away with measuring on-time delivery, customer complaints and other metrics but what does that really tell us? Do our customers simply want a reliable delivery estimate and someone to pay attention to ensure success or do they want a tailored, customized customer experience? Are we getting complaints from our unprofitable customers and silence from our best customers, and therefore focusing in on the”20″ of the 80/20 equation? It happens more frequently than you’d think!

Once you know what is meaningful to your key customers, define a way to measure your success in achieving your objective. Perhaps use the net promoter score as it is one simple question that speaks volumes: How likely is it that you would recommend [brand] to a friend or colleague? As you explore why, you’ll find ways to increase the value of your customer experience to your key customers. Certainly, customer service is a critical topic in creating a resilient supply chain. You’ll find more information on these types of topics on our resilient supply chain series.