To thrive post COVID, manufacturing resilience will be cornerstone. Customers expect personalization, customization, and rapid deliveries without disruption, and they will change suppliers, substitute products and do whatever is required to satisfy their customers or get what’s needed. For example, although the preference is for online purchasing, consumers will return to stores to ensure quick, reliable supply of critical items. If your dog likes a particular brand of food, you will figure out how to get it or something similar. At the other end of the spectrum, manufacturers are paying more to source key materials with reliable suppliers and/or source alternates that will enable growth.
The Need for Manufacturing Resilience
To support customer needs and revenue opportunities, manufacturing resilience will be essential. The pandemic has uncovered deep seated issues with the status quo. Waiting for whatever steps are required to deliver and service the customer to include possible activities of quoting, design, engineering, customization, production (including having the appropriate materials in the ‘right’ place at the ‘right’ time), assembly, quality control, shipping, installation, etc. is unacceptable. Changing conditions will be commonplace, and if you don’t develop resiliency, your competition will.
What is Manufacturing Resilience
Our most successful clients are building manufacturing resilience. As customers needs evolve, they will have the foresight to changing conditions and make the appropriate changes (operationally, financially, R&D/ new products, supply chain, etc.) to meet customer needs and support revenue growth while meeting profit/ EBITDA objectives.
This could take many forms. For example, a client is quietly reshoring/ nearshoring 80% of a key product line to move production closer to the customer and create manufacturing resilience. Another client is reassessing their supplier network and geographical location to create a regional cluster that will support manufacturing resiliency. Other clients are upgrading planning and scheduling processes so that they can better utilize capacity across the organization to support revenue and service goals in the most efficient manner. Last but not least, another client is evaluating offload strategies and insourcing vs outsourcing options.
Creating Manufacturing Resilience with SIOP (S&OP/ IBP)
Our most successful clients are utilizing tailored and collaborative SIOP (sales, inventory and operations planning) processes to understand customers’ needs, create revenue predictability, and, most importantly, to define what’s required to be able to deliver these needs successfully, predictably and profitably. Most likely, given the rapidly changing circumstances in the global supply chain, you will need to reconfigure and continually refine how you supply the agreed upon demand plan. For example, watch a video about a client success story in utilizing SIOP to meet growth objectives and scale successfully.
In this situation, we have reevaluated where and when to place orders for critical purchases, reconfigured offload options, and assessed insource vs. outsource options based on changing needs. In another client situation, we evaluated manufacturing and storage capacity. We decided upon a certain level of reshoring/ nearshoring and agreed to reconfigure the distribution network, tailor for e-commerce increases and upgrade storage capabilities to flex to meet growth goals.
SIOP is not a magical off-the-shelf solution. It is tailored to each client and the unique circumstances, strategies, differentiators, people, processes, systems, and data. As you get a directionally-correct monthly cadence going with cross-functional and potentially cross-organizational engagement, strategic issues and related roadblocks will emerge. These issues become the focus to create resilience in manufacturing and supply chain.
Refer to our blog for many articles on SIOP. Also, read more about these types of strategies in our eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19. If you are interested in talking about what it would take to purse the SIOP journey in your business, contact us.
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Reshoring/ Nearshoring & My Interview on Bloomberg