Supply chains are evolving at a rapid pace as global risks increase. Not only are companies investing in the United States to mitigate risks such as medical device and pharmaceutical access, they are also transitioning to a regional, friendly, and more controlled supply chain. To achieve success with this transformation, companies must roll out advanced technologies and develop strategies to mitigate down-the-line risks and impacts such as access to critical minerals and energy. The supply chain has become integral to success and requires chess-like maneuvers to stay ahead of the competition. Future success will depend on predictive supply chain strategies.
Future Supply Chain Requirements
As companies reallocate production among countries, change sourcing, and invest in new manufacturing capabilities, a complete restructuring of end-to-end supply chains will occur. For example, Johnson & Johnson’s investment in four new U.S. manufacturing facilities will yield new suppliers, new construction jobs, and a new set of advanced technologies. Similarly, as Abbott Laboratories ramps up U.S. production of its diabetes care and structural heart medical devices, the company will enhance its end-to-end supply chain and increase its dependence on computer chips for domestic manufacturing. Predictive processes and technologies will be integral to navigating these evolutions.
Advanced technologies such as robotics and artificial intelligence (AI) will enhance the future of manufacturing and supply chains. Medical device manufacturers commonly use robotics in manufacturing as well as robotic delivery systems. The AI race will greatly impact future supply chains because the widespread applications will give companies a competitive advantage. Hence, NVIDIA’s April announcement about manufacturing its AI supercomputers entirely in the United States for the first time in its history is critical to supply chains’ future.
AI requires vast amounts of energy, and the data centers that power AI require rare earth elements. Likewise, the manufacturing of medical devices, infrastructure, and defense equipment relies on rare earth elements too. Consequently, the future of supply chains will be a race to develop new techniques in these fields as well as to ramp up the production and processing of rare earth elements and the expansion of energy. For example, the computational power for AI growth doubles every 100 days. Accordingly, the United States will have to kickstart its energy production because its current plans to increase energy terawatt production (from 1 to 2 terawatts) is far inferior to China’s strategy to expand its energy output from 3 to 9 terawatts.
Immediate Actions to Prepare Supply Chains
Proactive companies are shoring up their manufacturing and supply chain capabilities, starting with talent and resources. Rather than panicking, forward-looking executives are adding top supply chain and technical talent to their payrolls along with consultants and trusted advisors to stay abreast of changing conditions and devise ways to leverage future opportunities. Talent, however, must be supported with the proper tools and resources to ensure success.
Progressive companies are rolling out predictive processes such as SIOP (Sales Inventory Operations Planning) to successfully navigate changing conditions and plan for down-the-line impacts and opportunities. For instance, a medical device manufacturer prioritized the implementation of SIOP to better forecast future demand by analyzing region and product category to optimize its manufacturing and supply chain network while supporting aggressive sales growth plans. SIOP also provided a view of future material forecasts including the needs for advanced computer chips and end-to-end supply chain requirements, including rare earth elements. As a result, the supply chain teams were able to anticipate potential bottlenecks, increase safety stocks of critical items, and develop partnerships to secure in advance end-to-end supply chain needs.
Rolling out modern ERP (enterprise resource planning) systems, additive manufacturing, robotics, and advanced technologies is also of paramount importance to ensure long-term success. Navigating supply chain reconfigurations will require advanced forecasting and planning systems to nimbly predict supply chain requirements and optimize the flow of goods and materials. The only way to successfully escalate production close to customers in high-cost regulated countries like the United States will be to automate, digitize, and predict intelligently with robotics, additive manufacturing, digital twins, and AI-fueled systems.
Robots and cobots are enabling rapid increases in output to meet growing customer needs without having to use scarce low-skilled labor resources. Toolcraft, a machine shop serving the aerospace and medical device sectors, faced a challenge to increase production to fulfill a large order with limited labor supply in the surrounding marketplace. The company partnered with Lights Out MFG and used a cobot to automate a three-step CNC machining process, thereby boosting throughput by 43%. Similarly, an industrial manufacturing client installed automated systems and robots to produce goods around-the-clock to avoid a bottleneck production process without hiring additional resources.
Future-Proofing Supply Chains
Proactive companies are also future-proofing supply chains. In addition to diversifying and mitigating risks by reconfiguring their supply chains, businesses must pay attention to the impacts on their end-to-end supply chains. Starting with the simple yet often overlooked, companies should forecast critical materials, components, and capabilities required in their end-to-end supply chains. They also should assess their suppliers’ current capabilities and expansion plans. In addition, they must ensure risk is diversified and suppliers have the capacity and capital to drive the required improvements to fruition. The ability to scale is fundamental yet often forgotten, as doubling capacity is quite different than skyrocketing to 40 times capacity within a short time frame.
In addition, companies should assess down-the-line requirements of their end-to-end supply chain. This means determining where rare earth elements are produced and processed, the types of capabilities that are required, and the countries that specialize in and are gaining expertise in these capabilities. Businesses that become too dependent on risk-prone countries and/or other companies might need to collaborate with their competitors and other organizations that require the same type of capabilities. Just as the logistics sector invested heavily in zero emissions and sustainability, the manufacturing and rare earth intensive sectors will need to develop the appropriate strategies and partnerships to secure supplies in conjunction with public funds. These types of investments will require new capital and financial strategies. Companies that have suppliers or maintain operations in a resource-rich country should probably rethink their agreements and business strategies.
Energy will also be vital in fueling end-to-end supply chains. The United States is increasing its capabilities and capacities to address future energy needs but companies’ future success will largely be dependent on their supply chain partners, state regulations, and their specific energy needs. Progressive companies will ensure their supply chain partners estimate energy usage with the rollout of advanced automation and related technologies and assess availability and cost. Case in point: A building products manufacturer that supplies medical facilities has been shut down multiple times this year due to power surges in California. These sporadic shutdowns create the risk of delaying orders and negatively impact costs and margins. A backup power source would resolve the immediate issue; however, as energy requirements grow, the manufacturer will need to evaluate alternate locations with a more reliable energy supply. If the manufacturer plans to pursue AI solutions, it must secure an adequate supply source.
The Bottom Line
As global supply chains evolve, proactive companies will not just respond with agility and resilience, but they will also look to the future. Forecasting and predictive capabilities will become necessary to secure end-to-end supply chain needs amid constantly changing business conditions and in resource-intensive chains. Forward-looking companies will pull ahead, while competitors will fall behind by focusing on the past instead of embracing bold, predictive, and innovative strategies for success.
If you are interested in reading more on this topic:
Advanced Planning Strategies to Optimize Manufacturing Success