Are happy days on the horizon for global manufacturers? Many sector experts and prognosticators are singing an optimistic tune, inspired in large part by the hundreds of billions of dollars allocated through the Biden administration’s Inflation Reduction Act, Bipartisan Infrastructure Law, and CHIPS and Science Act.
In a recent report, Joseph P. Quinlan, head of CIO Market Strategy at Merrill and Bank of America Private Bank, effused that the U.S. is entering “the early stages of a manufacturing supercycle … [that’s] really gotten the attention of the world. When you talk to companies in South Korea, Japan, Europe, all they want to talk about is building out a presence in the U.S.”
More tangibly, as of April, spending on U.S. manufacturing construction (primarily new factories) was tracking at a $189 billion annual rate, or triple that of the 2010s. This boom in manufacturing investments creates myriad opportunities for supply chain leaders, provided they fully grasp the seismic shifts that are on the horizon and capitalize via smart investments and operational adjustments.
For starters, consider the many implications of nearshoring manufacturing in U.S.-based facilities. Nearshoring equals a decreased dependence on global supply chains as parts and finished goods are sourced closer to home. It also means less variability in delivery lead times, which creates an opportunity for supply chain professionals to hold less inventory and thereby reduce carrying costs.
Nearshoring also necessitates rethinking transportation capacity and logistics — i.e., if you’re nearshoring something, you have to make sure you have the capacity to move it! That means applying new scrutiny to carrier relationships, capacity and lanes. Do you have the right agreements in place for both long-term and spot buys? Efficient and prompt deliveries of finished goods to consumers — who have grown notoriously impatient — are equally important.
In addition, supply chain leaders cannot afford to let up on technology investments to improve operations and working capital efficiency. Recent supply chain-specific research from PwC underscores the many benefits of investing in advanced supply chain technologies, including “lower costs, increased revenues, improved sustainability, higher asset utilization, better risk management, and greater rates of on-time, in-full delivery to B2B and B2C customers.”
Additive manufacturing — or 3-D printing — is just one example of a technology that benefits manufacturers through accelerated design updates and prototyping while reducing supply chain risks and environmental impacts in the process.
Another example — real-time supply chain visibility solutions, which are critical in enabling agile supply chains that can act instantly to drive efficiencies, address disruptions and course-correct exceptions. Knowing the precise location of shipments — and even individual orders — at every point from origin to the final destination is indispensable to planning, inventory management, yard efficiency, sustainability, customer service and more.
Bigger picture, greater investments in manufacturing should spur supply chain leaders to think holistically across manufacturing, logistics, order fulfillment and every other aspect of supply chain operations. The massive disruptions of the last several years rightly placed the chief supply chain officer in the middle of business-critical conversations with the C-suite. Cementing that position will require several routine behaviors and practices, including:
In-depth scenario planning. Hopefully, the predictions are accurate and we are heading into a more prosperous era for manufacturing and supply chains. Regardless, no one can afford to be complacent or to presume that major disruptions are behind us. The partial collapse of the I-95 in Philadelphia should serve as a stark reminder that we can’t afford short-term memories. It will no longer suffice to stop at Plan A. Supply chain leaders must be ready with Plans B and C for multiple scenarios.
Change management. Supply chains will be in a constant state of flux and change. Workforce pressures and training requirements will evolve, new technologies will be introduced at a dizzying pace, geopolitical challenges will recur. Supply chain leaders will have to meet the moment, leveraging technology and automation to drive efficiencies while inspiring and training workforces to acquire new skills and drive greater organizational value.
Thinking like a profit center. For most of the long history of supply chain management, the focus has been on managing costs and assets. More recently, the balance has started to shift toward customer service and profitability, including product choice, delivery choice and precision, and flexible returns. To that point, a recent analysis of more than 1,500 public companies found that market cap leaders “use their supply chains to enhance … gross margins by providing differentiated service” and “supply chains and the service they provide become a significant part of the value proposition of the product.”
As we embark on a new era in manufacturing, supply chain leaders have an opportunity to usher in a new era in supply chain management, incorporating the lessons of the past while making unprecedented contributions to the business going forward.