It’s no secret that supply chains are critical to the success of any business. The past two years have certainly proven this to be true as companies have changed how they make purchase decisions and how executives think about their supply chain strategies – from transforming them to combat shortages, to tackling what has amounted to $9 trillion of global inflation, all while competing for qualified labour.

So, what has this taught us? Unsurprisingly, modern supply chains are finely tuned and indelibly linked. Built up over the past 70 years, they are rigid, opaque and complex, and with the lasting effects of globalisation, they do not respond well to rapid change. Ultimately, businesses that don’t modernise and develop their supply chain strategy will fall behind and fail. Inventories from the 3,000 largest companies around the globe have risen 6% to 9% of the world’s GDP since 2016. A continuous drive for efficiency has been replaced with a focus on resilience.

Staying ahead today not only means executive teams must have clarity on the following issues when developing supply chain strategy, but they must also harness innovation in order to tackle these challenges in new and sophisticated ways. Continue reading to find out exactly how.

A roster of challenges for manufacturers

  1. Changing production challenges

The combination and domino effect of COVID-19, a lack of raw materials, staff shortages and a rapid rise in costs have led to fundamental changes around where production facilities can be based, how the work is done and what raw materials can be kept on hand. Combined with a structural shift in the labour market, manufacturers have been driven to invest in automation and robotics. Further, giants like Apple are diversifying their supply chain away from China, causing the labour market in Vietnam, for example, to run red hot while manufacturers try to source the best talent. 

  1. Escalating global conflicts

Global tensions have added to the uncertainty felt by businesses. Companies must now review the concentration of their suppliers and the territories in which they are located as war and trade disputes increase risk – exemplified in the current fuel price crisis. And so, for perhaps one of the first times, governments from Europe to India are encouraging firms to develop ‘strategic autonomy’. 

  1. Developing environmental, social and governance (ESG) concerns

Businesses are under more pressure than ever to comply with stringent ESG standards set by consumers, shareholders and legislators alike. Suppliers must guarantee a higher level of transparency, demonstrating social responsibility. They must abide by regulations addressing working conditions to environmental impacts. Shareholders are also placing pressure on companies to review the sources of raw materials, where they base their factories, and to analyse their supply chain’s impact on the environment. Businesses need to understand the level of risk their supply chains expose them to when they are not fully understood or effectively managed.

Despite these challenges, solutions abound

While these are just a handful of the issues facing manufacturers today, it’s important to remember that challenge represents opportunity. There’s a chance for businesses to evolve into market-leading, industry-defining organisations. And here’s how…

  1. Digitisation and automation

Digitisation and automation are critical components to improve the supply chain. Developing a mechanism for gathering and analysing data to produce insights is crucial in modern supply chain management. By digitising your supply chain, you will form robust connections between each component part, enabling your executive team to make decisions faster and scenario plan predictively. Digitisation will allow you to develop a customer-centric supply chain, predicting demand and assisting in predicting adverse events using artificial intelligence and machine learning. Automation increases efficiency and lowers costs. It frees up valuable bandwidth among your team, reduces human error and generally performs faster and more accurately than manual processes.

  1. Visibility

Supply chain visibility is imperative to identify potential vulnerabilities. A map of the end-to-end value chain highlights the risks suppliers are exposed to and how they respond to everything from stock shortages to local shutdowns. Increased supply chain visibility helps businesses anticipate and develop mitigation strategies that can insulate them from disruptions in what was previously thought to be a non-related component. A clear supply chain picture also helps a business understand its ESG impact. Suppliers are held accountable to ESG targets, and companies can guarantee their effect on labour forces and the environment.  

  1. Location

Companies must consider where their suppliers are and build diversification strategies. An emerging trend of ‘mini-factories’ has led companies to work with suppliers to re-shore or near-shore miniature production facilities, which provide considerable benefits, including a reduction in inventory cost due to location proximity, availability of stock with short lead times and reliability with production facilities located in the same geography.

Vertical integration continues to drive transformation and has been strongly adopted by the automotive industry. Original equipment managers (OEMs) are acquiring everything from chip design companies to nickel mines. Owning the supply chain allows for additional insights and ensures preferential treatment in allocating limited stock.

The time to act is now

Supply chains must constantly evolve to keep up with the pace of global challenges. As experts in manufacturing, we have deep experience, from supply chain optimisation through to ESG work. Let’s change the game together.

Connect with us today to get started.