11 Ways Manufacturers Can Build a Robust Supply Chain
In today's global economy, a resilient and efficient supply chain is crucial for the success of any manufacturing business. Supply chain disruptions can have far-reaching consequences, impacting operations, reputation, and financial health. To remain competitive, manufacturers must adopt strategies to strengthen their supply chains, enabling them to navigate challenges such as transportation slowdowns, unreliable suppliers, demand fluctuations, and market uncertainty. This article explores 11 key strategies for building a robust manufacturing supply chain.
The Importance of a Strong Manufacturing Supply Chain
The manufacturing supply chain encompasses the processes that transform raw materials into sale-ready products. A well-planned supply chain ensures the timely and efficient availability of all materials and components required for production, optimizing lead times and reducing costs. Furthermore, a strong supply chain is essential for meeting customer expectations of quick order fulfillment and short delivery times.
In the face of increasing globalization and complexity, manufacturing supply chains have become more vulnerable to disruptions. According to the 2022 Economic Report of the President by the Council of Economic Advisers, "The globalization of production has also made supply chains more vulnerable to disruption… they have less ability to recover quickly from unexpected events… they can also easily break." This fragility stems from various factors, including fluctuating international trade relations and the rising frequency and cost of weather disaster events, as measured by the National Centers for Environmental Information.
Manufacturers with stronger supply chains are better positioned to adapt and serve their customers when breakdowns occur. By quickly adjusting processes, such as switching to alternate suppliers or ramping up production at unaffected facilities, these businesses can maintain continuity and mitigate the impact of disruptions.
How to Build a Resilient and Efficient Supply Chain
By embracing the following strategies, manufacturers can effectively manage risks, increase efficiency, improve customer satisfaction, and gain a competitive edge in the marketplace.
1. Implement Modern Technology Solutions
Modern technology provides manufacturers with increased visibility throughout the supply chain, offering accurate and up-to-date data to inform decision-making. By automating processes like inventory tracking and reordering, companies can optimize stock levels, balance carrying costs, and ensure the availability of raw materials and finished products.
Enterprise resource planning (ERP) systems are a popular choice among manufacturers, providing managers with a comprehensive view of the supply chain to identify and address inefficiencies before they escalate into major problems. For instance, warehouse management software offers real-time insights into inventory levels, storage, staff productivity, demand forecasting, and order fulfillment workflows, enabling proactive management and optimization.
2. Build Strong Relationships with Suppliers
As the starting point of the supply chain, suppliers play a critical role in a manufacturer's ability to produce goods. By fostering strong, mutually trusting relationships with suppliers, manufacturers can effectively communicate their needs, plan ahead, and proactively address potential shortages, delays, or other issues. These partnerships can also lead to benefits such as priority access to scarce supplies, cost savings through discounts, and reliable deliveries.
According to a July 2022 survey of more than 200 U.S. manufacturing executives by Deloitte and the Manufacturers Alliance, "strengthening existing relationships" was the top choice for mitigating supply chain disruption risk, with 83% of respondents identifying it as a key strategy. Regular evaluation and selection of reliable suppliers are essential to minimize inefficiencies and delays that can adversely impact lead times.
3. Establish Communication and Procedures for Disruptions
While supply chain disruptions may be inevitable, their impact can be mitigated through proper planning and communication. Many manufacturers employ strategies such as multi-sourcing, using alternate delivery providers, or maintaining production facilities in different regions to ensure continuity in the event of unexpected shutdowns.
However, the effectiveness of these contingency plans relies on timely communication and well-defined procedures. For example, when a supplier shuts down, the designated backup vendor must be contacted immediately to secure supplies before competitors deplete available stock. Visible data across the organization, often through dashboards, and open lines of communication are crucial for creating and executing contingency plans in the face of supply chain breakdowns.
4. Implement Lean Principles
Lean principles, such as just-in-time (JIT) inventory management, help manufacturers stay competitive by reducing waste and optimizing resource utilization. By leveraging technology and automation to collect accurate internal sales data and external market data, businesses can generate precise demand forecasts, minimizing overproduction and unsold inventory.
According to data from the St. Louis Fed, the ratio of private inventories to final sales in late 2022 was down 40% from the early 1980s and 57% from the early 1950s, reflecting the growing adoption of lean practices. While JIT inventory management offers benefits such as reduced carrying costs and increased flexibility to meet changing customer demands, it also carries risks associated with supply chain disruptions and delivery delays. Manufacturers must carefully balance lean principles with risk management strategies to ensure resilience.
5. Utilize Data Analytics
To ensure that supply chain improvements are effective and meeting expectations, manufacturers must track and analyze key performance indicators (KPIs). Monitoring metrics such as inventory turnover rates, product-specific sales reports, and changes in supply costs can help identify areas for improvement throughout the organization.
Many supply chain management and ERP systems provide businesses with detailed, data-driven reports on these and other KPIs, equipping analysts with the tools they need to strengthen their supply chains. By leveraging data analytics, manufacturers can make informed decisions, optimize operations, and drive continuous improvement.
6. Reshore or Near-Shore Operations
Global supply chain disruptions can be difficult to predict, stemming from diverse factors such as blocked trade routes or shifts in international politics. To mitigate these risks, manufacturers often bring some or all of their overseas operations closer to their home base through reshoring or near-shoring.
While local regulations may increase certain costs, such as labor or materials, reshoring can decrease shipping costs and lead times, providing manufacturers with greater control over production and delivery schedules. This proximity also enables faster response times to changes in customer preferences and market conditions, enhancing flexibility and agility.
“Monitoring metrics such as inventory turnover rates, product-specific sales reports, and changes in supply costs can help identify areas for improvement throughout the organization."
7. Encourage a Culture of Continuous Improvement
Strengthening the supply chain is an ongoing process, as innovations, global supply chain dynamics, and market trends continually evolve. Frontline workers are a valuable resource for identifying inefficiencies and improvement opportunities, as they have direct insight into day-to-day operations.
By fostering open communication between labor and management, businesses can quickly identify and address weaknesses before they escalate into major problems. This culture of continuous improvement empowers employees to take ownership of their roles, leading to increased productivity and higher-quality products. Encouraging innovation and new strategies from the ground up can help manufacturers stay ahead of the curve and adapt to future challenges.
8. Implement Sustainability Practices
Incorporating environmentally conscious and sustainable practices into the supply chain can help businesses reduce costs, prepare for future regulations, and meet the growing demand for eco-friendly products. Investing in energy-efficient equipment, from high-performance manufacturing machinery to eco-friendly lighting, can reduce utility costs and optimize equipment lifespans.
Proactively adopting sustainable materials and processes can give businesses a competitive edge as new environmental standards are introduced, while competitors rush to meet regulatory deadlines. As the manufacturing supply chain often accounts for a significant portion of a company's energy consumption, identifying areas where sustainability practices can make a difference is crucial for long-term success.
9. Conduct Regular Supplier Assessments
Regular supplier assessments help businesses ensure they are getting the best combination of quality and price for their raw materials. While a supplier may have been the optimal choice when contracts were initially signed, better options may emerge over time. By exploring alternatives and conducting periodic evaluations, manufacturers can identify potential vulnerabilities, improve supplier relationships, and increase collaboration for greater efficiency.
“ERP systems and automation play a crucial role in integrating multiple business processes on a centralized platform, facilitating open communication, reliable data, and increased productivity."
10. Streamline Processes
Streamlining supply chain processes can reduce lead times, improve order fulfillment rates, and enhance agility in the face of disruptions or market shifts. By standardizing workflows, eliminating unnecessary tasks, and increasing coordination, businesses can quickly adapt to changing circumstances.
ERP systems and automation play a crucial role in integrating multiple business processes on a centralized platform, facilitating open communication, reliable data, and increased productivity. For example, integrating manufacturing with sales enables teams to easily share data, streamline order fulfillment, and provide customers with accurate information on stock levels and delivery estimates.
11. Build a Robust Risk Management Plan
Despite meticulous planning, unexpected supply chain disruptions can still occur. The key to weathering these challenges lies in having a robust risk management plan with multiple contingency strategies. To develop an effective plan, businesses need visibility into every link of their supply chain, from raw material procurement to final product delivery.
While some disruptions, such as natural resource shortages, may be beyond a manufacturer's control, proactive measures like diversifying processes, identifying backup suppliers, and monitoring market changes can help businesses adapt and gain a competitive advantage in uncertain times.
Why Strengthen Your Supply Chain with NetSuite
Gaining the necessary visibility to manage a supply chain effectively can be challenging, but NetSuite's supply chain management solution offers businesses the tools to oversee processes from supplier contact to final product delivery. With NetSuite, companies can track supplies, schedule resources, and maintain accurate records throughout their supply chain. Integrated demand planning and forecasting tools enable businesses to plan for the future, ensuring optimal inventory levels and timely delivery of goods.
NetSuite's manufacturing cloud ERP system provides a streamlined, centralized solution for coordinating every step of the supply chain. By offering a global view of inventory, NetSuite empowers businesses to manage both internal and outsourced manufacturing processes with flexibility and control. The scalable system enables growing businesses to adapt to future supply chain challenges and seize opportunities for improvement.
The Importance of Ongoing Supply Chain Monitoring
As globalization has made supply chains more complex and vulnerable, manufacturers must take proactive steps to mitigate risks and plan for disruptions while continuously strengthening their day-to-day supply chain processes. By implementing strategies such as increasing supply chain visibility, fortifying supplier relationships, streamlining processes, and developing robust risk management plans, businesses can gain a competitive edge in the face of supply chain disruptions.
Moreover, these strategies offer benefits even under normal operating conditions, including increased efficiency, reduced costs, and faster lead times. However, it is essential to recognize that supply chain optimization is an ongoing process, requiring continuous monitoring and adaptation to ensure that the business can meet the evolving demands of tomorrow's supply chain landscape.