In addition, other variables can make planning extremely difficult:

• Timing and quantity of material purchases
• Commodity market shifts
• Opportunity costs of unforeseen delays in transit.

Manufacturers face difficult choices when deciding which costs to absorb and which ones to pass on to customers. Overcoming the pricing obstacle means ensuring that internal systems provide the visibility needed to make timely pricing decisions. Procurement strategies and contract terms also demand a rigorous look. Smart companies consider longer buys on inventory now, as “just-in-time” approaches have lost viability.

2. Where you buy matters as much as the price you pay.

As companies gain deeper insights into the pricing factors that apply to their markets, they also should explore contract structure and management. For decades, the distribution sector thrived on reliably cheap offshore labor and services. This included low-cost, easily accessible, high-efficiency container shipping, seemingly available forever.

Recently, offshore cost advantages have quickly diminished or disappeared. For example, in the container shipping segment alone, steep premiums for container space and newly scarce workers quickly erased any offshore savings. These unplanned events applied tremendous financial pressure at almost every stage of the supply chain.

Businesses now can benefit from an end-to-end assessment of their procurement, transportation and warehousing contracts to help ensure they align with realities on the ground. “On-shoring” has become a serious conversation topic for U.S. businesses as they consider shifting from China to Mexico (or elsewhere in North America) to manage recurring costs like sourcing, assembly and test or warehousing. Apart from direct supply chain issues, volatile fuel costs make proximity an even more crucial planning factor.

3. It may be time to update and diversify your vendor mix.

In addition to analyzing and updating specific terms and conditions of individual contracts, companies also should reconsider who they do business with. One way to gain a competitive edge with a supply chain strategy: avoid relying on a single source for anything depended on for production reliability or product quality. Winning companies seek to eliminate overreliance on too few suppliers—or on the wrong mix of suppliers.

There is more than one way to approach vendor diversity and quantity. One obvious remedy is to always have at least one fully vetted alternate source for any item vital to your company’s revenue streams. In addition, question your underlying sourcing strategy and see if there is a process or profit benefit from outsourcing some operations to third parties that can provide those operations as a service. In addition to the upfront efficiency benefit, you also benefit long term by converting fixed overhead expense to a variable cost managed more directly.

Also consider if some service or product purchases can be unbundled from a single supplier to multiple vendors who can deliver at more favorable rates or at a less expensive point in the value chain.

By getting creative and having transparent leadership conversations, strategies like these allow companies to unlock hidden margin by questioning the “one commodity, one supplier” way of doing business.

4. Workforce realities impact every step of your company’s supply chain.

From worker shortages to shifts in remote work opportunities, new labor factors have come into play. Employees performing functions that don’t require hands-on operation have begun to adopt a “work from anywhere” expectation. To be seen as an employer of choice in this environment, manufacturers need to update recruiting and retention strategies to address the increasing demand for remote and mobile workforce options.

Robotic process automation has received a lot of attention in the distribution sector. There may be opportunities to get more done with smaller headcounts by investing not just in physical automation tools but in software automation as well.

By reducing the number of manual data-capture points in a process, manufacturers not only gain efficiency but also increase the speed and value of insights needed to make business decisions. Conventional wisdom says that automation alternatives like these can reduce labor-related pinch points in the supply chain. While this is partly true, keep in mind that a base number of people (or vendors) still is required to build, maintain and operate the automation.

Generational factors also impact the global supply chain. As older workers age out and retire from traditional transportation and logistics jobs, manufacturers also may need to retire some outdated workforce assumptions. To attract younger employees, it is important to integrate new work models into staffing plans, modernize job descriptions and reposition the company’s brand as an employer. Younger candidates want to see a connection between their evolving values and the career paths companies have to offer.

5. Technology can help manufacturers make better and faster business decisions.

Many companies with expensive ERP systems still do not use them to their full potential. Inventory management is a prime example of a process-improvement opportunity that can be addressed by technology. Even if the capability is not an out-of-the-box feature, numerous third-party software solutions exist for adding or expanding dashboards that integrate process, inventory and financial data for deeper visibility and more timely insights.

By increasing the quality and variety of analytics capabilities, manufacturers can make more timely and effective improvements in purchasing, production, packaging, warehousing and shipping. Going digital provides greater visibility into how many times an item is touched, handed off or left to sit idle before it generates profit. These kinds of insights can help companies rapidly prototype process improvements with real margin potential.

The same goes for customer communication and shipping efficiency. By increasing the intelligence of touchpoints with both consumers and shippers, manufacturers can stay ahead of market changes and eliminate wasted motion in their systems.

While technology is a valuable management and business-process improvement tool, software and hardware innovation also can play a significant role in direct production and warehousing improvements. For example, companies that take the lead in supply chain recovery measures seek to make targeted investments in artificial-intelligence (AI) applications that make data do more work. Smarter dashboards, AI applications and automation feedback all can provide insights to drive supply optimization.

6. Looking at the big picture can help build resiliency in the business.

Taking all these obstacles and opportunities into account, addressing supply chain challenges means taking deliberate, creative steps to build more resiliency into every physical, technical and human system. From closer attention to pricing fundamentals to broader supply portfolios, to workforce planning and development and more integrated technology applications, manufacturers have many opportunities not only to mitigate supply chain issues but also to rise above them as an industry leader with a new competitive edge.

Wipfli distribution professionals advise businesses in key areas like strategy and operations services, technology management, digital services and more. Contact us today to get a handle on your supply chain concerns and get started on a path forward.

See also: Wipfli LLC

Technologies: Management

Subscribe to the Newsletter

Start receiving newsletters.