At a Glance
- Manufacturing is the backbone of the global economy and directly employs 13% of the global workforce.
- Manufacturers should prioritize flexibility in their supply chains by transforming them into circular supply chains that consider product design, business models, supply chain networks, and material and information flows.
- Supply chain transformation cannot simply be an add-on to the existing strategy. Companies need to adopt a continuous improvement approach to their supply chains to adapt to changing regulations, consumer demands, and rapid technological advances.
Manufacturing plays a vital role in our lives. Without it, almost everything we own, or use would cease to exist, including appliances, furniture, technology, everyday essentials, and life-saving medical devices.
Manufacturing’s role and contribution to the global economy
Beyond its impact on our daily lives, manufacturing is also the backbone of the global economy. It accounts for 17% of global Gross Domestic Product (GDP).
In addition to creating products, they are also major consumers of resources. They procure essential raw materials from other factories, such as metals, plastics, and chemicals.
Manufacturing directly employs 13% of the total global workforce, and the total manufacturing employment is expected to reach 238.5 million this year.
Manufacturing also drives innovation. From the cotton gin and interchangeable parts to industrial robots and three-dimensional (3D) printing, forward-thinking companies continue to push the boundaries of production. In the United States, manufacturing accounts for 55% of patents and three-fifths of private sector research and development spending.
It’s not all rosy in manufacturing
Despite its vital role and contribution, manufacturing has faced a number of challenges over the past five years. The global pandemic wreaked havoc on supply chains and manufacturing, bringing production to a standstill.
When consumer demand and spending resumed, manufacturers struggled to meet demand due to shortages of labour and key materials. In 2021, more than 60% of manufacturers reported delays from suppliers.
As the manufacturing sector gradually regained its footing, Russia’s invasion of Ukraine affected commodity markets, trade routes, and consumer confidence. The resulting inflation eroded purchasing power and slowed global economic growth.
To make matters worse, the looming threat of cyberattacks disrupted trading operations, resulting in financial losses, and the theft of corporate and financial data. In 2021, up to 46% of businesses reported losses from a ransomware attack, and 67% said their total losses were between US$1 mil and US$10 mil. Cyberattacks on businesses, particularly supply chains, can cause disruption and production delays.
Building a resilient supply chain for the modern manufacturing era
Given the current challenges, manufacturers must proactively implement measures to overhaul their supply chains and effectively adapt to unpredictable market conditions.
1. Transition from linear to circular supply chains
Traditional manufacturing often follows a ‘take-make-dispose’ approach. However, with fluctuating resource or material costs and increased regulatory and environmental pressures, manufacturers should prioritise flexibility in their supply chains.
Consider transforming a traditional supply chain into a circular supply chain (CSCs) by taking a holistic approach that includes changing product design, business models, supply chain networks, and material and information flows.
This shift enables faster deliveries that are also aligned with sustainability goals. It should be noted that reconfiguring the supply chain is a major undertaking that needs to be carefully considered.
2. Accelerate the adoption of digital technologies
Data analytics and digital technologies are the driving forces behind Industry 4.0. These components provide stakeholders with the essential insights needed to develop robust supply chain strategies. Start by identifying technology gaps in your operations. Engage experts who can assess the immediate benefits of digital technologies and align these solutions with your long-term business goals.
3. Avoid knee-jerk reactions and policies
In times of crisis, it is important to react carefully rather than hastily. Overreactions, particularly during tumultuous events such as pandemics, wars, and other events involving government decisions, can have a negative impact on your business. Instead, remain calm and flexible at the same time.
Take a long-term perspective when developing policies. Improving communication between policymakers and organizational decision-makers enables your company to make measured changes to support regulatory changes without implementing reactionary “knee-jerk” policies.
4. Adopt a continuous improvement approach to supply chains
Market dynamics and supply networks are often unpredictable, volatile, and complex. Companies should, therefore, adopt a continuous improvement approach to their supply chains in order to adapt effectively to evolving regulatory policies, changing consumer demands, and rapid technological innovation.
As part of your supply chain makeover, focus on building trusted and diverse relationships at all nodes along the supply network. Plan ahead to manage disruptions that may occur throughout the product lifecycle.
Solutions for success: Supply chain management
Transforming the supply chain in the modern manufacturing era requires a comprehensive understanding of a wide range of factors, from matching production site characteristics to trade restrictions, and the ability to rapidly reconfigure supply networks. Supply chain transformation cannot simply be an add-on to the existing strategy.
At Renoir, we have over 25 years of experience in optimising the supply chain and delivering improved business results. As part of our engagement, we take projects through to full, sustainable adoption using our behavioural and cultural change methodologies.
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