Time to look at your supply chain

The manufacturing market as recently as 2004 was, as we all know, very different from the market today.  There is now a much deeper integration in global supply chains for both SMEs and larger companies.  The consequence of this is that we have seen a ‘domino effect’ in manufacturing industry as part of the global economic downturn. 

As a valuable lesson learned from this, I believe that manufacturing business models will see a shift once again in favour of local supply networks.

The basic issues manufacturers tell us they are facing at the moment include access to credit finance and a lack of orders.  One of the reasons for the drop in demand is the de-stocking taking place throughout supply chains, partly as a result of previous over-production.

When demand gradually returns, total sales quantities may get back to similar levels, but I expect individual order sizes to be managed and delivered with much tighter control.  No business worth its salt will want to see valuable cash tied up in non-essential stock.

This will require greater levels of flexibility and agility in the supply base which I believe strongly favours locality of supply over that of offshoring high-volumes to low labour cost economies.  This current climate might actually be the trigger needed for our region’s manufacturing supply chains to become as lean as they need to be.

Obviously, a large number of manufacturing companies will always have connections abroad and a global presence in overseas production.  We already recognise that one of our great strengths here is doing the clever bits of the manufacturing chain, but we also need to re-engineer the chain to our advantage as circumstances change.

Manufacturing, we must remember, goes beyond production - people are no longer interested in purchasing merely a product.  Our leadership in customer service, R&D, design and advanced manufacturing technology is therefore strategically important in terms of adding the most “value”.

Forward-thinking manufacturers are already starting to identify and exploit new opportunities to create added flexibility and value using local supply chain partners.  The current economic challenges can be useful to focus the minds of manufacturing companies and employees alike on the importance of adapting their business model and investing for the future. 

And that investment, whilst investment capital may be hard to come by, should be seen also to include manufacturing optimisation, training, and the development of supply chain partners and objectives that will add value for the customer in the longer term.