The Supply and Demand Roller Coaster — How Manufacturers and Distributors Can Stop the Ride
At the height of the pandemic, demand for many goods and services tanked. Restaurants and retailers shuttered and millions were out of work. Today, we seem to have the opposite problem. Demand is sky-high, supplies are limited, and skilled workers are hard to find.
For manufacturers and distributors, dealing with the pendulum of supply and demand is a top challenge. The volatile cost of raw materials makes it risky to know when and how much to buy. Shipping delays add to the uncertainly. It’s the time to make hay, but the sun isn’t necessarily shining. What are some of the strategies manufacturers are using to overcome their supply chain challenges and take advantage of a growing economy?
Shifting Supply Chains Homeward
Localization is gaining momentum due to the disruptions experienced during the pandemic. Deloitte’s 2021 Manufacturing Industry Outlook report found that nearly one-third of executives indicated that they would nearshore some part of their production back to the Americas in the coming year. Case in point — fitness industry darling Peloton just announced it would build its first US manufacturing facility in Ohio, bringing 2,000 jobs to the area.
These new domestic factories are likely to be smaller and more automated, using technology that enables manufacturers to change production lines quickly as demand shifts. They may also then be more cost-effective to run. In turn, this creates opportunities for other manufacturers and distributors — those that make and sell automation components.
Driving Productivity Through Automation and Robotics
Manufacturers have long hurt for skilled employees. The skills gap has widened during the pandemic-related furloughs and retirements. In response, many manufacturers are accelerating the deployment of technologies including automation, robotics, and Artificial Intelligence (AI) to sustain capacity and enhance employee productivity.
An example of this is the Industrial Internet of Things, or IIoT. IIoT connected devices can be used for a wide variety of purposes — to collect machine performance data for preventative maintenance planning to tracking the location of tools, equipment and even personnel.
The use cases for technologies like IIoT are everywhere. One industrial supplier adopted an IIoT solution and documented that it ran over 100 hours per month faster, produced 150,000 more parts in three months, and increased machine usage by 11%. Another contract manufacturer used IIoT technology to save $1.5 million and increase productivity by 20%.
Taking It Online
The pandemic drove B2B commerce online. A 2020 survey of 200 manufacturing and distribution companies found 68% saw online sales grew between 11%-50% during the pandemic. Another survey from McKinsey revealed that 80% of B2B leaders will retain their new, digital selling models, even after the pandemic ends. The key to maintaining this success will be investments in enterprise resource planning (ERP) systems and cybersecurity tools to support and secure this channel.
Some manufacturers — such as Clorox, which grew eCommerce 35% in fiscal 2019, and Proto Labs Inc., where all orders are done online — were well prepared to respond to pandemic-related challenges. Both are also poised to grow by capturing new opportunities in the post-pandemic new normal. Many manufacturers are also extending their eCommerce initiatives directly to consumers with good success.
Productivity and Agility Through the Cloud
For too long, manufacturers have invested in technology that may have improved their productivity but limited their agility. The cloud delivers on both. The cloud computing model fits the dynamic manufacturing environment better than giant, complex on-premise systems that cost a fortune, take years to implement, and can’t adapt to the market and supply-chain changes we’re experiencing. An increasing number of manufacturing companies are moving their operations to the cloud to take advantage of improved security, connectivity, interconnectivity, and collaboration.
Cloud-computing applications impact virtually every aspect of modern manufacturing companies — from ERP and financial management to data analytics, CRM, and workforce training. The cloud allows manufacturers to integrate data streams from supply chain partners, gain deep visibility into transactions and exchange data in real-time to better manage just-in-time production.
A Good Problem?
Can we call it a good problem? Demand is nearing all-time highs, driven by a rapidly improving public health situation and government subsidies to households. Concurrently, manufacturers and distributors struggle to satisfy the demand surge because of resource constraints and bottlenecks in their supply chains. If a good problem is the kind that shows you’re doing something right but leaves you with a challenge — then we’ve got a good problem on our hands.
Manufacturers and distributors face supply chain disruptions and challenges stemming from the global pandemic and its uncertain aftermath. They also have been handed a red-hot demand environment. Organizations able to pivot, evolve, and adopt some of the winning techniques outlined here might even find the roller coaster ride a bit of a thrill.