A World Disrupted
As we move from one disruption to the next it becomes increasingly clear that those that manufacture and those that buy manufacturing services need to get used to a world disrupted! But how can brands that outsource and companies that seek to provide those outsourcing services adapt to a world in permanent flux?
Disruptive Brands Using Disruptive Manufacturing Services
Ten years ago a brand could partner with an EMS company with a global footprint, safe in the knowledge they were on top of the lowest cost geographies, in control of long complex supply chains and driving the best value solution for them and their customers. Now the world has been turned upside down by trade wars, pandemics, shortages and now an actual war!
Meanwhile consumer behavior has changed massively. Those buying products are more concerned about the ethics of the supply chain and they are increasingly looking for a better online experience, often using direct-to-consumer, or D2C, channels to purchase products with some degree of customization.
The upshot for a brand is that they need to rethink their supply chain. Many have already done so. Those that have embraced D2C have built more agile supply chains that are less dependent on lower cost geographies and increasingly enabled by technology. One great example is WAZP’s on-demand manufacturing solutions which has attracted large customers including IKEA.
Founded in 2014 in Ireland by Shane Hassett and Mariana Kobal, WAZP offers end-to-end global supply chain solutions to both large corporations and small and medium enterprises. Their strategy rests on three pillars: the decentralization of manufacturing; digitization; and demand-driven production. The flexibility provided by digitization and decentralization allows companies to manufacture products as the orders come in, reducing or even eliminating the need for inventory.
The benefits of this approach for WAZP’s customers are very significant: they can react faster to customers’ demand, minimize inventory, reduce transport costs and vulnerability to supply-chain shocks. There is no doubt that brands and manufacturers need to think long and hard about the impact and the opportunity of D2C solutions.
Meanwhile brands are thinking about where their products are manufactured more than ever before, and so are consumers. They are looking for shorter, more robust supply chains that are globally distributed and have some built in redundancy. This is accelerating the already apparent decade-long trend towards an in-region-for-region manufacturing strategy.
An EMS Industry Disrupted
If you’re an EMS executive you’ll be feeling the disruption every day. This isn’t a temporary or a new state, this has been so for some years and is starting to feel like a new, highly stressful norm. This constant state of stress isn’t good for anyone and the added anxiety is contributing to the great resignation. Executives, particularly those working in supply chain, are rethinking their life priorities and perhaps shifting to careers with more comfort and predictability. And who can blame them?
The truth is an industry cannot live indefinitely on this knife edge, under constant stress and pressure, with wafer thin margins, poor cash flow and a steady drain of talent to other industries.
EMS companies, and indeed the entire industry, needs to change to create manufacturing models that serve their customers better and are designed to survive and even thrive regardless of the disruption occurring. And we can’t design a new industry that is resilient to pandemics, or one that is resilient to trade wars. We need an EMS industry that is designed for disruption.
What might that look like, I hear you ask?
The answer isn’t simple and I don’t have the blueprint for success, but what I do know is that many executives are thinking about the future of the industry and redesigning their businesses and manufacturing models to suit.
The industry and the players that will thrive in the future will likely have a few things in common:
- They will embrace distributed manufacturing models providing manufacturing and supply chain services that are closer to the consumer
- They will embrace disruptive business models, like the Manufacturing-as-a-Service offerings from companies like Xometry, Fictiv and MacroFab, new model like WAZP’s and other we haven’t even thought of yet
- They will be digitally enabled, even digitally native, using data and AI to drive better and faster decisions based on real-time demand and supply chain information
- They will more collaborative, forming closer partnerships with the brands they serve, and building ecosystems of partners, some of which may have been competitors in the past
- They will be more environmentally aware, driving shorter more robust supply chains
- They will be more automated, using adaptable robotics to level the cost of labor in multiple geographies and mitigate talent shortages
- And they will not rely on low cost labor to be profitable
In the coming months and years I expect to see some new players shaking up the industry and becoming the rising stars of outsourced manufacturing.
In a world disrupted, those that design for disruption and even embrace disruption will be the winners.