The Supply Chain Bunker Debrief (Episode #5) – The Journalists’ View
By Dave Evans, Fictiv CEO
Now on many people’s weekly schedule, the Supply Chain Bunker continues to offer a platform for collaboration and the exchange of ideas and experiences, and a space to meet to discuss challenges as they occur. And there are plenty!
This week we brought together two guests that have not just spent years in the manufacturing and supply chain industries, but who are regularly published as experts in their field. First up was Sarah Barnes-Humphrey, Founder and Host of podcast and blog, ‘Let’s Talk Supply Chain’ (LTSC). With 20 years in logistics and supply chain, Sarah is also the Co-Founder and CEO of Shipz Inc. Sarah was joined by Ron Keith who has more than twenty years of operations and supply chain experience, and a reputation as an innovator, team builder, creative problem solver and strategic thinker who delivers straight talk and strong results.
Headline from my co-host, journalist Philip Stoten:
- As we move through the COVID-19 crisis we see increasing discussion on supply chains for a COVID recovery and in a longer-term post COVID world. Agility and Resilience are two of the key words being used.
- Japan has announced a multi-Billion-Dollar stimulus package to shift manufacturing dependence from China, basically paying Japanese companies to manufacture elsewhere. Meanwhile we are seeing momentum in the US on reshoring manufacturing to reduce dependence. All while China is getting back online and moving back towards full capacity. What is clear to me is that brands and consumers won’t want to pay extra for “made outside of China”, so automation and the digital transformation of manufacturing and supply chain are the only solution.
- Manufacturers continue to step up and collaborate. We saw, perhaps for the first time a headline with FLEX and Jabil in as “Philips announced that manufacturing partners Flex and Jabil are helping to further expand its hospital ventilator assembly lines and strengthen its supply chain”
- Despite pockets of increased demand, National Federal Data Shows Manufacturing Output Fell at 74-year Record Rate. Motor vehicle output plummeted 28% as consumer demand for auto products fell 27.2% and automakers closed their factories to prevent the spread of the contagion.
Before our guests joined the group, I shared an excellent article from the Harvard Business Review, entitled, “Bringing Manufacturing Back to the U.S. Is Easier Said Than Done” by Willy C. Shih. I’d recommend reading this piece and taking note of the comments relating to inventory being “fundamentally evil” and the relentless drive to reduce costs.
From our guests
It seems every week in the Bunker ‘collaboration’ comes up as a key ingredient to success and to getting through challenging times. This week was no exception with both guests underlining the need to not only work together, but to come together to share ideas and best practices.
Sarah opened her segment with some encouraging input based on her own interviews and conversations with economists and industry experts. It’s important at times like these to not have only doom and gloom and to look at what is fundamentally reliable in the world and the economy.
In exploring supply chains both Sarah and Ron agreed that current solutions are far too document driven and manual. This creates a ton of opportunity for those wanting to accelerate the digitization of the supply chain management process, particularly those with SaaS (Software-as-a-Service) plays. According to Sarah, the freight forwarding community has been focused on this digital thread connecting demand to fulfilment for some time, now it seems even more important and urgent. Sarah added, that this is no time to be building your own software, it’s just not doable and not flexible enough, particularly in such uncertain volatile times. When it comes to sectors like retail, we’d ideally want to be able to predict consumer behavior and we can only do that with data and analytics.
When Ron joined the discussion, the debate moved to the issues of manufacturing footprints, exploring the options to move manufacturing out of China and the reduction of supply chain dependency. We talked about the Toyota model of building a manufacturing city, where tier one and two suppliers sit cheek-by-jowl with the primary brand. Ron shared his experience with larger contract manufacturers doing something similar, especially when entering new geographies like Mexico in the very early 2000s.
Exploring the ‘reshoring’ or ‘regionalization’ question the panel agreed that no-one would really want to pay more for products to be ‘Made in America’ so those costs would have to be absorbed somewhere. Contract Manufacturers, or CMs, have notoriously low single digital margins, so that leaves the brands to pick up the bill. Both guests agreed that efficiencies in the supply chain could contribute, but cost would be an issue. After all, we’ve debated the cost of sustainability for years, and it seems there too consumers want more sustainable products but don’t want to pay a higher price. Just a reality check it’s important to understand that China has built an impressive manufacturing and supply chain capacity with over $4Trilion capacity, compare that to say Vietnam with around $40Billion, that’s 100x smaller
As you’d expect with two guests used to holding a microphone, there was no shortage of debate and interaction. The whole discussion was recorded and is worth an hour anyone’s time. Check out the recording here.
Here are a few of the key takeaways from The Supply Chain Bunker (Episode #5) – The Journalists’ View:
- Disruption may be the enemy of lean manufacturing principles
- We’re replacing just-in-time with just-in-case
- People won’t pay more for “made outside of China”
- Digital transformation can drive efficiency
- Don’t depend on government initiatives, create your own plan B
There’s a lot more to come in the Bunker. Please get involved, tell us what you’d like to know by reaching out on Linked to Dave Evans or Philip Stoten. Last week’s Supply Chain Bunker is available to watch or you can register for the weekly series once and drop in as often as you like.
See you soon in the Bunker…