In the manufacturing sector, the supply chain is the cornerstone of production. If a manufacturer creates a product but can't deliver it to customers in a timely or reliable way, then they are unlikely to receive new orders and will be unable to retain customers. Similarly, it they rely on a network of suppliers to deliver small parts or other supplies, then their production can be slowed or stalled if they fail to receive those items on time. To manage these risks, executives should maintain visibility throughout the supply chain using mobile data collection or other data collection tools.
The recent 2013 Global Manufacturing Outlook survey from KPMG found, however, that supply chain visibility is the exception rather than the rule. More than half of U.S. manufacturing executives don't have intelligence about their supply chain beyond immediate tier 1 suppliers. In addition, 32 percent said that it would take them one to two weeks to understand the effects of a supply chain disruption or delay.
This is problematic, explained KPMG chairman Jeff Dobbs, because an equipment manufacturer like Ford Motor Company or General Electric may have little to no understanding of their tier 4 or 5 suppliers that could be located in countries like Thailand, China or Japan. Processes that lack transparency are risky because executives don't understand where critical materials are coming from and how delays could impact their supply chain later on.
This became especially problematic after the March 2011 tsunami in Japan, which led to major disruptions in the global supply chain. For example, some unique paint pigments produced in Japan that were used to create red and black vehicles were no longer available. Over time, this resulted in a shortage of those colors and created a backup in production for automobile manufacturers, reported BizJournals.
"The economic impact of the evolution of the supply chain over the past few years has been dramatic," Dobbs, KPMG Global Sector Chair of Diversified Industrials, said about the research. "The concept of nearshoring or sourcing/manufacturing closer to the end market to reduce cost and risk was a hallmark of the post-recession recovery. As the recovery gained momentum, new models of cooperation and collaboration between OEM's and the value chain helped to optimize processes and further reduce cost."
2013 global manufacturing supply chain forecast
Executives who responded to this year's Global Manufacturing Outlook survey also indicated the following about how they see the supply chain developing over the next two years:
- Closer working relationships between suppliers and other partners will be critical for reducing collective response times to changes in the market
- Collaboration in the supply chain will allow companies to optimize inventory, logistics and reduce operational costs
- 91 percent said their company cannot assess the impact of supply chain disruptions within hours
- 80 percent of enterprises with revenues of $5 billion or more are unable to evaluate how disruptions will impact their supply chain within hours
- 42 percent of respondents said their company plans to invest more than 4 percent of their revenue in supply chain innovation tools over the next two years
"As you will see from the 2013 GMO, the next wave of supply chain gains will be the most dramatic yet, with a new spirit of partnership, transparency, and visibility across the value chain creating enormous economic value from a technology-enabled demand-driven supply chain," wrote Dobbs.
The survey showed that data collection and analysis tools have moved to the forefront of the supply chain process and are enhancing visibility as well as business intelligence. Technologies like mobile data collection that can incorporate a higher level of transparency throughout the process will only become more central to organizations in the years to come.