Today, manufacturers are focusing their efforts on supply chain visibility for overall collaborative innovation and operational efficiency. This is according to KPMG’s 4th annual Global Manufacturing Outlook report. According to the report, global manufacturers are taking steps to capitalize on potential future opportunities in different markets.
One critical challenge many manufacturing companies face is achieving a greater level of communication and transparency in their supply chains. The manufacturer's ability to optimize cost and performance in the entire supply chain is crucial to their being competitive and resilient in their markets. Most global manufacturers are moving to reduce some of the value lost to third party players by realigning their service distribution and customer service offerings. For some organizations, joint ventures and partnerships are helping them secure the cost benefits of vertical integration without shouldering too much risk or outlaying massive amounts of capital.
However, while cost reduction remains a key focus for manufacturing companies, operational effectiveness is also important. Some companies have started to optimize existing processes along the value chain through the development and implementation of pioneering innovation, aimed at reducing the time to market and at safeguarding product differentiation.
Some leading manufacturers are reviewing their existing sourcing and footprint decisions and are looking towards more radical approaches, such as the re-shoring of outsourced functions, facility development based on individual market demands, and the installation of local R&D departments.
Supply Chain Visibility Imperativeness
Visibility is becoming a primary focus of manufacturers seeking to optimize supply chain processes. Organizations are looking towards technological solutions to optimize visibility and communication. As companies expand their markets locally and overseas, strong visibility helps to reduce the complexity usually experienced when new partners are added.
Improved end-to-end visibility of the supply chain can help manufacturing companies and their partners to work together efficiently, and therefore be more responsive in today’s fast-paced global environment. Moreover, increased transparency can foster better and faster communication between customers and partners, and also augment operational resilience.
Innovation in the Supply Chain
Manufacturers looking to remain competitive must invest in R&D and innovation. In some instances, supply chain partners can play a crucial role in investments in R&D, as well as in innovation strategies. This is possible if the organization can overcome the challenges of collaborating with outside partners.
According to the Economies Intelligence Unit survey, 2012, there are five major innovation challenges that companies face. These are :
- Aligning innovation to company strategy
- Complexities in collaboration with suppliers and partners
- Executing innovation on time and on budget
- Shortage of ideas to drive innovation
- Incomplete view of or difficulty in understanding the needs of their customers
As communication improves across the supply chain, organizations are increasingly relying on their supply chain partners for new ideas.
As manufacturers rethink their innovation strategies in order to leverage opportunities in new markets, it is becoming clear that they may also have to rethink their R&D destinations. Most large manufacturers are keeping their R&Ds in the markets where they are established. However, some small manufacturers (those with revenues less than $US 5 billion) are considering moving their R&D to other markets, especially China and India.
General Cost Reduction
While most manufacturers are keenly watching their costs by optimizing manufacturing processes, other savvy organizations have started to refocus their efforts on the impact of general and administrative spend. In most cases, functions such as procurements, sales effectiveness, and corporate governance not only drive costs but are also potential value creators.
In the current global economy and advancing technologies, manufacturers encounter a number of challenges and opportunities. Companies looking to strengthen collaboration with partners in their supply chain are bound to remain competitive.
For improved performance and collaboration, companies need to ensure end-to-end visibility. At the moment, most manufacturers have visibility only up to their tier 1 suppliers. However, a more comprehensive picture of supply and capacity across all levels of their network is required for better cost optimization processes. Improved visibility will help manufacturers maximize their responsiveness to changes in market demand.
Apart from visibility, R&D strategies and innovation are crucial to staying ahead of the competition. Partners need to be brought into the center of innovation and R&D strategies to help in the generation of fresh ideas.