Large global manufacturers are changing the game
It goes without saying that China’s influence looms large in the global manufacturing, supply, consumer markets. Major Chinese manufacturers are expanding their global footprint through acquisitions abroad. While they used to manufacture products in China for shipping everywhere else in the world, they are now making products for Chinese consumers and building global brands. Their increasingly far-flung operations and global market reach will impact manufacturers and supply chains regardless of location.
Moreover, Chinese consumers are accumulating wealth, which means China is a huge market for nearly every major brand. It also means that labor costs are rising in China. While it may still be smart to source components from China, the labor delta is shrinking. Between rising labor costs and tariff implications, the prevailing practice of manufacturing and sourcing virtually everything in China will not make sense for every company or product. It’s time to assess these deltas before they turn into losses or advantage-killing restrictions.
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China, of course, isn’t the only player making big moves. India, South Korea, the Philippines, South America, and Africa are all on the heat map for various manufacturing and raw materials sectors.
Emerging technology upends current models
Key technologies that have the potential to transform manufacturing are still fairly nascent in practice, but we’re seeing wide enough adoption that it’s time to start assessing their impact and preparing infrastructure in advance. Robotics, 3D printing, artificial intelligence, IoT-driven predictive analytics, and model-based manufacturing stand out at the moment, and the disruptive flow of new technologies shows no signs of slowing.
Additive manufacturing (3D printing of components and products) is a prime example. As adoption becomes more widespread, it will change relationships with suppliers. It may become more efficient to print long tail or low volume components in-house or at a nearby supplier. This is already happening in aviation, particularly around replacement parts. Subtractive manufacturing (machined parts) produces more waste than additive methods. While the economies of scale may not be there yet, they will soon. Procurement teams and OEMs will have to understand new cost structures and supplier capabilities in order to make the switch to additive manufacturing suppliers.
Eventually, suppliers will download fully integrated digital 3D models complete with tool paths, making it easier to switch suppliers and move rapidly to market. All of this, of course, will require companies to develop the capabilities and systems to manage and analyze sensor data, house 3D plans and models, and ensure information security. It’s a whole new security game, for instance, when you have millions of IoT devices sending data to cloud. This represents an enormous, multi-faceted risk, and companies should start working now to develop related strategies and capabilities.
One thing is certain — 2019 will not be a boring year for procurement and supply chain professionals. Converging technology advances, wildly unpredictable political environments, and global consumer trends will create surprising synergies and bring complex new challenges to the forefront. It’s time to prepare for significant shifts to occur in the next several months, over the next couple of years, and into the foreseeable future. Those who plan ahead can ride the wave instead of wiping out.