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Engineering, manufacturing supply chains lag

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The report, The Resiliency Challenge: Constructing the Agile Supply Chain for Heavy Industry, says companies have been slow to respond to changing patterns of demand, cost pressures and the rise of consumer expectations in industrial manufacturing industries, says Jan van Rooyen, Industrial Manufacturing lead of Resolve Solution Partners.

Report author Lisa Harrington, president of the US-based LHG (the lharrington Group), says: “Change won’t come easily to an industry populated by companies which have been around for over 80 years and are used to ‘business as usual’. But it is imperative that they transform their supply chain in order to meet the demands of modern business with its onus on faster, leaner and more resilient operations. Those that do so can use their newly discovered logistical capability as an offensive weapon against competitors who fail to adjust.”

Harrington also says: “As emerging markets grow and new markets emerge, demand is dispersing geographically. Demand is also fragmenting as a result of increasingly complex requirements from customers both for new product customisation and post-sale support and service.” Consumer traits typical of the retail sector are now becoming part of the heavy goods industry.

“A new business paradigm is emerging to serve this demand; a lean, resilient and regionalised supply chain model in which global companies’ goods are produced, sold and consumed in the same geographic region,” she says.

The report states that engineering and manufacturing companies are “currently operating the least mature and therefore most costly supply chains in global industry”. This is also true within the South African context, where Resolve has worked with companies in the Mining, Engineering, Paper, Steel and Petrochemical industries. Companies struggle to coherently align the customer-facing supply chain (demand driven) with the production supply chain (push driven).

Four key drivers for building resilient supply chains within the Industrial Manufacturing industries are proposed:

* Supply chain as an assertive weapon – leading manufacturers place the supply chain at the centre of their efforts to achieve their strategic priorities.

* Control Tower approach – an answer to the challenge of achieving a greater level of transparency and communication and to promote greater collaboration among one’s network of partners.

* Life-cycle management – moving from product centric to usage centric – the goal in life-cycle sustainment is to anticipate and prevent emergencies or breakdowns – shifting the supply chain to be predicable and anticipatory rather than reactive.

* Risk management and contingent capacity – adopting a risk management strategy for critical components of their supply chains, such as transportation.

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