Industry and government leaders have long sought ways to mitigate risk in supply chains. Despite the long-standing need for more resiliency, the COVID-19 pandemic brought new urgency to the task. By early 2020, 75% of businesses experienced a supply chain disruption, while the demand for goods and services increased nearly 40% from the end of 2019 to the end of 2020.
These issues have had a serious impact on global economies, prompting government officials and businesses across all industries to collaborate on solutions. President Biden earlier this summer announced a move to establish a task force to tackle supply chain bottlenecks caused by the COVID-19 pandemic.
Many of these disruptions are the result of unpredictable factors such as natural disasters, technology outages and geopolitical unrest. With so much out of their control, business leaders must be strategic about what they can manage to minimize the impact. Following are three ways logistics leaders can lessen supply chain risk amid the uncertainty.
Decentralize manufacturing. The first step businesses should take is to decentralize the manufacturing of their products. Centralized manufacturing is often preferred, due to its more streamlined inventory turn rates, production schedule efficiencies and financial benefits, costing 10% less than its decentralized counterpart. Offering the conveniences of easier forecasting, consistent production, and a more effective use of limited resources, centralized manufacturing appears to be the most logical choice. Despite the immediate benefits, however, it has serious drawbacks in the face of supply chain disruption.
Centralized manufacturing lacks the flexibility to develop efficient workarounds when unforeseen circumstances arise. Decentralized manufacturing, on the other hand, not only enables flexibility, but allows manufacturers to establish themselves closer to customers. As a result, companies gather more relevant data, which helps them better understand and service demand. In the end, the upfront cost of decentralized manufacturing pays for itself. By mitigating supply chain risks before they occur, companies avoid costly disruptions and improve the overall bottom line.
Distribute manufacturing domestically. Focusing on in-demand manufacturing instead of mass production or micromanufacturing (the manufacturing of products in small quantities using small manufacturing facilities), offers several benefits. Because it can operate on a smaller scale than traditional manufacturing, there is much less overhead. Micromanufacturing reduces the need to maintain high volumes of stock and avoids the unnecessary cost of storing said stock in one location. Additionally, it can increase speed to market, getting goods closer to consumers, all while supporting a smaller ecological footprint.
By decentralizing and better distributing manufacturing, the impact of unavoidable incidents is minimized. For example, instead of having one mass manufacturing distribution center in Texas that may be forced to halt national operations due to a local storm, a company might invest in smaller operations across the country, so those in other areas may still be able to receive their goods in a timely manner.
Get the gig economy involved. During the initial pandemic lockdowns, individual Americans banded together to create personal protective equipment (PPE) by hand or with the use of 3-D printers. In a similar way, micromanufacturing opens up the opportunity for anyone to be a manufacturer from wherever they are.
With more than 1.6 million gig workers and counting across the country, there is a readily available workforce to tap into for at-home micromanufacturing. All that's required in a distributed micromanufacturing environment is a gig worker, a 3-D printer, a small space in their garage and a connection to the local network that allows them to produce and supply goods within a couple hundred miles of their home. Gig workers of this kind are likely to grow in number, as more Americans prioritize job flexibility after the pandemic-led shift to remote work.
As companies continue to recognize the need for resiliency in their supply chains, distributed micromanufacturing must play a central role. Fortunately, businesses need not look far to find an accessible workforce that’s ready when they are.
Cyndi Brandt is vice president of sales enablement and product marketing at Omnitracs.
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