Is the trade war a silver lining for manufacturers? It may be just what it takes to push manufacturers to make changes to be future-ready.
October 21, 2019
By Shanton Wilcox, Partner and Manufacturing Practice Head, Infosys Consulting
As the U.S. – China trade war wages on, the U.S. manufacturing sector faces a state of change that may very well be the new norm. While change in general tends to rattle nerves, this situation requires a different approach that may, in fact, be a silver lining in these uncertain times.
Traditionally, manufacturing organizations have been product-driven businesses. Determinations about where and how to manufacture products have often been made irrespective of changing international trade policies, regulations or tariffs. Today’s business climate now requires manufacturers to transition from this product-only focus and become data-driven organizations that pursue more dynamic decision making. With increased access to data and insights on how to act on that data, manufacturers now possess a greater ability to decide what their supply chains should look like and where they should be located, giving them more opportunities to maintain a cost-effective supply chain. The journey to get to that end result isn’t necessarily that complicated.
First Step: Get Back to Basics
To get started, manufacturers need to take a fresh look at the business. It’s more important than ever that manufacturers establish standard operating procedures to help workers achieve efficiency, quality and consistency and comply with regulations. Confidence in the core business will enable manufacturers to refocus on how to successfully manage constant change and minimize future disruptions. A key to managing exceptions in operations is the ability to identify them. So standard procedures, with supporting business rules, help the organization and enabling technologies identify where standard operations are not executing as expected.
Own Risk: Create a Risk Culture
In this always-changing environment, manufacturers need a mechanism in place to constantly monitor the trade landscape and manage change. Various monitoring services exist to continuously look at free trade agreements and provide real-time insights into how tariffs and trade policies impact operations now and in the future. With this steady supply of information, manufacturers can analyze and plan for different scenarios, building a culture of always-on risk management that constantly assesses potential risks and prepares to minimize them. Manufacturers cannot afford to be backed into a corner because they didn’t see change coming. By understanding likely scenarios, industry leaders can create backup plans to establish expert teams and options regardless of what happens.
Keep Data Front and Center
Data drives insights, including root causes of problems, symptoms before a situation escalates, and directions toward potential solutions, and should be shared with experts across the entire organization. Having access to the right data is a critical need for organizations not only to thrive now but survive in the long run.
However, according to the 2020 Annual Third Party Logistics Study from Infosys Consulting and others, 77% of companies that manage a supply chain regularly experience problems with the availability of clean and useful data. Another 59% report having insufficient analytics resources, and 41% of these shippers recognize the need for additional data science talent.
In fact, the skill sets required to manage the manufacturing supply chain are rapidly evolving. Companies need to think very differently about the skills set that are now required to retain competitiveness.
Evolve Supply Chain Skill Sets
In addition to shortcomings in the data analytics area, companies that participated in this study revealed other significant talent concerns, particularly in the area of supply chain finance – those individuals who manage the financial implications created by the increasing complexity of global operations. Supply chain leaders need their own finance capability to manage the growing number of factors that impact supply chain costs. Today’s operations are not simple and potential impacts aren’t clearly understood by all. So the ability to develop scenarios and determine the viability of tradeoffs is a key capability that global supply chain operators need to manage effectively in this new business environment.
Another emerging capability needed for logistics and supply chain teams is that of global trade management (GTM). By incorporating experts with proficiencies in optimizing and streamlining business processes related to cross-border trade, manufacturers can expand supply chains to provide visibility and control over orders and shipments while ensuring adherence to global trade regulations.
GTM also manages regulatory compliance and increases working capital utilization by ensuring that goods keep moving. It may also benefit customs management by enabling visibility and control of customs procedures and filings as well as automating customs filing procedures, broker collaboration and e-filings. With trade volumes growing at an average of 4.4% and regulatory complications continuing to increase, GTM is one of the most promising solutions for the simplification and de-risking of trade.
Make Your Own Silver Lining
Tariff changes, potential trade wars and concerns over a variety of other industry disruptions are prompting organizations to become more prepared. If there is a silver lining in all of the global economic uncertainty and fear, it is that tools exist to help manufacturers make the right decisions today that prepare them for a better situation tomorrow.
Manufacturing Practice Head, Infosys Consulting
Shanton joined Infosys Consulting in 2016 to lead our manufacturing practice in the U.S. He is focused on applying advanced operations capabilities to manufacturing and service organizations to integrate and streamline value chain operations. He has a record of outstanding success with a deep set of experiences across several industries, including aerospace and defense, automotive, high tech and consumer goods. Shanton has held various leadership roles at Deloitte, Ernst & Young and Capgemini Consulting. In the latter, he was the North American lead for their digital manufacturing practice and offerings. Shanton is a sought-after speaker at client and industry events, and a regular contributor to the firm’s thought-leadership channel.