Due to COVID-19 the existence of many CNC companies is at stake. The outbreak highlights the vulnerability of manufacturing supply chains.
by Oliver Lodl, CSO, Orderfox
Due to the current crisis, the existence of many CNC companies is at stake. The COVID-19 outbreak has highlighted the vulnerability of the complex global manufacturing supply chains. To make matters worse, the CNC industry relies heavily on on-time deliveries. Delivery delays of just one day can create gaps in the entire supply chain, which can lead to exploding costs, enormous sales losses or even a complete standstill.
Business for many companies has been delayed or halted as a result of the pandemic, industrial trade fairs have been canceled and tens of thousands of workers around the world are in quarantine at home: The financial impact of the coronavirus crisis will undoubtedly be severe.
Yet we are not completely powerless. It is now imperative that we limit the damage and contain the losses. The crisis may limit many production facilities, but the demand for components is still high.
Changes in supply chain management are now being called for
COVID-19 was a wake-up call for many companies. Many of them have realized that they need to fundamentally rethink their supply chain management.
“The coronavirus pandemic has shown us that our supply chains are unstable, and that the paths we have taken in the past are dangerous. In the context of globalization, many companies have concentrated primarily on lowering prices and have often opted for a single-sourcing strategy”, says Wilfried Sihn, Professor for Industrial Engineering and Systems Planning at the Institute for Management Sciences at the Vienna University of Technology.
This is now clearly becoming a major problem, as these supply chains are beginning to collapse. Due to closed borders and interruptions in production, supply from these individual sources can no longer be guaranteed.
“A new concept is being discussed in science: Glocalization. This refers to the combination of globalization and local procurement. It is important not to overlook local procurement and thus improved supply security,” says Sihn.
In order to diversify their risk, companies should consider moving their production to another location. Production costs may no longer play a major role in the selection of the production site.
“We have seen the effects of cutting off transport and production routes. The importance of production in our own country or in Europe is unmistakable. The coronavirus will influence the global situation. I therefore assume that many production steps will return to Europe. Companies will consider whether they will continue to outsource everything in the future or whether it might be better to procure in close proximity at a minimally higher price,” says Oliver Lödl, CSO of Orderfox.com.
Digitization as an opportunity for CNC manufacturers
Many CNC manufacturers are small and medium-sized enterprises that rely on traditional procurement strategies that are time-consuming and quickly becoming obsolete. In many cases, these producers are highly dependent (more than 65%) on their regular customers, while only around 30% of their turnover is generated from newly acquired customers (Source: Orderfox Customer Research). Customer acquisition is often difficult and time-consuming. And now that numerous industrial trade fairs have been canceled, new acquisition channels are urgently needed.
Digitization will change the CNC procurement
It is not easy for buyers in the CNC industry to fill the gaps that have arisen and find alternative business partners. Many manufacturers don’t have their own website, and therefore can’t be “googled”. Most industrial fairs, which have been a reliable source of business contacts for many years, are expected to be cancelled in 2020.
Without these familiar events, where we usually make new contacts and expand our business network, the digital world is a welcome alternative. Thanks to online platforms, it is possible to establish new customer contacts independent of time and place, whether on a local or global level. There, CNC manufacturers and buyers can easily find each other with just a few mouse clicks.
Digital platforms are a welcomed solution, as they open up new market opportunities while providing additional transparency. Among them, Orderfox is the only global platform that believes in the need for a direct relationship between buyer and manufacturer. While other platforms hide manufacturer information and supplier procurement takes place in a “black box”, Orderfox enables direct communication between the two parties. This creates maximum transparency and mutual trust. At the same time, the price pressure on manufacturers is alleviated, as the latter can also differentiate themselves from their competitors by means of quality attributes.
Oliver Lödl, CSO of Orderfox AG, provides an example of how available capacities can be quickly identified and used profitably: “Once the crisis has passed, when all equipment is put back into operation and we have to compensate for the demand of the past months, online procurement tools will be crucial. Even when things are running normally, newly purchased machines are only utilized at 70 – 80% of their capacity. Orderfox is able to increase their utilization to 100%”.
Online platforms to find new CNC suppliers
A digital platform can significantly increase efficiency and save CNC purchasers a considerable amount of research work. With the help of digital sourcing, delivery delays can be reduced and risks in general minimized.
Oliver Lödl: “There are countless small and highly professional companies that are extremely hard to find because they don’t invest much in their market presence or marketing. This tedious research is carried out by Orderfox for you. Visitors to the platform can see at a single glance which components can be produced by which companies, in which tolerance classes they can do so, which machines they use and where their production is located.”
Due to the crisis, Orderfox is extending its free access to the platform until May 31st, 2020.
Safeguard your digital future now – overcome the crisis – find out more here.
Orderfox is the world’s leading digital marketplace for the CNC industry. We want to maximize the success of our business partners and revolutionize the way they work together. Companies in the CNC machining sector can rely on our global network for customized manufacturing by qualified workshops. The entire industry will have free access to our CNC platform until May 31st, 2020.
Find more information here.