Volume 13 | Issue 4 | Year 2010

While manufacturers still recover from the 2009 economic downturn, the industry optimistically forges ahead in 2010. The latest Institute for Supply Management’s Report On Business® showed that activity in the manufacturing sector expanded in June for the 11th consecutive month.
One clear insight came out of the recession: Globalization is significantly impacting manufacturers’ dependence on international partners. According to a June 2010 McKinsey Quarterly report, a typical manufacturing company relies on more than 35 different contract manufacturers around the world to provide the necessary parts for its goods. So, from a manufacturer’s perspective, when one nation’s economy deteriorates, the entire global supply chain is affected.

As manufacturers emerge from the downturn, they must put considerable emphasis on creating a flexible global supply chain that enables them to respond quickly to economic or market changes. Ultimately, such preparation will help manufacturers improve their ability to handle spikes or dips in customer demand, better manage costs, and gain a competitive edge. In fact, a key step to manufacturers’ business recovery, according to the PricewaterhouseCoopers Manufacturing BarometerTM survey, is efficient management of their global supply chains.

Although there are signs of an upturn, managing costs remains paramount for manufacturers and their customers. One way that companies can drive home cost savings is by taking a close look at where it all starts: the plant floor. The truth is, most manufacturing facilities have several areas of misused space. This wasted real estate means that these companies can’t operate as efficiently as possible. So, in today’s economic climate where orders still ebb and flow, being able to accommodate sudden spikes in orders is crucial.

Increased global trade has forced logistics providers to offer even more shipping options that can move goods to customers all over the world more quickly and cost-effectively.

In the past, manufacturers that needed to ship products across the globe traditionally relied on one of two options: ocean freight or air freight. Ocean freight proved to be the most cost-effective and efficient option – especially considering the sheer volume of goods that a freight vessel can carry. The downside was that goods could spend weeks in transit. Conversely, shipping goods via air freight saves time. However, it is more expensive. Thus, for goods that have longer cycle times, air freight may not be worth the cost.

With today’s transitioning global economy, some logistics companies have developed hybrid services that combine both air and ocean freight for a single movement. This model involves using an ocean freight vessel to transport goods to a city that has a sophisticated port authority and airport. There, products are transferred from a vessel to an aircraft to reach their final destinations. The combination of services provides faster transit times than an ocean service, but it also consumes substantially less fuel and costs less than a pure air service.

Every manufacturer knows that the supply chain doesn’t end when a product or good reaches its customers. So, an efficient and nimble reverse logistics model is essential. Automating the returns process is a key way to add efficiency to the supply chain. A logistics provider can make it possible for a percentage of returns to go directly from the customer back to the manufacturer instead of a distribution center. Fewer touch points mean faster transit times, fewer chances for errors and more rapid turnaround and credit processing.

Most important, an automated returns process ensures greater inbound visibility, which means a return never gets lost in the system. The latest technology puts tracking tools in place to give reverse supply chains the same end-to-end visibility as outbound operations. Complete returns visibility reduces inventory redundancy and customer calls for status updates. It also helps companies allocate staff based on inbound volumes and automate the receiving and credit processes.

During the economic downturn, many industrial manufacturers shied away from major technology investments. But, as we emerge from the downturn, it’s clear the investment in new technologies will be key to revitalizing the sector worldwide. Certain technology investments can even make a manufacturer’s global supply chain more flexible and cost-effective.

While signs pointing to an upturn, the industry is not yet out of the woods. The best way to prepare for any market condition is to create an agile supply chain that can be adjusted based on real-time insights. Building supply chain flexibility today ensures that manufacturers can handle what happens tomorrow.

Matthew Hanna, marketing manager with UPS, works with customers in the industrial manufacturing industry. Through his understanding of current industry trends and challenges, he has been instrumental in implementing strategies that address UPS customer needs in the manufacturing sector, such as reducing transportation costs, improving delivery speed and maintaining a lean inventory.

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