Accounting for approximately 17 percent of GDP and 14 percent of employment globally, the manufacturing sector is the engine of global trade - 70 percent of the entire global trade volume stems from manufacturing companies. Against this background, supply chain concepts need to be regionalized, interconnected, more resilient and sustainable as well as more agile to comply with trends such as shifting markets, customization or increased compliance, according to a new whitepaper published by DHL.
"Building the World - A DHL Perspective on Future Engineering & Manufacturing (E&M) Supply Chains" outlines six influential trends from worlds of economy, environment, politics, society and technology and their implications.
The six trends are:
- Shifting markets
- Customization and convergence
- Compliance and sustainability
- Volatility and exogenous threats
- Labor shortage
- New technologies
Based on these key findings, it derives the sector's respective responses and the five implications for future supply chains.
For example, supply chains have to become more regionalized as customers in different geographies require unique products and services, the report finds. Since business and end consumers' expectations changed, E&M companies have begun to restructure their production processes and adapt their business models to become more customer-centric and competitive. In the future, this will also include intelligent and sustainable manufacturing and new collaboration models along the value chain. As emerging countries are prospering and companies shift their production closer to these markets, supply chains have to be adapted. A global network of more regionalized supply chains is required to speed up delivery and respond immediately to changes in customer demand. However, this will also challenge supply chain managers to comply with an increasing number of country-specific regulations and guidelines.
The greater volatility in customer demand consequently also implies that future supply chains must become more resilient, DHL finds. Companies will be forced to constantly compromise between efficiency and redundancy with contingency planning becoming imperative. Simultaneously, future E&M supply chains have to be more agile, fast, efficient and responsive to deal with smaller batches of customized products or unpredictable variations in demand. This could include solutions such as 3D-printing options, smarter inventory management as well as inbound-to-manufacturing and lead logistics provider concepts.
Moreover, future E&M supply chains need to be more sustainable. Customers increasingly choose their suppliers based on their ecological performance. To reduce their environmental impact E&M companies have to increase visibility along the supply chain to track carbon emissions of all suppliers. Part of this solution is connected and integrated supply chains: By analyzing data gathered from suppliers and their sub-suppliers, supply chains could be connected end-to-end and in real time. This would lead to higher visibility and improved collaboration across various supply chain stages.
In these conditions, the diversity of the E&M sector represents an opportunity. Many E&M companies are already successfully applying innovative supply chain concepts, and these can be leveraged across the entire sector. More than this, well-established concepts from other industries are ripe for application in E&M, especially concepts from automotive and technology businesses.
"Generally speaking, we expect that supply chain managers will have to deal with even higher complexity in the future", said Reg Kenney, President Engineering & Manufacturing, DHL Customer Solutions & Innovation, in a press release. "Customers will expect a broader, more customized product portfolio. In combination with shifting growth markets, thus more suppliers, a lack of qualified workforce and new technologies, this will have companies rethink their current supply chain models."