Supply chain managers keep discovering the benefits of onshoring options, taking advantage of contract manufacturers that use digital technologies and smart, on-demand manufacturing on shores.
Managing global supply chains has arguably never been more challenging. Every industry has had its fair share of macro-economic unpredictability over the years, be it natural disasters, health epidemics and now a global pandemic, or political unrest. It’s for that reason supply chain leaders see an increasing number of customers turning to localised and on-demand manufacturing alternatives to off-shoring. In fact, one third of more than 2,000 industrial companies have digitised their supply chain while nearly three-quarters expect to by 2020, according to a PwC survey. Not to mention, manufacturing locally, or closer to the point of consumption, has been made more economically feasible with the proliferation of digital manufacturing.
See also: Expert Formula to Combat Omnichannel Supply Chain Complexity
Leveraging on-demand production
Simply stated, on-demand manufacturing helps companies effectively manage demand volatility and gain greater control of inventory cost.
In terms of volatility issues – this concept of manufacturing on demand helps companies navigate market volatility so that they are not tied to massive production forecasts. When demand spikes, they can get parts quickly, avoiding the risk of lost sales opportunities because of stock outages or long lead times from off-shore vendors.
On the other hand, when it comes to inventory issues, on-demand sourcing can lower overall inventory cost and warehousing expenses for companies because they are no longer focusing on mass producing products with high minimum order quantities (MOQs). Instead, they are opting for on-demand production in low volumes. This approach enables companies to create a supply chain that is truly driven by customer demand, not by (and dependent on) a supplier’s lead time.
Avoiding logistical logjams
Going off shore can increase the logistical complexity and cost of the supply chain. Companies might find it is not as adaptable to adjust to production volumes when transit time from an international factory floor. And a company’s warehouse might be measured in weeks or even months because of container ship lead time. Onshoring in these cases can solve the long litany of logistical logjams.
Mitigating on again, off again tariffs
Another reason to opt for onshoring instead of offshoring, is the on-again, off-again tariffs that have been front and center in the news. Indeed, this issue has only worsened, as the tariffs that were originally only on critical raw materials, might now include finished products.
Deploying mass customisation
As reported in “What Keeps a Buyer Up at Night” by Protolabs, today’s market demands are much more customised. This has moved manufacturing to become more reactive. This low-volume and high-mix ratio of products is not the supply chain of the past where mass production was the norm. Some manufacturers still focus their capabilities to mass produce products with high MOQs and long lead times. Customisation is changing how manufacturing needs to react and on-demand manufacturing has the digital capacity and rapid turnaround capability to help meet those mass customisation needs. In other words, one-size-fits-all mass production has given way to mass customisation and product personalisation. In the end, digital manufacturing plays a key role in this game-changing transition.
See also: The Continuous COVID-19 Pandemic: Have You Reboot Your Supply Chain?