A manufacturers survey shows that many companies have “significant room for improvement” when it comes to managing their supply chain.
A survey by Grant Thornton LLP for the National Association of Manufacturers showed that manufacturers “are behind the curve” in addressing potential supply chain issues that could arise under the new Trump administration.
“We’re obviously in a new era and there’s a lot of uncertainty if you’re a manufacturer,” NAM chief economist Chad Moutray said in a statement. “Manufacturers are optimistic about pro-growth policies like tax reform, regulatory relief, a rethinking of the Affordable Care Act and a possible infrastructure package. At the same time, there are anxieties about trade, and people are looking to be on the right side of that from a supply-chain perspective.”
With newly elected President Donald Trump comes hope for lower corporate taxes, reduced regulations and greater domestic job creation, but the optimism is tempered by worries that Trump’s policies on trade and immigration could hamper domestic manufacturers in the global economy.
A survey of 120 U.S. manufacturers, mostly small and midsize companies, showed that more than 20 percent said they were very positive about their company’s business outlook; 62 percent said they were somewhat positive.
When it comes to their supply chain, the companies admitted that they have significant room for improvement.
Only 10 percent said they had a fully implemented strategy to optimize their supply chain performance. Meanwhile, 36 percent said they had only informal supply chain processes and little measurement of integrated tactical plans.
Almost 78 percent said they focused their supply chain improvement efforts on managing direct costs, such as labor, overhead, material costs and inventory. Only 17 percent said they focused their supply chain improvement efforts on managing indirect costs, such as waste, rework, warranty, on-time delivery or bad debt.
“The survey results suggest that many manufacturers are behind the curve and have a lot of room to grow. The good news is that many of them have identified the need to do something,” said William Hickey, manufacturing senior adviser for Grant Thornton and former chairman and CEO of Sealed Air Corp.
Rather than be defensive because of political uncertainty, manufacturers should embrace supply chain strategy as a way to navigate the shifting terrain, said Brad Holcomb, chairman of the manufacturing survey committee at the Institute for Supply Management.
“There should be more energy spent on supply chain management,” Holcomb said. “Being nimble is going to be very much in vogue.”
He makes recommendations such as building a high-performance team to develop a strong supply base, improve quality and service and develop a measurement system; developing a disciplined process to find the best suppliers; using competition to increase performance and reduce price; and having two regular suppliers of one product, as well as one “on the bench,” to create competition.
He also advised setting expectations and goals for suppliers to improve their performance.
Lastly, he said to look at the locations of suppliers to determine whether offshoring or onshoring is a better alternative.
“Companies should take a hard look at sourcing local — if not as a strategy, then as a precaution,” Holcomb said. “The message is: Be ready or even ahead of the game.”