This informal CPD article will look at how operational and technological investment can provide solutions to the challenges faced by the logistics industry as manufacturers localize and diversify their operations. It was provided by Cambashi, a global market research, industry analysis, consulting & training firm focused on engineering and industrial software markets.
The global supply chain has always been a complex and delicate ecosystem, but recent events have further highlighted its fragility. The COVID-19 pandemic disrupted supply chains around the world, causing widespread shortages and delays, and the hangover from these impacts is still being felt today.
The manufacturing industry was hit exceptionally hard, with businesses struggling to source the raw materials and components needed to produce their goods. As we look towards the future, it is clear that the current supply chain struggles will have long-term implications for the manufacturing industry.
The shifting of global supply chains has presented significant challenges to logistics providers, including transportation companies, freight forwarders, and customs brokers. While some providers were already equipped to handle this shift, others had to adapt quickly to meet the needs of their customers.
The Long-Term Implications of Supply Chain Struggles
The pandemic has exposed the vulnerabilities of relying on a single source or location for manufacturing and production. Many manufacturers believed that re-shoring production to local markets would be a possible solution. By doing so, companies would reduce the risks associated with disruptions in transportation and trade, improve the quality of their products, and reduce the costs associated with shipping and tariffs. However, re-shoring production has proven to be a complex and challenging process for many companies.
One of the main challenges of re-shoring is the high costs associated with production in some regions. For example, labor costs in developed regions, such as North America and Europe, are significantly higher than in developing regions like Asia, making it difficult for companies to compete on price. Additionally, the lack of infrastructure and skilled labor in some regions makes it difficult to establish new production facilities. Companies must weigh the benefits of re-shoring against the costs and challenges associated with doing so.
Consequently, many businesses have opted to diversify their supply chains, sourcing goods from multiple regions, such as Vietnam, Indonesia, and Malaysia, rather than relying on a single source, typically China. This strategy has proven to be more effective in mitigating the risks associated with supply chain disruptions. By sourcing goods from multiple regions, companies can reduce their dependence on a single source or location, and make their supply chains more resilient and adaptable to changes in supply and demand.
Manufacturers must also ensure they have the logistics in place to transport materials from multiple locations. This can be a challenging and time-consuming process, but it is essential for ensuring the resilience of the supply chain.