How Supply Chain Management Software Became Manufacturing’s Shock Absorber In 2021

How Supply Chain Management Software Became Manufacturing’s Shock Absorber In 2021

Bottom Line:  Unpredictable demand swings caused by the pandemic are stress-testing supply chain management software systems across manufacturing, helping many manufacturers discover new strengths they hadn’t realize they had before.

Manufacturers’ toughest challenges deliver the most valuable lessons on surviving in a chaotic, turbulent market today. Take demand planning, the urgent role of supply chain management software, and the need for achieving greater manufacturing efficiency for power tools, for example. Stanley Black & Decker saw orders for power tools, wrenches, tape measures, and utility knives plummet 40% a week last April from a year earlier, according to a recent Wall Street Journal article, Consumer Demand Snaps Back. Factories Can’t Keep Up. By May, CEO James Loree said those retailers were selling about 30% more of the company’s products than a year earlier, as homebound consumers tackled renovations and yard work.

Stanley Black & Decker’s Supply Chain Management Challenges

Stanley Black & Decker didn’t see new orders as retailers were drawing down on their inventories to preserve cash. Without better supply chain management visibility, manufacturing executives had a choice to make: either wait for retailers to place panic-size orders that Stanley might not deliver on time or raise production on the belief retailers would soon start restocking. Making the wrong choice would lead to Stanley being stuck with six months of inventory.

Stanley’s CEO decided to build $600 million worth of tools, including power drills, table saws, and tool chests. His decision combined intuition and what data they had on demand planning and their supply chain management softwaresystems – which together provided just what they needed. Power tools were selling out at stores by early summer. Better yet, Stanley’s tools business reported a 57% increase in profit for the fourth quarter on a 25% increase in sales. Stanley increased prices during the period, which further increased profits. Sales of electric sanders so far during the first quarter of 2021 are fourfold higher than the same time last year.

Seeing Supply Chain Challenges As An Opportunity To Grow

Why is it that the more chaotic, challenging, and uncertain managing supply chains become under crisis, the more certain manufacturers adapt and excel?  A large part of it is the growth mindset of manufacturers profiled in the Wall Street Journal article. Dr. Carol Dweck’s best-selling book, Mindset, defines the specifics of how to create and strengthen a growth mindset, reflected in the roadmaps to recovery that Malibu Boats Inc., Marlin Steel Wire Products LLC, Peloton, Simplicity Sofas, Stanley Back & Decker, STI Fabrics, and Wanxiang America Corp. achieved.

Further proof a growth mindset pays off in manufacturing can be found in the latest results reported from the Institute for Supply Chain Management (ISM) January 2021 Manufacturing ISM Report on Business.  The January PMI registered 58.7%, down 1.8% from the December reading of 60.5% but still marking an eighth consecutive month of expansion. The report also mentions the following key insights from the interview completed in January of this year:

  • January 2021 started with strong orders for plastic components in auto, electrical and other sectors. The industry outlook is optimistic. Looking at investing in new equipment for anticipated demand later this year. Reshoring is taking hold, with new customer potential.” (based on an interview with a Plastics & Rubber Products manufacturer).
  • Supplier factory capacity is being well-utilized in electronics manufacturing. Increased demand, labor constraints, and upstream supply delays are pushing lead times. This is more prevalent with international than U.S.-based suppliers.” (based on an interview with a Computer & Electronic Products manufacturer).
  • Labor shortages continue to be a constraint on manufacturing growth. Two ISM survey respondents in January cite labor shortage as an impediment to fulfilling orders. A Primary Metals manufacturer says that “business is improving, but we are still struggling with a shortage of available labor.” A food, beverage, and tobacco product manufacturer said.
  • Business is very good. Customer inventories are low, with a significant order backlog through April. The supply base is struggling to keep up with demand, disrupting our production here and there. Raw material lead times have been extended. COVID-19 continues to cause challenges throughout the supply chain. Huge logistics challenges, especially in getting products through ports and in getting containers. We see significant cost increases in logistics and raw materials.” (Machinery manufacturer).

Absorbing More Market Shocks With Track And Traceability

The pandemic accelerated digital transformation across manufacturing supply chains faster than the most convincing business case ever could. Add to that the risks, costs, fines, and logistical challenges of handling a recall, and the growing popularity of track-and-trace systems becomes clear. According to a recent National Association of Manufacturers’ survey, manufacturers waste over $275B a year on unnecessary product recalls. These losses to recalls could have been averted if they had more effective traceability systems in place, with track-and-track being considered table-stakes or a must-have in all manufacturing industries today.

The following are the key reasons why manufacturers’ reliance on manufacturing supply chain traceability enabling, including track-and-trace software, is growing:

  • Troubleshooting how a defective part was first introduced into production can save product lifecycles’ revenue and margins that otherwise may have been lost. Track-and-trace gives manufacturers the visibility they need to find the origination point of a defective product immediately. Knowing which suppliers’ lot number or container delivered the defective part as quickly as possible saves valuable time and the high costs of a recall or, at the very least, a product retrofit in the field. 
  • Supply chain track-and-traceability is foundational to manufacturers’ quality management and compliance strategies. Troubleshooting supplier quality problems is integral to maintaining aerospace & defense, automotive, food & beverage, plastics, medical device manufacturing, and pharmaceutical regulatory requirements. As the pandemic and trade pressures are forcing manufacturers to reconfigure their supply chains overnight, track and traceability deliver the data needed in real-time to stay in compliance and continually achieve higher product quality. Medical device manufacturers who excel at complying with the U.S. Food & Drug Administration (FDA) 21 CFR Part 820 requirement gain the added benefits of achieving new lean manufacturing levels in the process. Track-and-traceability is proving invaluable to aerospace and defense manufacturers. To successfully sell products in their industry, they need to prove compliance with the International Traffic in Arms Regulations (ITAR) standard, Defense Contract Audit Agency (DCAA), and AS 9100 Rev. C standards.
  • A well-managed track-and-trace system helps reduce inventory shrinkage by providing greater visibility and control across supply chains. A state-of-the-art track-and-trace system can differentiate between inbound shipments’ batch, lot, and container level assignments of materials. Most advanced track-and-trace systems rely on advanced sensors to gain greater knowledge of each shipment’s condition. RFID and IoT sensors are now becoming more commonplace across manufacturing. Walmart ran a pilot to see how RFID could streamline a  distribution center’s track-and-trace performance and improved efficiency by 16 times over manual methods. 
  • Track-and-trace also improves production scheduling accuracy and efficiency by providing greater visibility into assembly, part & component inventory. Providing DELMIAwork’s MES system with real-time updates on suppliers’ assembly, part, and component inventories helps keep production on schedule. Immediate insights into inventory can also help manufacturers get more done in less time. Many manufacturers have the goal of offering short-notice production runs to their best customers. Track-and-trace helps to make that happen.
  • Collaborate and serve customers with real-time track-and-trace data they need to know. DELMIAWORKs’ track-and-trace solution is specifically designed to share the most valuable data customers need to meet FDA and quality audits. It’s possible for customers to instantly print detailed tracking reports that are often provided in customer and regulatory agency audits. Track-and-trace saves valuable time on the shop floor by automating reporting, so quality or production engineering doesn’t have to do the reports manually.  
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This article was written by
Louis Columbus

Louis is currently serving as Principal, IQMS. Previous positions include Director Product Management at Ingram Cloud, Vice President Marketing at iBASEt, Plex Systems, Senior Analyst at AMR Research (now Gartner), marketing and business development at SaaS start-ups. Mr. Columbus’ academic background includes an MBA from Pepperdine University and the Strategic Marketing Management and Digital Marketing Programs at Stanford University Graduate School of Business. Louis also teaches MBA courses in international business, global competitive strategies, international market research, strategic planning and market research. Mr. Columbus currently is a member of the faculty at Webster University and has taught California State University, Fullerton: University of California, Irvine & Marymount University.