Targeting Manufacturing Growth in the New Year
By Lisa Anderson
There will be new policies, new supply chains and new manufacturing growth in the New Year. Although 2024 has ended on a sluggish note for most manufacturers with concerns swirling around missed revenue goals, inventory levels tying up cash and supply chain vulnerabilities and risks, there is excitement around changes coming down the pike. However, only the strong, proactive and those willing to take prudent risks will be ready to take advantage of the opportunities ahead.
Although there are many uncertainties surrounding Trump’s new administration, there are also several consistent themes. Tariffs will be used as a negotiating tool at a minimum to entice manufacturing growth to mitigate supply chain risks. One simply must look at the risks the U.S. experienced during the pandemic with the lack of medical supplies, computer chips and items related to national defense to understand the focus on reshoring, friendshoring, expanding manufacturing capabilities and vertical integration.
For example, a client that is vertically integrated was able to keep production going and satisfy customers while their competition’s goods were delayed in long lines off the ports of Los Angeles and Long Beach during the pandemic, stuck in China during Zero COVID and their East Coast shipments were diverted around the Panama Canal during the drought and around the southern tip of Africa when the Houthi rebels attacked ships in the Suez Canal. In essence, long lead times became the norm, escalating the revenue of the vertically integrated manufacturer.
In addition to tariffs, the new administration has said it will be focused on cutting regulations, slashing waste and increasing energy production to stimulate manufacturing and address inflationary concerns. According to the National Association of Manufacturers, for every $1 invested in manufacturing, $2.69 is added to the economy. Thus, the expectation is that energy producers will be stimulated, which will decrease the cost of energy and electricity, thereby stimulating manufacturing as the industry is heavily dependent on energy. By cutting regulations, the ease of manufacturing and the ability to start up rapidly will improve, and by slashing unnecessary costs, further investments can be targeted toward industries associated with national security.
With that in mind, companies are on the move. For example, Titomic, an Australia-based metal AM company that specializes in cold spray technology in support of the defense industry is opening a new headquarters and manufacturing facility in Alabama. This manufacturing resurgence will be robust. Consumer goods supplier Reckitt Benckiser wants to respond faster to shifts in demand for its over-the-counter pharmaceuticals and is moving more of its manufacturing to the U.S. with a plant in North Carolina. Also, immediately after the election results occurred, Steven Madden Ltd. is accelerating plans to shift production out of China. In fact, they expect to reduce goods manufactured in China by 40 percent within the next year.
As supply chains evolve and manufacturing grows, companies must be prepared to be resilient and scale efficiently and effectively. Thus, the most successful companies will focus on predictive processes and advancements in talent and technology. The best process to stay on top of strategic changes while ensuring execution remains on track is the SIOP (Sales Inventory Operations Planning) process. SIOP predicts future demand and highlights strategic decisions to ensure the appropriate capacity and supply are available to deliver superior customer performance at maximum margins.
To navigate these changing conditions, top talent is required to stay ahead of the curve. As mundane tasks are automated, the best of the best will stand out from the crowd with high-skilled talent. It will no longer be doable to steal all the talent required to succeed; instead, proactive executives will build talent. Training, development and mentoring will be key to success. In addition, robust technology will be a must. Upgrading to a modern ERP system is required not just to satisfy customer requirements with the least amount of inventory, but, more importantly, it is required to deliver customer value and be predictive based on ever-changing global conditions in the supply chain. Artificial intelligence (AI), additive manufacturing and digital twins are key technologies to address what-if needs and stay on the leading edge of supporting technologies for creating a resilient supply chain.
Plan for manufacturing resurgence and supply chains to be on the move to mitigate risks and take advantage of the opportunities for growth. As supply chains evolve, building resilient supply chains will become a top priority with nearshoring, friendshoring, reshoring, expanding manufacturing capabilities and vertical integration. Successful companies will focus on modernizing their ERP systems and rolling out advanced technologies while upgrading processes with programs such as SIOP. The proactive, resilient, and modernized manufacturers will have more opportunities than at any other time in history.
Lisa Anderson is the founder and president of LMA Consulting Group, Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. She recently released “SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth,” an e-book on how to better navigate supply chain chaos and ensure profitable, scalable business growth. A complimentary download can be found at www.lma-consultinggroup.com/siop-book/.
