The Future of Supply Chains 2016

On Thursday May 5th, I attend the Critical Materials Conference in Hillsboro, and while focused narrowly on materials and supply chains semiconductor manufacturing, I found that many topics were universal and relevant to all manufacturers, regardless of size, location or industry.  

China is Still the World Influencer

In terms of forecasting world economic and industry-specific growth, what happens in China remains the number one driver of current and future economic growth.  As the preeminent world manufacturer and emerging consumer, China’s economy touches all global manufacturers in terms of materials pricing and availability, product demand, and competition.  And, whether China is potentially dumping, constraining supply, or merely selling at reduced prices due to labor costs and efficiencies, they continue to heavily influence the price of many commodities.

New Global Opportunities for Manufacturers

Beyond China, three separate trends present opportunities for growing markets for manufacturers’ products and services:

Demographic Changes

Aging Boomers, low birth rates, aging populations and the rise of the Millennials are all driving product development, product adoption, and product disinvestment. Consider how the smart home and self-driving cars will permit older people to stay in their homes longer.  Or how some millennials’ disdain for cars and delayed purchases of homes will shift investments in transportation, housing and consumer goods.  In each case, what’s past is not prologue, and these shifts are already expanding new markets and reducing others.

Coopetition, Not Competition

As demand for new products evolve and global competition grows, manufacturers may need to move from no-holds-barred competition to deliberate cooperation to ensure the availability of materials and products that meet ever increasing demand for lower cost, tighter specs, improved quality and better performance.  As Tim Hendry, Intel’s VP for Technology & Manufacturing, observed in his keynote presentation, major leaps in quality and performance requires the organization of industry groups, including direct competitors, to improve entire supply chain ecosystems.  Raw and intermediate materials, equipment, metrology, manufacturing and product design suppliers all working together to define standards and share knowledge may be necessary to innovate, create new markets, and stave off competition.

Forecasting Major Economic Events

Gus Richard, Senior Research Analyst at Northland Capital, discussed the importance of traditional forecasting and market intelligence while stressing the need for businesses to keep their eyes open for bubble events such as the 2007 Asian financial crisis, the 2001 dotcom crash, and the 2008 housing collapse.  In each event, over-exuberance was evident for entire industries without supporting economic fundamentals long before the bubbles burst.  Mr. Richard encouraged developing and sticking with your own basic rules of thumb for forecasting and building your business strategy on fundamentals, while continually keeping a weather eye out for demand created by unsupported exuberance. 

In other words, don’t ignore the little voice in your head that says things may be too good to be true or last…you are probably right!

Return on Investment for Sustainability

Norm Armour, Managing Director for Worldwide Facilities and EHS at Micron Technology in Boise, demonstrated in slide after slide how Micron’s efforts to reduce their carbon footprint, waste production and energy consumption have reduced Micron’s Cost of Goods Sold at the same time yielding environmental and corporate citizenship benefits!  In one example, programs to reclaim water have enabled Micron to return water to aquifers, raising their levels for the first time in years, and saving Micron water costs today and in the future.  A second example demonstrated how reductions in CO2 emissions and waste led to significant decreases in energy usage, saving tens of millions of dollars annually and thereby increasing profitability.  Micron’s project ROI threshold is 1 year, so every project shared delivered immediate bottom line savings independent of the size of investment.  Keith Long, Research Geologist for USGS added in his presentation on conflict minerals and rare earth metals that it is possible to be sustainable while also being cost effective.  The message from both presenters was, as Mr. Armour said “these projects pay for themselves”.

Transparency = Success

In his keynote, Intel’s Tim Hendry also discussed the importance of supply chain visibility, particularly in terms of understanding your materials’ control points for quality, can lower costs, reduce risks and create better products.  And it doesn’t require huge investments in staff, travel and time to achieve this.

Simply asking your suppliers what their key quality control points are, and whether they know what the control points are for their suppliers, can go a long way toward ensuring a continuous flow of good material, even in times of limited supply.

Although not every manufacturing company has as much dependency on their extended supply chain as the Intels of the world, in many ways we’re all in the same boat and subject to the same economic and social trends.  As a result, I believe the take-ways above are relevant to manufacturers independent of size, industry and process.