The Friday Report: October 22, 2021

Manufacturing Technology Orders Increase in 2021 

According to the Association for Manufacturing Technology, orders for manufacturing technology increased 9% from May to June 2021, a period which also recorded 42% more orders than last June.  In short, this means that manufacturing technology orders escalated by nearly 50% in comparison to the same time interval in 2020.  The association reports that this growth is driven by a rebound from the COVID-19 pandemic.  The increase in orders may be to offset the backlog of demand. 

Growth in manufacturing commodities such as screws, nuts, springs, and blots may be ramping up orders to help diversify supply chains due to disruption across the world.  Another popular market is medical equipment manufacturing which rose 60% in comparison to the first half of 2020.  With the pandemic, nonessential elective surgeries such as knee and hip replacements were suspended, causing nearly a 36-month backlog in these operations. 

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Supply Chain Visibility is Critical to New Automotive Supply Chain 

With a rampant shortage of semi-conductors, manufacturers have had to make major production cuts.  Stakeholders in the automotive industry have recognized the need to rebuild supply networks around core principles of resiliency and efficiency. 

It has traditionally been difficult to establish visibility across the entire automotive supply chain due to a lack of trust and communication between stakeholders, dependence upon outmoded data management systems and poor volume forecasts.  Because the industry is challenged to see threats before they become apparent, it is difficult to evade and compensate for them.  Structural supply chain bottlenecks are also an issue. 

Most OEMs have yet to establish processes and begin to use systems that facilitate the real time exchange of information with suppliers.  This often means that even small shifts in demand result in significant shifts in production planning volumes, in other words, “the bullwhip effect”.   

In response to these issues, OEMs have initiated the use of numerous new tactics to aid in minimizing near-term damage.  This includes direct engagement with Tier 2 and 3 suppliers, focusing on the assembly of more in-demand products, obtaining alternative sources of semiconductor goods, and bypassing and postponing the installation of some modules to a future date. 

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Larger Businesses Better Positioned to Handle Shortages of Goods 

Larger businesses across the supply chain have the advantages of deeper pockets and strong supplier relationships that can be leveraged in troubled times.  Having increased buying power helps big businesses negotiate, enabling them to lock in lower prices and long-term contracts.  Most suppliers favor their biggest customers and are assured that the relationship will last in the long term.  Big businesses are also better positioned to deal with supplier cost increases as well as rising commodity costs.   

Large businesses do not have all the advantages, however.  In contrast, small businesses tend to be able to adapt quickly, changing processes and evolving business models.  This spirit of innovation and ready adaptation was seen early in the pandemic as smaller breweries and distilleries shifted to producing hand sanitizer. 

For more information, please continue reading here.