Manufacturers are finding they increasingly have to focus on an aspect of their business that doesn’t involve making a product.
As supply chains expand to encompass networks of companies across multiple continents and as mass customization injects more complexity into products, manufacturers will need to invest their time and resources in developing logistics strategies in order to remain competitive, experts say.
“This whole notion that I’m going to make 100,000 of these (parts) and they’re going to be warehoused until I sell them is a real old idea. It’s not going to work like that,” said Nate Young, vice president of global innovation at Newell Brands, whose design center is based in Kalamazoo.
The New Jersey-based company manufactures a variety of consumer products for brands ranging from Sharpie and Coleman to Rubbermaid.
“People don’t want to inventory anything. They don’t want to hold any assets longer than they have to hold them,” he said. “It puts a lot of pressure on the manufacturing to delivery process. How can I get what I want to sell only when I can sell it?”
While manufacturers have practiced just in time delivery for more than a decade, the philosophy has only continued to gain traction as manufacturers contend with more variability between products and shorter volume production runs.
For companies highly exposed to the retail environment, the decline of brick-and-mortar stores in favor of online retailers such as Amazon has only served to strengthen manufacturers’ focus on logistics.
“The old way of getting inventory to the big boxes versus getting inventory to Amazon is really quite different,” Young said. “There’s a whole nimbleness discussion. If I’m a manufacturer, I’d be working with companies saying not only can we make the part, but we can logistically get this to you when you need it and only when you need it.
“Whereas before, you were shipping something to a central warehouse for a Walmart and now you’re (sending it) to distribution centers that are all over the country. What does that do to your costs? What does that do to your nimbleness? What does that even make you think about where you produce some of these things?”
These dynamics played out for Newell Brands with its Brute brand of trash cans. The company historically produced, warehoused and shipped the trash cans in large, bulk orders. But now that its production lines have expanded to overseas markets — and with the rapid rise of online retailers — it’s had to reconfigure its product lines and distribution network for a higher degree of customization.
“Now we’re starting to make customized refuse containers that are built entirely by order and built only to order, when it’s ordered,” Young said. “A customer actually goes on to the configurator, picks out what they want, we make that product and get it to them. It’s really different than the old process.”
In addition to working closely with distributors, manufacturers also have to manage an increasingly complex and global supply chain.
“There’s a lot more diversity in our products and there’s a lot more suppliers that we use to supply us for a broader range of things,” said Bob Krestakos, vice president of global operations for Steelcase Inc. “Our supply chains are long distance in some cases, so our logistics would cover ocean freight as well as air freight as well as over the road. Those are big differences over the last decade or so. There’s more of a mixture of those things.”
In addition to managing a variety of different supply chains, manufacturers must also strike a balance between the global product lines that are uniform across countries, and those product lines with small variations for different markets.
“We have a wide range of products and many of the products we have are global,” Krestakos said. “When we deal with global multi-national companies, they want a consistent product across the world for their facilities. … Our challenge is there’s a regional part of the business as well that the products would vary from region to region. There are products with a European flavor, products that you can only get in Asia and so on. Those supply chains can be quite a bit shorter.”
Krestakos noted that the Grand Rapids-based office furniture manufacturer manages shipments of parts for 12 different locations throughout North America, Europe and Asia. Managing those supply chains largely comes down to experienced staff and sophisticated monitoring and tracking technology, he said.
“I’d say the complexity of managing logistics and schedules is quite a bit higher in the last ten years,” he said.
For Newell Brands, managing a global supply chain has led to some issues with maintaining a consistent product throughout different markets. In particular, the company has struggled to preserve color continuity from all of its suppliers, since the composition and pigments of materials vary from country to country, Young said.
To solve this problem, the manufacturer has partnered with X-Rite Inc., a Grand Rapids-based color research firm, to develop a system for standardizing colors across its vast supply chain footprint.
“What’s really great about that is that it’s not just about making something,” Young said. “It’s about making something well that’s super sensitive to what the customer wants.”
CHALLENGING THE LOGISTICS SECTOR?
Manufacturers’ increased focus on logistics has become apparent even to companies outside the industry.
A 2016 report published by PricewaterhouseCoopers LLP noted that manufacturers’ investment in logistics was putting pressure on the logistics sector.
“Customer expectations are increasing greatly,” according to the report. “Both individuals and businesses expect to get goods faster, more flexibly, and — in the case of consumers — at low or no delivery cost. Manufacturing is becoming more and more customized, which is good for customers but hard work for the logistics industry. Add it all up and the sector is under acute and growing pressure to deliver a better service at an ever lower cost.”
Specifically, the report mentions a potential future scenario, dubbed the “lot size of one,” in which each individual product is manufactured to the specifications of every end user.
The report also notes that breakthroughs in internet of things technology and increased technological adoption by manufacturers could push logistics firms to even more complex warehousing and tracking software.
While it’s uncertain how manufacturers will affect the logistics industry in the long term, it’s certain that companies in as disparate sectors as Newell Brands and Steelcase will continue to focus on improving their supplier networks.
“Our industry is very competitive and there is always a lot of innovation that companies are trying to do to get that edge,” said Krestakos of Steelcase. “I don’t see any of the industry that I’m in retreating from being global. I think the complexity will go up (and) I think that the systems will try to keep up in managing that complexity, but it takes a lot of effort to get those systems in place and get them customized to your business.”