What Manufacturers Should Do Today to Prepare for the Demands of Tomorrow
According to the United Nations Conference on Trade and Development (UNCTAD), the number of global online shoppers is expected to grow by 50 percent by 2018. A positive projection, indeed, but are U.S. product manufacturers and distributors ready for this growth? The UNCTAD business-to-consumer (B2C) index suggests maybe not, as the majority of the top performers in B2C e-commerce hail from Europe. In fact, the U.S. doesn’t even crack the top ten on this index, coming in at No. 15.
Brian Beaulieu, CEO and chief economist for ITR Economics, says in order to compete for B2C e-commerce, it’s imperative manufacturers and distributors make investments to improve efficiency in their supply chain today to prepare for the demands of tomorrow.
“The consumers are demanding almost instant gratification because we live in the Digital Age,” said Beaulieu. “Manufacturers have to be able to accommodate that within reasonable expectations, which means faster throughputs within the manufacturing environment, whether you are making big widgets or small widgets.”
And if companies don’t have the resources to stock inventory, Beaulieu says other more aggressive supply-chain strategies will be necessary to meet demand.
“Manufacturers will need to level-load their facilities more than they used to with seasonal items,” said Beaulieu.
Level-loading is a production planning method that maintains a stable production rate over a set period of time while allowing inventory levels to fluctuate regardless of demand. This technique can be utilized to optimize manufacturing efficiency and supply chain processes. It is a technique that is used when spikes in demand exceeds the capacity to produce product.
“Level-loading is necessary to maintain a reasonable cost structure. The final component to that is, if the consumers want it overnight, figuratively if not literally, we as manufacturers, we as distributors need to figure out a way that we can price that luxury into our product.”
Beaulieu says level-loading might be a tough strategy to sell to the C-suite who tend to focus on lean manufacturing techniques, but it’s important to weigh the pros and cons given that the trajectory of the economy could change within the very near future.
“There is going to be more inflation in the future,” he said. “I’m asking all the manufacturers and distributors to be sensitive to that and be ready to make sure that they’re getting the margin they deserve for instantaneously satisfying consumer demand.”
This is especially important given Beaulieu’s expectation that the U.S. economy will experience another recession as early as 2019. Factors he says could contribute to a recession: rising interest rates; a push to curtail government spending due to a burgeoning national debt; and a major oil supply disruption due to higher prices per-barrel in the Middle East.
“Companies that are not keeping up with the Digital Age will be bought up or shuttered,” he said. “There’s time to get ready, there’s time to build up a war chest, there’s time to get really good at something. But it’s not a long time. Two years goes by in the blink of an eye in economic terms if you’re trying to change your business strategies.”
How does one prepare for a potential recession in the Digital Age?
Beaulieu offers some insight: “Our advice is to invest in yourself and, by that, we mean use technology, use capitol-intensive processes and equipment to the greatest possible extent so you can control your cost,” he said. “And, if you’re going to be hiring people, hire leaders, hire salespeople who can take you into new markets where you can be selling to people you’ve never sold to before, or selling a part or service you’ve never sold to before. Gaining market share in that sort of an environment come 2019 is going to be very helpful for protecting your company. But you have to be willing to make these investments rather than just continue on with the status quo.”
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