The supply chain crisis is far from over and US manufacturers are taking various steps to confront this issue. The old methods of confronting delays in the supply chain, such as moving production offshore as sources of less-expensive labor, are no longer viable. Companies making high-end products with a substantial profit margin are finding their manufacturing efficiency has dropped. These companies are considering moving their production to its original location. However, reshoring is a decision that can’t be made lightly.
US Experiencing Labor Shortages
The US has been experiencing a labor shortage in recent years thanks to pandemic-related business closings. As of October 2022, there were around six million unemployed workers to fill about 10 million US jobs.
Companies that must reshore their operations find it challenging to find workers to get the job done, and those they do find may not have the needed skills. This means spending money on training, but the cost goes beyond just getting suitable employees.
The labor shortage also makes creating the needed infrastructure for US-based manufacturing difficult. After years and years of sending labor overseas, suitable manufacturing facilities do not always exist. This does not just require workers to build the infrastructure; it takes time that many companies do not have.
Energy and Transportation Expenses
Infrastructure is not just about a suitable facility; it also involves the power grid. Some parts of the country just do not have a power grid that can sustain the needs of heavy manufacturing. While one area may not have a grid with enough capacity, other areas with enough capacity may already have reached the limit of how many manufacturers it can sustain.
Then there is the cost of transporting materials to new facilities. In the struggle to find the right location for a new manufacturing facility, finding one with local vendors can be tricky. All these factors mean higher production costs overall.
Lack of Community Support
Without public support, opening a new manufacturing facility is a huge challenge. A company may not be able to get the necessary permits to build if residents do not want a factory in the neighborhood. And with an already overabundance of jobs available, bringing jobs to the area is not the incentive it used to be.
Manufacturing Efficiency: Inventory Strategies to Cope with Supply Chain Issues
Lean inventory management is an overall approach to handling a company’s supply chain and manufacturing processes. It is a long-term approach that urges company management to find ways to reduce waste in three major areas: materials, time, and work. This approach includes reducing excess inventory, overproduction, and lag times due to waiting, excess processing, or adjusting machinery.
A just-in-time supply chain moves material shortly before it’s required in the manufacturing process. The manufacturer doesn’t store a lot of materials in its warehouse. This method is used to keep costs and timing delays down by precisely timing orders. The goal is to have exactly what is needed at present, and no more.
Lean inventory, a just-in-time supply chain, and technology can help your company mitigate supply chain issues to reduce costs and run more efficiently. Click here to view a video on this fascinating topic. To learn about PositiveVision’s ERP solutions, contact us to speak to a product expert.