Wiring Harness News May-Jun 2022 - Page 21

INDUSTRIAL INFO-TAINMENT TTI20018 _ TradeAds _ 011822 . pdf 1 1 / 18 Wiring / 22 Harness 3:39 PM News MAY / JUNE 2022 21

Strategies to Protect Our Supply Chains

By John Olsen - Komax ___________________________

The consequences of Covid caught us off-guard . Suddenly we realized how vulnerable our supply chains are . Do we now have to abandon the just-in-time principle that has proven itself for decades ? Below we present four strategies to better protect our production systems from shocks .

• Industrial OEM manufacturers of lower-volume , highermix wire harnesses desperately need to push automation .
• A digital ecosystem that provides production transparency can produce valuable data to understand and avoid unexpected supply disruptions .
• According to one study , companies with smart factory initiatives are experiencing 10 % higher production output , 11 % higher capacity utilization , and 12 % higher labor productivity .
In the 1970s , Toyota and other companies began to develop lean supply chains based on the principle of just-in-time ( JIT ) manufacturing . The “ ultimate goal ” of this is to ensure a balanced , fast production flow that is precisely tailored to the customer ’ s needs . Three techniques are used to achieve this : eliminating disruption , using flexible system designs , and eliminating waste ( especially inventory ). To achieve the goals of a lean production system , we focus on four building blocks : product design ; process design ; human resources , and organization ; and planning and control .
Outsourcing to low-wage countries
In the wire harness supply industry , JIT and lean manufacturing gained strong acceptance in North America in the 1980s by focusing on manufacturing design ( decentralized cutting ) and assembly work ( moving to low-cost labor ). Under the leadership of many large automotive suppliers , production moved from a centralized cutting model ( often a self-contained plant ) to a decentralized model . Now the wire processing machines were in the factory for wire harness assembly . Mid-market OEMs often outsourced to local manufacturers or offshore suppliers to simplify their production line . Thanks to duty-free zones , they could also outsource production to Mexico with lower labor costs . A high concentration of wire harness “ maquiladoras ” emerged in Ciudad Juarez and other border cities .
In the 1990s , manufacturers moved further inland . At the same
time , a new market with even lower labor costs developed in China and many OEM manufacturers moved their production facilities there . Lean supply chains in markets with low labor costs have been the driver of the wire harness industry over the last 20 years .
The shock was profound
The pandemic shockingly showed us how sensitive our supply chains are . After the total shutdown of the economy , it was extremely difficult to get our collective economic engine going again . In addition , there were further demands on our supply chain as demand in the US shifted from services to goods .
Today , most manufacturers face four common supply chain challenges : logistics delays and costs , component bottlenecks , labor shortages , and supply chain surprises . In a survey of global supply chain managers ( 2021 ), McKinsey found that 61 % of respondents cited increasing inventory levels as a strategy for dealing with supply disruptions .
It certainly looks like wire harness manufacturers will continue to be under pressure . The last two years have taught us that we need to develop more robust production systems to insulate the production system from external shocks . From the four general challenges mentioned above , four strategies emerge , which we will discuss in more detail below .
Strategy 1 : Nearshoring and insourcing
According to the global online freight marketplace Freightos , between 2018 and 2021 the transit time for sea shipments from China to the US doubled from 40 to 80 days . In addition , the price of transporting 40- foot containers rose from $ 4,500 to over $ 20,000 . Freightos predicts similar delays and costs for the current year . This implies that we will have to accept severe disadvantages for long transport routes in the future as well . A similar result is evident in the US with long-haul trucking , where costs are rising , and delivery times are getting longer . The American Trucking Association estimates that the US was short over 80,000 long-haul truckers in 2021 , and this shortage is expected to continue to increase .
A McKinsey survey of global supply chain leaders found that 90 % of respondents are aiming for some degree of regionalization in the next three years . Mr . Murat Aksel , VW ’ s purchasing chief , was quoted in the WSJ : “ We still want competitive prices , but my priority is securing supply . Without components , you can ’ t build cars . And zero production means zero profit .”
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