If you are trying to buy sunflower seeds for your bird feeder this winter. Good luck. Over 50% of supply comes from Russia and Ukraine. With sunflower seeds in short supply, few are making it into a bag of bird seed.
Over the last decade, supply chain processes primarily focused on optimization of labor. Few supply chain leaders can have a healthy discussion on the atoms that make up their supply chains and appropriately manage the risk/reward scenarios in future planning.
Designing to Embrace a Wider Periodic Table
Today, the supply chain uses a much wider array of elements from the periodic table than in the past decade. As a result, sourcing is more complex. There is no technology available to help companies make intelligent decisions on the flows of atoms. Material supply discussions are a greater risk to the future supply chain than labor.
For example, when is the last time you had a discussion about the availability of neodymium? As one of the seventeen rare earth elements, 95 percent of sourcing is from China. Rare earth minerals, generally deposited together, are actually not all that rare. The mining is costly unless the deposits are large and concentrated and the materials require specialized conversion.
The iPhone display is based on a permanent magnet using the rare earth metal neodymium; and the screen and display module are manufactured with europium, yttrium and terbium. The lens in the camera has a coating of lanthanum sourced primarily from China. Within a few years, rare earth metals such as europium, yttrium and terbium will be in almost every light bulb on sale at every store. Uncertainty looms with potential shortages.
The availability of aluminum, nickel and palladium today are major supply chain risk factors resulting in higher prices and shortages. Demand for semiconductors continues to outstrip supply.
Steps to Take
Material shortages are here to stay. The specific issues will ebb and flow. Today the shortage might be plastics, but tomorrow it might be palladium. The question is do you have the knowledge/ insights of your supply chain along with the flexibility to withstand the global shifts of pending shortages?
- Know Your Atoms. Map the sourcing of material inputs for your supply chain. Design products based on mitigating demand and supply risks.
- Design for Platform Simplification and Product Reuse. Work with your suppliers to simplify platforms and streamline bill of materials. For example, if we could simplify the complexity of demand for semiconductors to make the foundries more efficient, there would be fewer issues. In addition, if the same part can be used in multiple bill of materials or if interchangeability is improved, the supply chain is more resilient. For example, Campbell’s Soup had thirty-three cuts of carrots for their soup. The reason? Each new product launch defined a new cut. The differences were insignificant to the consumer. The Company reaped large cost savings and improvement in reliability by standardizing on three cuts. The issue is that most new product launch efforts are focused on launch not on complexity reduction.
- Manufacture Based on Demand. Today, warehouses are full of the wrong products. Map demand flows, decrease latency and get good at planning. Sadly, we are raping the planet to make and move products that are not selling.
- Be A Good Trading Partner. Understand the risks and issues with material sourcing two-to-three layers deep in your supply chain. Invest in supplier development teams to understand the intricacies of supply. Build these insights into product design and development in the stage gate processes of new product launch. Less than a third of companies have supplier development teams attempting to understand the issues of supply.
- Demanufacture and Improve Reclamation. Instead of landfilling products that are not selling move to internal reclamation. For example, despite the plastic outages in 2022, only 9% of plastic in drink containers is reclaimed. Plastics are made from fossil fuels, and the plastics industry is expected to consume 20 percent of oil produced worldwide by 2050. In the United States, only 39% of waste is recovered. The opportunity is for manufacturers to work with local governments to reclaim their atoms.
Traditional supply chain discussions focus on labor efficiency assuming that the right atoms can be purchased for supply. As the periodic table widens, this is not longer the case. Material sourcing requires greater insights and design for flexibility. Both are a gap for supply chain leaders.