It is often quoted that 80% of the product cost are pre-determined by the Engineers during the design process and only 20% of the cost are related to the supply chain.
But for as long as I can remember, the engineering and supply chain teams have “discussed” how much flexibility the manufacturing and supply chain teams really have once a product design is handed over to them.
Engineers are asked to meet cost targets for products. And of course, they chose the best components to meet the design, quality and regulatory requirements. But very often, supply chain and carbon footprint considerations are neglected.
Is this the fault of Engineers? No, it’s not. They simply don’t have the information they need to make the best decisions.
Global supply chains with local execution
As supply chains have changed over the past few months, and will continue to evolve moving forward, it is becoming clear that in an effort to reduce risk and increase resiliency, businesses will introduce global supply chains which are executed locally.
We must design with alternate sourcing strategies in mind. That means for Engineers, it’s not only one supplier and one component which needs to be selected, but in the future Engineers need to qualify several suppliers in multiple regions.
I believe manufacturing companies need to take a view on how companies like McDonald’s are managing the supply chain. It’s no surprise that Gartner considers McDonald’s a “Master” of supply chain (i.e. being recognized as a supply chain leader for several years). McDonald’s is unique because the company uses local suppliers to produce products locally, which were designed globally.
This model is not only more efficient, it’s also more sustainable.
Now, especially in manufacturing industries, we also need to think about the circular economy. It’s not just nice to do, but it’s big business. The recycling process is not easy to organize and not very efficient. But again, there are examples in the world, which we can use to adopt – let’s just look at Germany or Austria for that matter. Recycling in these countries is not only a “nice to have”, it became the norm for everyone.