The following is the author’s weekly guest commentary appearing on both the Supply Chain Expert Community and Supply Chain Matters web sites.
Global supply chain strategy is highly influenced by global economics, especially as it relates to energy, the primary driver of supply chain costs. Today, business media is echoing the headline that the United States will surpass all other countries as the world’s largest energy producer by 2020.
The headline stems from the latest analysis performed by the Paris based International Energy Agency (IEA) which factors the recent boom and reserves discovery concerning shale-oil and gas finds across the U.S. A Wall Street Journal article points out that the IEA is not alone in forecasting this strategic shift since both OPEC and the U.S. Energy Information Administration (EIA) have also predicted sharp rises in U.S. petroleum and energy production in the coming years.
This development not only has significant impact on global politics and economies, but has impacts to global supply chain sourcing shifts in the years to come. Supply chain strategy and sourcing teams need to be cognizant of these shifting trends, if they have not done so. Further, this is yet another wake-up call to the U.S. legislators and the broader supply chain community to be prepared to take advantage of opportunity.
Already, European media has been focusing on the shifting economic advantage that continues to favor U.S. based manufacturing. More abundant and cheaper supplies of natural gas has caused German based manufacturers to become concerned that high energy consuming foundries or metal-working will no longer be economically competitive for both Germany and Europe as a whole. The Financial Times reported that global automaker Volkswagen, which actively practices universal global platform and component sourcing strategies, has already begun alternative sourcing from German based suppliers to foreign based suppliers. The FT reports that VW has joined a growing chorus of German based companies that have raised an alarm about Europe’s ability to economically compete given the shifting global energy trends, and Europe’s current dependence on more expensive natural gas emanating from Russia and Norway. In its reporting, the WSJ notes that OPEC will become more dependent on Asia-based energy consumption in the years to come, vs. the U.S., which further shifts global transportation and manufacturing economics.
Supply Chain Matters has previously weighted-in with two separate commentaries, noted here and here, concerning the building resurgence of U.S. manufacturing. We noted shifting strategies reflected in global automotive, discrete manufacturing and process industries. The shift is primarily driven by the changing economics of energy and global currency shifts, as well as future developments in additive or custom manufacturing that allows manufacturers to have much more flexibility in production design.
This latest IEA forecast has obvious impact toward high energy consumption manufacturing such as process industry, refining, fabricating and machining. It is also, by our view, a huge wake-up call to U.S. manufacturers to continue to invest in process automation and address current challenges in training and preparing a higher skilled workforce. For U.S. legislators, unions, and logistics providers, it is another reinforcement on needs for significantly renewing U.S. logistics infrastructure. There are challenges related to furthering efficiencies of designated import and export ports on both coasts. Surface transportation, highways, rail, and logistics transfer movements need to become much more efficient as is continually pointed out in the Annual State of U.S. Logistics reporting. Movement of newly discovered energy sources to designated refineries and/or consuming manufacturing regions is an area already identified by logisticians and policy makers. There are new opportunities to co-locate energy distribution and manufacturing, as well as leverage new sustainable energy strategy in consumption and further re-cycling of materials.
However, the most fundamental challenge remains in addressing the current shortage of a skilled U.S. workforce, one prepared to manage advanced manufacturing processes and more sophisticated production equipment, and prepared to oversee more analytically-driven supply chain management techniques. This author continues to hear senior supply chain management point to this challenge as significant and in need of joint government and industry action.
As the adage is often stated and practiced, opportunity comes seldom knocking, and when it does, those prepared to take advantage, reap the rewards.
Now that the tumultuous U.S. Presidential election is finally headed toward completion, the time is long overdue for both government and private industry to actively come together and prepare for taking advantage of opportunity for the renewal of U.S. based manufacturing and supply chain infrastructure capabilities.
Supply Chain Matters had previously made reference to a two part commentary exploring sustainable operations and their relationship with asset management pain points which is being featured on the Infosys Supply Chain Management blog. Part One of this commentary included my recent guest commentary that responded to questions related to the growing interest in sustainability strategies and approaches within asset intensive industries. The questions explored my views of how asset intensive industries are starting to shift focus more toward sustainable operations and green assets, opportunities to tie these needs with asset management approaches and current concepts in smart buildings and IT data centers. The notion comes down to thinking a bit differently, that smarter asset management, real-time monitoring, coupled with sustainability and product objectives opens up new opportunities to compete for business and revenue growth.
In the Part Two commentary of this series, Praveen Agrawal, Enterprise Asset Management Consulting and System Integration lead from Infosys, along with the assistance of Joanna Karlic, a participant in the Infosys Global Internship Program, expand our ongoing dialog for this topic. Their posting reflects on the current focus areas of sustainability in asset intensive industries today, that being namely energy savings in buildings, with some suggested thoughts as to how broader based sustainability goals can be leveraged within focused aspects of Asset Management systems.
Our readers, especially those within asset intensive industries should gain benefit and insights from this series of commentaries and please share your own thoughts as well.