One consensus is clear: The holiday selling season is getting longer. In 2023, consumers spent $109.3 billion online between November 1 and Cyber Monday on November 27—a 7.3% increase from 2022, Adobe Analytics reports.

Spending on Cyber Monday itself spiked as well, jumping 9.6% to $12.4 billion, according to the report.

Why the early start? Rather than forking over expedited shipping fees or risking out-of-stock issues, “consumers started their shopping with Black Friday, Cyber Monday, or even earlier,” says Ann Marie Jonkman, senior director, global industry strategy for logistics services with Blue Yonder.

The longer season isn’t the only important takeaway from the most recent holiday sales period. Here’s a look at some of the other trends:

Continued strength in omnichannel retailing. Online and other non-store sales such as social commerce helped drive overall holiday sales growth in 2023, which jumped 8.2% to $276.8 billion, according to U.S. Census Bureau data, reported by the National Retail Federation (see chart). Social commerce—in which the shopping experience occurs on social media sites such as Facebook and Instagram—more than doubled between 2020 and 2023, hitting $56.2 billion, or about 4.7% of total retail sales, according to McKinsey.

Consumers are continuing in-store shopping as well, says Tom Wicky, co-founder and chief executive officer with MyFBAPrep, which provides logistics and other services to ecommerce retailers. Retailers and their suppliers need to invest in all the channels their customers are using.

Disruptions are likely to continue. The supply chain upheavals that have occurred over the past few years will continue to impact holiday preparations for the 2024 peak season. “We are living in a ‘not if, but when’ time,” says Brian Bourke, global chief commercial officer with SEKO Logistics.

For instance, the targeting of merchant ships in the Red Sea, as well as the drought at the Panama Canal, which is prompting authorities to reduce shipping volumes, will potentially impact air and ocean peak seasons all year long.

Amazon’s policies evolve. During the 2023 holiday season, Amazon doubled its Amazon Prime Day promotions and sales period from five to 10 days. “I expect that to happen again,” says Todd Phillips, vice president of agency operations with Run AMZ, which offers services for companies selling on Amazon.

Amazon also imposed several new fees on its sellers, such as a “low inventory fee,” intended to minimize out-of-stock situations.

Reverse logistics and cybersecurity are critical functions. Retailers anticipated customers returning approximately $148 billion in merchandise for the 2023 holiday season, equating to a return rate of 15.4%, finds a National Retail Federation and Appriss Retailer report. Of this amount, nearly $25 billion in fraudulent returns was expected.

Supply chain organizations that master reverse logistics and can head off fraud can gain a competitive edge.

Consumers remain interested in sustainability. Even during the holidays, a growing number of consumers consider the sustainability and environmental impact of the goods they purchase, says Satyendra Pal, global supply chain lead at digital consultancy Publicis Sapient. That’s especially true for younger consumers. Companies seeking to make the most of the 2024 holiday season would do well to remember this.

Moving Forward

With these takeaways in mind, how can shippers, carriers, and logistics providers prepare for a strong and smooth holiday 2024 season? Here are 11 actions to take.

1. Plan Early and Often

Source: National Retail Federation (NRF) and U.S. Census. Non-seasonally adjusted retail sales.
NRF holiday spending is defined as the months November and December.
NRF’s calculation of retail sales excludes automobile dealers, gasoline stations, and restaurants.

As the holiday season becomes longer and more vulnerable to disruption, starting holiday-focused supply chain planning and preparation earlier “ is a new best practice,” says R.J. Romano, managing director, management consulting, supply chain, with BDO.

For instance, PyroFarms, a company that grows and sells PyroDinos (bioluminescent phytoplankton that can produce light at night and fresh oxygen during the day) has become more strategic in planning for its holiday demand spikes.

Prior to 2023, the company began its holiday planning process in August or September. But in 2023, it began forecasting holiday levels in June, combining 2022 trends and current growth.

“This modeling allows us to order supplies sufficient for a strong holiday season while not extending our inventory beyond what is required,” explains Dean Sauer, PyroFarms’ founder and CEO. The early start also allows for more coordination with suppliers.

Through a different lens, a longer peak season can make operations more manageable. Buyers can try to space out their purchasing, so, for instance, they receive some inventory in early October and the rest in mid-November.

If demand spikes before the later shipments arrive, the company still might not be able to meet it. “Timing is a critical piece,” Romano says.

Scenario planning exercises are another important tool for early planning, where various stakeholders bring together data from across the enterprise to model “what-if” scenarios and identify gaps and risks.

Modeling the impact of an unexpected demand spike, for example, enables leaders to study the results and determine where to add supply chain redundancy to avoid being caught short.

Some companies have begun planning for the holiday peak as early as January, says Steve Sensing, president of supply chain solutions and dedicated transportation with Ryder. Ryder works with customers to prepare continual, rolling 12- or 13-week forecasts throughout the year.

This allows time to assemble resources—whether people or equipment—to assist in the flow of goods.

Given the Red Sea situation, the drought at the Panama Canal, and potential labor action at U.S. East Coast ports, importers and exporters need to prioritize contingency planning, adds Bourke. This includes considering alternate modes and routings, he adds, noting that companies are returning to sea/air and road/air solutions to help keep products moving.

2. Embrace Automation

Boosting efficiency through automation is important any time of the year. During the crush of the holiday season, it can become critical.

Take the example of Burlap & Barrel, a provider of single-origin spices: The company developed proprietary software that its two third-party logistics (3PL) providers can both access. The solution enables Burlap & Barrel to easily shift orders between the 3PL facilities and keep orders shipping out in time for the holidays, explains Ori Zohar, the company’s co-founder and co-CEO.

To accomplish this, Burlap & Barrel modeled its daily fulfillment needs based on its sales forecast and then matched it against each 3PL’s daily capacity. This data allows it to flag the days or weeks when one facility is likely to become backed up. When pending orders at a facility start to exceed daily capacity, the company shifts more orders through the other one.

3. Leverage Visibility

Visibility across an organization’s supply chain is critical for a smooth holiday season. “Visibility is table stakes,” says Jonkman.

Companies must go further yet: The key is using the information that’s now visible to take actions that can improve operations. One example is using the data to reroute goods that are delayed due to congestion or a snowstorm.

“The worst thing is to have great sales and delivery, but then have the product stuck somewhere in transit,” she says.

Combining visibility and collaboration also pays off. For instance, tools that allow operations and customer service teams at both shippers and logistics providers to collaborate can eliminate time-consuming calls and emails.

4. Make Data-Based Decisions

Leveraging technology to make data-driven decisions is another tactic to boost performance. For instance, analytics tools can detect unexpected demand shifts earlier so companies can respond quickly, leading to a nimble and resilient supply chain.

“Putting the proper data collection and analytics tools in place during the non-peak season is an essential first step in preparing for future busy seasons,” says Romano.

In addition, AI and generative AI can help plan for staffing needs and assess what-if situations.

5. Boost Inventory Management

The advent of the peak season should be a call to retailers to clear their distribution centers and stores of obsolete and burdensome inventory.

“Retailers must perform a delicate balancing act between creating space for seasonal products and streamlining operations for maximum efficiency and effectiveness,” explains Jeff Bornino, president, North America with TMX Transform, a supply chain consultancy.

Given the potential for ongoing disruptions, Wicky of MyFBAPrep recommends a sourcing approach that encompasses multiple different suppliers, even ones located in different regions of the same country.

He also suggests shifting from a just-in-time inventory approach to holding enough inventory to avoid going out of stock. That’s particularly true for online sellers, who may jeopardize their rankings on different marketplaces if they experience out-of-stocks.

Depending on how ongoing geopolitical events evolve, companies also may need to book orders earlier than normal to avoid transportation delays in receiving inventory.

6. Communicate With Business Partners

While communication among shippers, carriers, and freight forwarders is essential at all times, it’s becoming even more so currently, given the likelihood of disruptions continuing into the holiday season.

“Companies need to be very clear with how they see their forecasts changing,” Bourke says. He advises companies to provide forecasts early and often to all logistics and transportation providers, so they can safeguard space in their networks.

7. Monitor Amazon Policies

Companies that sell on Amazon need to consider the behemoth’s changing policies as they prepare for the 2024 holidays.

For instance, the fees regarding low inventory and aged inventory are designed to prompt sellers to manage their stock and sell-through effectively. “Amazon prefers items that don’t go out of stock,” says Phillips.

Supply Chain by Amazon—a fully automated set of supply chain services that helps sellers get products from manufacturers to customers across the globe—continues to expand. Among other functions, this service allows companies to ship inventory directly from overseas manufacturing into bulk storage, where it’s automatically pulled into fulfillment centers as needed.

Though “it’s hard to say if this development is good or bad,” notes Phillips, it is worth tracking for holiday 2024.

8. Nail Down Reverse Logistics

While returns can feel like a necessary evil, a smooth returns process can build brand perception and inspire goodwill and further purchases. Best practices include clarifying return policies and including a link to the policy in a website footer, notes Wicky.

Given the costs of handling returns, many retailers are testing different tactics to try to reduce the overall volume of returns. For instance, some are shortening returns periods or forcing shoppers to pay for shipping when returning certain items.

Over the past few years, some retailers have also experimented with ways to rein in returns abuse, including analyzing data to identify fraud and then charging extra to shoppers who abuse return policies.

9. Handle Fraudulent Orders ASAP

Along with sales, fraudulent orders tend to increase during the holidays. At Burlap & Barrel, for instance, the customer support team worked hard to verify potentially fraudulent orders, but didn’t have a great way to do it.

So, the company implemented an automatic order cancellation solution that cancels orders flagged for fraud risks. For example, fraudulent orders often come through one source in rapid succession, such as a new affiliate marketing partner that generates a handful of fraudulent orders. Automatically canceling the fraudulent orders saves time and helps avoid costly chargebacks.

10. Offer Options

Consumers want the ability to make decisions about their orders. This can include multiple delivery options, the ability to consolidate orders and reduce delivery trips, and the ability to pick up orders in a store, among other choices.

“It’s about choices and consumers will shop based on choices and values by that brand,” Jonkman says.

11. Learn to Operate with Uncertainty

Data for 2021–25 are projected.
Source: eMarketer

It’s impossible to predict exactly what holiday season 2024 will look like. Supply chain-dependent companies must be able to operate with some uncertainty.

“They can’t know for sure how demand will rise and fall, especially during busy seasons like the holidays,” Romano says. “But they can—and should—prepare in advance for influxes in demand during busy times.”

Recent studies indicate that organizations that effectively balance demand planning and supply planning see up to a 15% increase in forecast accuracy and a 35% reduction in inventory costs. A company that successfully applies these concepts in forecasting customer demand and managing inventory production ensures a streamlined supply chain.

Demand Planning: Its Significance and Differences

Demand planning revolves around forecasting customer demand to match optimal inventory management. By analyzing sales data and other factors, demand planners create a demand plan that predicts future customer demand. 

This demand plan is used to guide supply chain operations, align with financial and service goals, and achieve accurate forecasts.

Key components of demand planning include:

• Historical Data Analysis: Leveraging historical sales and related data to identify patterns and trends.
• Demand Forecasting: Utilizing tools like demand planning software and unconstrained demand forecasting to project expected demand.
• Collaborative Planning: Integrating data from various departments, including sales and marketing, to refine the demand forecast.

For instance, many businesses benefit from accurately predicting consumer demand. They neither overstock nor understock. However, failures in demand planning can be catastrophic. 

The demand planning department not only focuses on raw demand potential but also partners with marketing and sales teams. Such collaboration yields better demand projections and helps in reducing costs.

An integrated business planning approach ensures each department, including the demand planning department, shares critical component data, streamlining operations and chasing demand effectively.

A notable example was the fashion industry. They needed to capture demand projections to avoid overproduction and unsold inventory. When they failed, they had clearance sales, damaging the brand’s premium image and profitability.

Supply Planning: Its Significance and Differences

While closely related to demand planning, supply planning ensures that businesses have the necessary resources, including raw materials and production capacity, and meet the forecasted customer demand. Supply planners analyze the demand plan and consider the manufacturing process constraints, minimum order quantities, and safety stocks to produce a supply plan that aligns with demand and business limitations.

Essential elements of supply planning encompass:

• Master Production Schedule: Determining the quantity and timing of finished goods production.
• Inventory Management: Managing safety stocks and lead times to produce as needed.
• Raw Material and Resource Planning: Ensuring raw materials and other resources are available for production to avoid potential supply chain disruptions.

A classic example of effective supply planning is a global tech giant renowned for its product launches. Accurately anticipating maximum demand potential and aligning its supply chain operations ensures product availability across global markets.

On the other hand, a contrasting scenario involves a car manufacturer that faced supply chain disruptions when the supply planning failed the forecasting parameters. This led to a critical shortage and resulted in production delays and substantial financial losses.

Supply planning’s role goes beyond just matching production with demand forecasts. Efficient supply planning aids businesses in managing their cash flow by ensuring optimal stock levels and reducing tied-up capital in excessive inventory. By managing minimum order quantities for raw materials, companies can negotiate better terms with suppliers; thus, supply costs remain manageable.

It’s essential for supply planners to remember that demand can be forecasted; external factors like supply chain disruptions can always introduce unforeseen problems.

Demand planning vs. supply planning isn’t just about contrasting two concepts but understanding their interdependency and significance in the broader supply chain management framework. Both play essential yet separate roles in helping businesses meet service targets and, at the same time, reduce costs and optimize cash flow.

The Value of Strategic Demand Planning and Supply Chain

In an ever-evolving business landscape, the strain on demand planning and supply chain management remains a prominent factor in organizational success. Their intertwined roles ensure businesses meet customer demand efficiently, streamline operations, reduce overheads, and maximize profitability.

The essence of strategic demand planning lies in forecasting demand in tandem with a supply chain that smooths the transition of products from production facilities to the end consumer. Together, they form a symbiotic relationship, shaping the trajectory of businesses in many industries.

It’s imperative to note the evolving nature of both demand and supply planning in today’s dynamic market. For many businesses, the challenge isn’t about generating raw demand potential but converting it into actual sales. 

Constrained demand forecasting, which accounts for business limitations and constraints, ensures the forecast is realistic and achievable. Such nuanced approaches in demand planning vs. supply planning play a significant role in achieving financial and service goals and help businesses remain competitive.

The Future Role of Demand Planning in Supply Chain Management

As industries become increasingly digitized and globalized, demand planning will play an exciting and essential role in guiding supply chain operations and enforcing that the right product reaches the right consumer at the optimum time.

Career Paths of Demand Planning and Supply Chain Specialists

With the expanding emphasis on integrated business planning, career opportunities in demand planning and supply chain have burgeoned, offering roles from tactical analysts to strategic leadership positions, each instrumental in driving business growth and sustainability.

The landscape for demand planning and supply chain specialists is ever-evolving. With the integration of AI and machine learning, there’s an increased emphasis on data-driven decision-making. Professionals equipped with skills in advanced demand planning software and those who understand the intricacies of managing safety stocks in an era of volatile demand can become leaders in this dynamic industry.

Implementing and Streamlining an Efficient Supply Chain Model

Implementing an efficient supply chain model is pivotal for businesses aiming to meet service targets, reduce overheads, and maintain a competitive edge in today’s fast-paced market. A successful model necessitates harmonizing demand planning, inventory management, raw materials sourcing, and production capacity.

Many businesses thrive by optimizing their supply chains. Amazon, with its Prime delivery model, revolutionized ecommerce by promising quick delivery times. However, failures are equally instructive. BlackBerry once led the smartphone market but faced supply chain problems and was ill-equipped to manage safety stocks and release of new models in a time with industry expectations. This significant failure contributed to its decline.

Key steps in streamlining:

• Accurate demand forecasting based on historical sales and consumer behavior
• Regularly reviewing and updating the master production schedule
• Aligning procurement strategies with expected demand and managing minimum order quantities effectively
• Incorporating flexibility in the supply chain to adapt to sudden market changes

Technology and Software to Enhance Supply Chain Operations

Incorporating advanced technology and software tools in supply chain operations streamlines the processes and offers accurate forecasts and real-time data analysis from past sales data. These innovations are pivotal in enhancing efficiency, reducing costs, and timely delivery in complex supply chains.

FAQs

A list of commonly asked questions about demand planning vs. supply planning and their respective roles in the industry.

What is the relationship between demand planning and supply planning?

Demand planning predicts future customer demand, while supply planning ensures adequate resources and inventory to meet that demand.

What does a supply and demand planner do?

A supply and demand planner forecasts customer demand, manages inventory, and coordinates resources to ensure timely production and distribution in supply chain planning.

What are 4 crucial elements of demand planning?

Historical data analysis, demand forecasting, collaborative planning, and continuous review and adjustment are key elements.

Key Takeaways of Demand Forecasting and Supply Chain

Understanding the distinctions between demand planning vs. supply planning is paramount for efficient supply chain management. Accurate, unconstrained demand forecasting guides supply chain operations and demand planners for businesses to have the right resources and meet customer demand. Integrating both with advanced technology can further enhance operational efficiency and profitability.

Here, we’ll explore this critical component of the supply chain management process.

Demand Planning Process

Demand planning is the multi-step process businesses use to predict customer demand and meet their expectations. Demand planning incorporates historical sales data, internal and external data sources, and statistical forecasting to shape these predictions.

Key Steps in the Demand Planning Process:

• Data Collection: Effective demand planning begins with gathering relevant internal data like sales, inventory, and other historical data. External data relies on economic trends and potential natural disasters.
• Demand Forecasting: After data collection, demand planners employ methods like statistical forecasting, aided by machine learning and artificial intelligence, to predict future demand. This forecast helps in production planning and maintaining sufficient inventory levels.
• Collaboration with Stakeholders: The demand planning team collaborates with sales and marketing teams and finetunes forecasting models based on promotions or product launches.
• Review and Adjustment: Regular reviews ensure forecast accuracy. Adjustments address discrepancies between the forecasted demand and actual sales.
• Integration with Supply Chain Management: The overall demand planning process needs to be tightly integrated with other supply chain processes like enterprise resource planning to maximize profitability and meet customer demand.

Industries from manufacturing to retail benefit from a robust demand planning system. With accurate demand forecasts, businesses can ensure they neither overstock and increase inventory carrying costs nor understock, resulting in missed sales opportunities.

Modern industries are leveraging demand planning to enhance their product portfolio management. By aligning with customer demand, companies can strategically expand their product range, discontinue underperforming items, and introduce innovative solutions. 

Trade promotion management facilitates this alignment, where sales and marketing teams collaborate with demand planners to shape demand, introduce promotions, and analyze the success of these strategies based on sales data. 

Cosmetic brands often use demand planning to determine the feasibility of launching new product lines based on market demand and competitor analysis, an essential process in product portfolio management.

The Significance of Demand Planning in the Economy

In the broader economic landscape, demand planning holds substantial influence. A streamlined demand planning process means an effective supply chain. This leads to reduced costs for businesses. These savings trickle down to consumers in the form of competitive pricing.

Moreover, with accurate forecasts, industries can balance demand and supply and secure product availability to boost customer satisfaction. As businesses become more agile and responsive to demand signals, there’s less wastage, fewer stockouts, and more efficient use of resources. All these factors contribute to a healthier economy, as industries can pivot quickly in response to market changes, creating stability in fluctuating market conditions.

From a sustainability perspective, efficient demand planning can lead to greener operations. Overproduction and excess inventory create waste of unsold products and the resources used in their production. With precise demand forecasts, companies can produce goods more responsibly, minimizing waste and contributing to more sustainable supply chains.

Essential Components of Demand Planning

In demand planning, several components contribute to optimal efficiency and accuracy.

• Historical Data Analysis: This is the foundation of any demand planning process. Businesses can identify patterns and trends that help predict future sales by analyzing historical sales data and inventory levels.
• Internal and External Data Sources: Beyond historical sales data, demand planning requires a comprehensive understanding of internal and external factors affecting demand. Internal data might include production timelines or marketing campaigns, while external data could involve economic indicators, industry trends, or even unexpected internal and external events like natural disasters or accidents.
• Collaborative Planning:  Engaging sales departments, marketing teams, and production and supply chain management to work in unison is imperative. This collaboration provides a holistic view of the entire supply chain planning process.
• Demand Forecasting Methods: This involves using statistical forecasting techniques, aided by artificial intelligence and machine learning, to refine predictions about future demand. For example, Coca-Cola leverages advanced analytics to optimize its demand forecasts to capture efficient production schedules.
• Feedback and Continuous Improvement: No system is perfect. Regular reviews and feedback loops adjust and refine the demand planning processes. A notable failure in this regard is the case of Nike in 2001. Due to a flawed demand forecasting model, the company overproduced low-demand shoes and underproduced high-demand ones. This error cost  $100 million.

The rapid technological advancements promote the integration of demand planning with other essential business processes, such as end-of-life planning. Recognizing when a product is nearing the end of its life cycle and planning for its phase-out is necessary. Efficient end-of-life planning, backed by accurate demand forecasts, helps businesses manage their resources better to minimize losses and seamlessly transition to newer product lines.

Demand Planning and Forecasting Software

Choosing demand planning software and forecasting is indispensable to advance modern business operations. These digital enterprises streamline data collection, automate complex statistical forecasting, and facilitate real-time team collaboration. By integrating historical and real-time data, demand planning software enables businesses to make more accurate demand forecasts, thereby reducing costs and maximizing profitability.

Supply Chain and Demand Planning and Its Role

The interplay between supply chain and demand planning resembles a well-choreographed dance, where each step depends on the other for a successful performance. At its core, demand planning predicts customer demand, allowing businesses to produce the correct quantity at the right time. 

This forecasted demand becomes the backbone of the supply chain and establishes inventory levels, production schedules, and distribution plans. When demand planning is accurate, the supply chain operates smoothly, minimizing stockouts and overstocks. For example, Apple’s ability to anticipate product demand and coordinate with suppliers ensures sufficient inventory during product launches. 

The synergy between supply chain forecasts and demand planning can significantly impact customer satisfaction. For instance, if a business accurately predicts and meets demand spikes, especially during festive seasons or promotional periods, it ensures timely product availability. It elevates their brand image in consumers’ minds. Effective supply chain management, backed by accurate demand forecasts, means businesses can deliver products to consumers swiftly, improve overall customer experience, and build lasting brand loyalty.

Conversely, a failure in this interplay was evident in the 2010 Toyota recall, where poor demand planning for specific car parts led to supply chain disruptions, further resulting in massive brand damage.

Future Demand Planning and Forecasting

As industries continue to evolve, the future of demand planning magnifies in importance. With global markets becoming increasingly volatile and competitive, the capability to predict future demand becomes paramount. 

Advanced data harvesting tools scrape vast information from consumer behaviors on ecommerce platforms to macroeconomic trends. When processed with modern software tools powered by artificial intelligence and machine learning, these rich datasets provide companies with unparalleled forecasting accuracy. Moreover, integrating real-time data offers businesses the agility to adjust to sudden shifts in the market. 

For instance, demand sensing, a cutting-edge technique, allows firms to adjust forecasts based on real-time demand signals, ensuring supply chains meet demand. As industries lean further into digital transformation, future demand planning and the tools that facilitate it will be the linchpins of business success.

The future of demand planning will likely involve increased adoption of advanced technologies from the artificial intelligence sector. These technologies will enhance demand forecasting by analyzing vast data sets, recognizing patterns, and predicting future scenarios with improved accuracy. Ecommerce will impact how 3PLs prioritize their role in delivering within the supply chain sector.

Combine this with real-time data from IoT (Internet of Things) devices, and businesses can achieve almost real-time adjustments to their demand forecasts with a high responsiveness to actual market conditions. As a result, companies that invest in such technologies and upskill their demand planners will create a better position to navigate the complexities of the modern market landscape.

Demand Planning How-To Skill Set

Pursuing a career in demand planning requires a fusion of analytical prowess and industry-specific knowledge. Those interested often follow paths including:

• Education: Many demand planners hold degrees in Supply Chain Management, Business Analytics, Economics, or related fields.
• Certifications: Professional certifications like APICS CPIM (Certified in Production and Inventory Management) can bolster one’s credentials.
• Experience: Entry-level supply chain, sales, or inventory management positions can pave the way to more specialized roles in demand planning.
• Continuous Learning: Given the rapidly evolving nature of technology and industry trends, ongoing education and training are vital.

FAQ

Dive into our frequently asked questions to clarify common queries regarding demand planning.

What are demand planning tools?

Software applications that aid in forecasting future customer demand based on historical data, trends, and other relevant variables.

What are the methods of demand planning?

Methods include statistical forecasting, qualitative methods, causal models, and time series analysis.

What are the 5 demand forecasting methods?

Time series, causal models, qualitative forecasting, simulation, and artificial intelligence-driven predictions.

Successful Demand Planners Summary

To master the art of demand planning, professionals must embrace a blend of advanced tools, solid strategies, and a keen understanding of the ever-evolving market. Well-executed demand planning provides a roadmap for businesses and guides inventory management toward shaping effective supply chain operations. 

With the increasing reliance on data-driven decisions and forecasting, the role of a demand planner is critical in ensuring business sustainability and maximizing profitability.

2. UTILIZE THE INTERIM TIME BETWEEN “PEAKS” FOR OPTIMIZATION. Effectively manage the time between peak periods for review, consideration, and improvement in order to future-proof operations before the next peak season.

3. FINE-TUNE STAKEHOLDER RELATIONSHIPS. Ask everyone from vendors and manufacturing to supply chain management, carriers, brokers, and truckers this question: “Who are you in business with and why?” Need to review and understand advantages, disadvantages, successes, failures, concerns, potential ongoing problems? Address areas of concern and work to eliminate any unaddressed weaknesses or issues before the next peak season.

4. CREATE A PEAK SEASON PLAN. Your plan ought to be an ever-evolving document that specifies what you are expected to deliver—when, where, why, and how much. Put it all together in a well-organized document that everyone involved understands.

5. ESTABLISH EXPECTATIONS AND DELIVERABLES. Don’t draft the operational plan separately. In order to have an action plan that leads to positive outcomes, clear expectations, responsibilities, and deliverables need to be in place after the plan is finalized.

6. CONCENTRATE ON PLAN EXECUTION WITH AGREED ALIGNMENTS. Gather stakeholders from the outset to ensure that no one is confused about the immediate objectives of the plan. Prior to deployment, ensure that it is formalized with secure sign-offs from all stakeholders.

7. BOLSTER DAILY STAKEHOLDER COMMUNICATIONS. Ensure that all stakeholders are kept up-to-date on how things are progressing daily, from the time the draft is completed to the conclusion of the peak season. Also create a simple dashboard that provides all concerned with needed callouts. And schedule regular conference calls with stakeholders to discuss relevant matters and address those issues promptly.

8. RELY ON ALTERNATIVE RESOURCES AS BACK-UP. The best laid plans will always encounter issues that can range from the departure of a key staff member to a supplier not being able to deliver in full. It’s always a good idea to have a backup plan and remain “open for business” with alternative providers.

9. INTEGRATE EXCEPTION MANAGEMENT. It is frequently thought that this is difficult to achieve, but if you get ahead of the process with your plan, your peak season should arrive at a point where everything is functioning well and the only issues that arise should be exceptions. If you lay the groundwork, you will have created the space to solve the inevitable challenges by implementing a well-thought-out plan that puts the majority of the increased peak workload on autopilot.

10. REMAIN FOCUSED ON BOTTOM-LINE DELIVERABLES. As you prepare and implement the plan during peak season, remember to ask yourself if any new matter you have been asked to assist with or develop is as critical as what you’ve been asked to accomplish during peak. Be comfortable with declining new commitments or projects that might prevent you from meeting your peak season goals.

SOURCE: Richard Kohn, Director, Global Logistics & Optimization, SeaCube Container Leasing Ltd.

The relative certainty that procurement and supply chain organizations enjoyed at the end of 2019 has all but disappeared. Take maritime container prices as an example. According to research by Upply, the average rate basket between Asia and Europe has quadrupled in just three years to between $6,000 and $7,500 per 40-foot container.  

That’s an astonishing hike, but one in keeping with an inflationary environment that has turned supply chains on their heads. As a result, the challenges facing global logistics and supply chain professionals have never been so stark, particularly as global disruptions continue.  

In the midst of the storm, there might be a temptation to panic, an urge to turn our backs on everything that has been learned in the previous 20 years. But those actions would merely exacerbate the problem. This is a time for cool heads and a period where supply chain and procurement logistics professionals must be strategic to combat the economic headwinds and sail into smoother waters.

1) Improve the total cost of operations 

Looking at the total cost of operations and removing any inefficiencies is one of the most effective ways of maintaining a level of control over logistics spending. That can be done through better demand planning and the need to view demand as something which is dynamically changing. Being able to sense that demand and match it with capacity, and a dynamic pricing model is crucial at this time.  

Demand planning among big manufacturing companies has traditionally been done on an annual or bi-annual cycle. In the current environment that’s neither desirable nor sensible.

Instead, a more pragmatic approach is required. Embracing a dynamic pricing model is also essential. In fact, there are industries that are already realizing the benefits of this approach, such as airlines, for example, so we know that this is a successful strategy.  

2) Don’t ignore your existing suppliers   

When budget allocations are at their lowest, it may be tempting to ditch existing suppliers and others in your value chain who may not be offering the best price. Indeed, if your contract has been in place for years, you’re likely not often negotiating for the lower costs.

While cost efficiency is vitally important during this time, don’t discount the value of existing relationships. Existing suppliers are more likely to give you preferential and expedited access to the materials that you need than new ones.

And, when you’re higher up in the “queue” to get the materials you need, this can help to prevent some of the shortages we are seeing across the supply chain. If you really can’t afford an existing supplier, try re-negotiating with them before letting go of a relationship altogether.

3) Be agile – diversify your supplier base 

While existing supplier relationships are vitally important, make sure you’re not putting all of your eggs in one basket. We’ve seen in the past two or three years how the pandemic has heightened risk—and illustrated that it’s not desirable to focus everything on the success or failure of one or two suppliers.

If a business is hugely dependent on a small number of suppliers, that’s a very risky strategy. Now, with businesses around the world feeling the weight of recessionary pressures, procurement needs to respond by spreading the risk among a diverse portfolio of suppliers. 

That may take a strategic mindset change, but the lessons of the pandemic have shown it’s a necessity.

4) Embrace innovation  

In a recession, logistics procurement professionals tend to focus solely on short-term goals, such as reducing costs and increasing efficiency. Unfortunately, during this time, implementing new ideas and innovations can be seen as an extravagance and a waste of valuable time and resources, and ultimately put on the back burner.

However, even today, many procurement and supply chain processes are still very manual. Digital technology is out there to solve the problems detailed above, and at scale too.

By bringing in artificial intelligence, for example, procurement and logistics pros can automate mundane tasks like plotting the most optimal shipping routes. With innovation on your side, your staff can focus on more high-value tasks, a perk that could prove invaluable as staffing and talent shortages remain.

If the economy is going through a downturn, then only the strongest companies will ultimately survive—and embracing innovation can often be the difference between making it through the bad times and not. 

Key takeaways  

Every challenge brings possibilities. And this is certainly the case for logistics and supply chain professionals in the current economic downturn. By placing the function at the heart of the business’s response to the crisis, your organization can be positioned for success now and in the future.

2. Know your sources of volatility. Gain a holistic view of internal and external challenges—including market trends, competitors’ actions, supplier performance, and logistics cost drivers—and make this analysis an ongoing exercise.

3. Gather institutional knowledge. The Great Resignation spurred longtime employees to move on to new opportunities, while many others retired. Capture your best practices and processes today and ensure that expertise is not lost when experienced team members move on.

4. Address master data challenges. When neglected, issues with foundational master data—both static data (product categorizations) and dynamic data (lead times) can provide the wrong signals and impact product visibility, material sourcing decisions, and more. Good data hygiene pays dividends in decision making.

5. Focus on decisions, not tasks. A focus on decisions and outcomes helps ingrain strategic thinking into day-to-day operations. Task-oriented thinking can miss the big picture. For example, how can augmenting logistics decisions with data-driven insights help reduce or avoid less-than-truckload shipments?

6. Integrate outside data sources. When you draw on port congestion data, logistics marketplace information, and a wide range of other data sources that add insights beyond your own view, you can better adapt to changes in demand—for instance, by making adjustments automatically that maximize loaded miles.

7. Add decision intelligence. With more decisions to make in a day than time or people to make them, using artificial intelligence and machine learning to support and automate decision making is a necessary source of competitive advantage.

8. Maintain an innovation mindset. Digital native companies and agile startups delight their customers and disrupt markets by innovating. To keep pace, examine the value you provide and challenge yourself to find better ways to collaborate with customers, suppliers, 3PLs, and other stakeholders.

9. Embrace adaptive S&OP. The Demand Driven Institute defines Adaptive Sales & Operations Planning (S&OP) as “the integrated business process that provides management the ability to strategically define, direct, and manage relevant information.” All organizations could find benefits when undertaking this process.

10. Focus on continuous improvement. Response to the unexpected too often involves endless calls, slide decks, and spreadsheets. Instead of static emergency action plans, adopting digitized decision-making promotes a focus on continuous improvement. This helps improve decisions over time as your business evolves—as opposed to a “one-and-done” technology implementation mindset.

SOURCE: Fred Fontes, Head of Growth, Aera Technology

2. consider delivery constraints.The route plan should include constraints such as low bridges, type of roadway (gravel vs. paved), narrow passageways, time windows (dock only open a limited amount of time), and limited access at the delivery location, such as loading dock size and ramp availability for unloading packages. Knowing these types of constraints beforehand helps prepare the driver to make the best delivery possible.

3. Understand delivery requirements.While Amazon set the stage for consumer expectations, few deliveries need to arrive within hours. Finding out what customers really want versus what they need can save money, both for the customer and your delivery operations. If a part needs to keep a production line going, the order needs quick delivery; a t-shirt can wait.

4. Predict customer handling times.Looking at historical data to predict dwell and delivery handling times creates the best stop sequence in routes without missing an appointment. This data-driven approach saves precious time and you can rapidly assign single or multiple pickups to the best drivers considering all operating constraints.

5. re-sequence stops Continuously.Re-sequencing stops continuously on a route plan ensures on-time service. If you get a new pickup for your driver, you can add this leg of the trip to their route plan, but you must include time commitments and current traffic to ensure timely delivery.

6. Superimpose real-time weather data into your route plan.Route planners can glean valuable insights that help them adapt quickly to disruption. You can identify potentially impacted delivery points and create contingency plans around or away from the affected areas.

7. Utilize telematics, GPS, and ELDS.These technologies improve real-time location information so customers know exactly where the truck will bring their order and whether the truck will be on time or delayed due to traffic. These devices allow planners to see in real time the actual route against the planned route so they can ensure that their plan is being followed and savings realized.

8. Give dispatchers visibility. Dispatchers need to see the overall pick up and delivery operation. If a driver will be late for a pickup or delivery, they can proactively alert the customer about the delay, reducing the volume of calls to your customer service organization.

9. Use historical data from telematics.This improves the transport plan continuously. If delays regularly occur at a specific customer site, you can identify the root cause and then solve the problem so it doesn’t continue to happen.

10. Collect and measure KPIs.Key performance indicators (KPIs) include number of deliveries completed, percentage of missed deliveries, number of late deliveries, damage claims, delivery time, vehicle capacity utilization, number of complaints, and more to monitor operational efficiencies and improve service levels. You can also measure the number of hours a vehicle is in motion and divide it by the number of hours the vehicle is stopped to determine overall performance of shipment delivery.

SOURCE: Rambabu Yadlapalli, Product Manager, RouteMax by HaulSuite

The origin and destination offices for importers’ supply chains are not simply adjacent silos, they are orbiting planets. Bring both sides together on a central supply chain management platform so they can work together in real time on the same shipment file.

—Bryn Heimbeck
President
Trade Tech

The lack of a platform that integrates data and provides visibility to volume, dwell, railcar availability and train bunching, and truck capacity and driver shortages.

—Tom Martucci
Chief Technology Officer
Consolidated Intermodal Technologies

Data. From suppliers not sharing data with producers to manufacturers not knowing when to ramp up or down staffing, the lack of good data or lack of access to it can hurt everything from productivity to shipping.

—Carl Schweihs
President and COO
PeopleManagement
a TrueBlue company

The disconnect between strategic planning and day-to-day tactical supply chain optimization. The functional areas that contribute to both ends should collaborate to make deliberate trade-offs to remain aligned overall with the big-picture strategy. Give enough latitude to respond to daily business needs—but without jettisoning strategic progress.

—Troy Prothero
SVP, Product Management, Supply Chain Solutions
Symphony RetailAI

Sales and operations teams are often disconnected. Lacking a unified view of the customer leads to a weak, inconsistent customer experience—and lost sales. Customer relationship management software helps put everyone on the same page.

—Mark Buman
Chief Revenue Officer
Magaya

Ineffective packaging management causes shortages, loss, expedited freight, and an overall poor performing supply chain. To break this silo, companies must look at their supply chain holistically and implement a packaging and asset management system.

—Mike Garcia
Market Manager—RPM
ORBIS Corporation

Compliance. Despite impacting nearly every aspect of how goods are shipped (packaging, documentation, carrier selection, etc.), compliance responsibilities are often separated by business unit, function, or location. Establish reliable and repeatable processes across all divisions and locations and integrate compliance into other operational systems, including TMS, WMS, and ERP.

—Mario Sagastume
VP Software & Customer Success
Labelmaster

data flow throughout the supply chain. Embedding cross-functional metrics, dashboards, and (ideally) organization enables informed decision making, transparency, and value company-wide. The more teams know about the full value chain, the more successful each team will be.

—Omer Abdullah
Co-founder and Managing Director
The Smart Cube

In forward logistics, products are identified by universal product codes (UPCs). However, when a product is returned, there is no system to identify it. To break down this silo, I advocate for a reverse UPC classification structure based on specific conditions and accessories to facilitate faster refurbishment, accounting and reconciliation, and resale.

—Scott Huddle
Chief Supply Chain Officer
goTRG

Lack of visibility across modes can create silos, especially for global shippers that combine ocean, air, intermodal, and over-the-road transportation. Working with a provider that offers technology and expertise across modes is critical to gaining visibility and ensuring exceptional service.

—JJ Schickel
CEO
Omni Logistics

The lack of shared networks. Collaboration up and down the value chain to drive business-critical process is still driven by antiquated systems that are incredibly manual or inflexible. Disruptive organizations are empowering agile teams to innovate their processes continuously while remaining connected.

—Peter Rifken
Principal Solutions Consultant
Quickbase

Traditional linear supply chains prevent companies from looking beyond the first tier, leaving the global flow of goods and materials vulnerable to disruption. A digital business network brings trading partners together for better visibility and collaboration.

—Tony Harris
SVP and Head of Marketing & Solutions
SAP Business Network

The biggest silo is between planning, procurement, and sourcing. Primarily driven by a lack of data transparency and integration, this is exacerbated by insufficient resources and unclear business processes. A digital supply chain platform that provides a single source of data and integrates business processes is the key to breaking down this silo.

—Lachelle Buchanan
Director
Logility

The biggest supply chain silo is data. There is so much information being exchanged across the supply chain—between ERP systems, carrier and 3PL systems, bills of lading, customs declarations—but they all exist in separate systems. Unifying this data is key to true supply chain visibility.

—Tony Pelli
Practice Director, Security and Resilience
BSI

Systems integration across the supply chain from manufacturing, inbound transportation, warehousing, and outbound transportation is one of the biggest silos within the supply chain. For most companies, different systems are used to run their business across the four functions of their network. Most of the time, the manufacturing systems doesn’t talk to the inbound side or their warehouses. This makes forecasting and labor planning more difficult for each portion of the supply chain.

—Greg Forbis
EVP of Strategy and Business Development
RJW Logistics Group

Data silos across logistics operations. Estimates show 69% of companies don’t have a holistic view of their supply chain. Shipment visibility solutions can provide end-to-end tracking of the location and condition of shipments across multimodal supply chains. Reducing dwell times, improving ETAs, and customer delivery schedules are critical.

—Stuart Ryan
Vice President, Other Industries Sales
HERE Technologies

Primary silos are between sourcing/buying, planning, and operations. Leaders must look holistically at their operation, opposed to focusing on each function, helping to streamline processes, evolve physical networks, and implement solutions to drive insight and innovation. This can be done through more advanced digital capabilities, clear leadership alignment and data-driven decisions support tools with cross-functional input and enterprise objectives.

—Matt Comte
Operations Transformation Practice Leader
PwC

Lack of transparency around efficiency and trailer utilization in over-the-road shipping. Our research estimates more than 50% of trucks are currently moving underutilized. Filling trucks to capacity through AI-created shared truckloads and publishing metrics help break this silo.

—Chris Pickett
Chief Strategy Officer
Flock Freight

The dock environment is a vital component of the supply chain. However, it can be a bottleneck, caused by inefficient, disparate, and antiquated systems. Integrating technology and hardware to empower dock associates to connect to systems on the move creates those all-important commodities in the supply chain—speed and accuracy.

—Ravi Panjwani
SVP, Marketing and Product Management
Brother Mobile Solutions

The biggest supply chain silo is transportation. Providing transportation visibility across the supply chain including to customers, suppliers, and logistics partners opens up the silo.

—Chris Jones
EVP, Industry and Services
Descartes

By far, with the impact on shipping from COVID issues, transportation is the biggest silo to overcome. With the 3G networks that so many electronic logs are configured for being decommissioned, until carriers are able to upgrade we could suffer a micro-shortage of capacity. It all depends on how agile the carriers are at upgrading to 4G. This is a silo that can only be toppled by proactive carrier engagement.

—Brian C. Gaffney
Supply Chain Specialist
Natural Fiber Welding

Mature supply chains have developed sales and operations planning departments, but transportation isn’t typically involved. Given variables like capacity volatility, unpredictable lead times, and product shortages, breaking down that silo could help shippers conserve resources and strategically plan for capacity needs.

—Aaron Galer
SVP, Strategic Partners
Arrive Logistics

Typically, each supplier tier is siloed from the next, and most companies have low, if any, visibility beyond their first-tier suppliers.

—Jeff White
Founder and CEO
Gravy Analytics

One of the biggest silos is visibility to supplier value chains. Transparency through the second and third tier of the supply chain provides valuable insights for serving customers.

—Hemant Porwal
EVP—Supply Chain & Operations
Wesco International

Supplier information lives in multiple locations across an organization, many of which are poorly connected, creating data silos. The resulting challenges in visibility, risk, and spend put supply chain resilience at jeopardy. To move forward, an organization-wide commitment to supplier-centricity and master data management, built upon active supplier experience management, is crucial.

—Anthony Payne
CMO
HICX

Have a great answer to a good question?

Be sure to participate next month. We want to know:

What pandemic-era innovation will have the greatest long-term impact on supply chains?

We’ll publish some answers. Tell us at editorial@inboundlogistics.com or tweet us @ILMagazine #ILgoodquestion.

Where Have All the Workers Gone?

Despite this strong demand for logistics labor, many companies can’t find the talent they need to remain fully staffed. Multiple causes contribute to the lack of supply chain labor, such as:

• Changing priorities. The pandemic has changed priorities for many American workers. For example, parents who once worked on site now need the flexibility to stay at home and supervise children when schools and daycares can’t operate in person. Concerns about safety and changing priorities caused others to leave in-person jobs to pursue remote options.
• COVID-19 deaths. The coronavirus pandemic has been responsible for nearly one million U.S. lives lost. This tragedy has had wide-reaching implications, including contributing to the labor shortage.
• Competition among industries. According to the U.S. Chamber of Commerce, there are 10.9 million job openings and only 6.9 million available workers. The logistics and transportation sectors must compete with various other industries for workers, including retail, hospitality, and construction, among others.

5 Ways a Logistics Labor Shortage Hurts the Supply Chain

Labor shortages in all industries can directly impact local, regional, and global supply chains. For example, understaffing at a factory will cause production slowdowns, resulting in inventory stock-outs for distributors and retailers. However, in logistics, the shortage of available labor directly impacts the ability to move goods between parties.

Here are some impacts the labor shortage is having on the supply chain right now:

1. Without enough longshoremen and dockworkers, ships face delays getting unloaded at U.S. ports of entry.
2. An exodus of drayage drivers from the trucking industry has resulted in shipping containers sitting in ports much longer than they should.
3. The long-haul truck driver shortage has created capacity shortages among trucking carriers, making it difficult for shippers to move inventory from ports to distribution centers promptly.
4. Understaffed warehouses and distribution centers can’t operate at full capacity, creating delays that result in material or inventory shortages for manufacturers and retailers.
5. A dramatic rise in e-commerce sales volumes has made it difficult for understaffed fulfillment centers to keep pace with order fulfillment volumes.

The aforementioned examples are only some of the ways labor shortages exacerbate supply chain issues. Together, they create a perfect storm for supply chain disruption. To fight back against the logistics labor shortage, shippers must reevaluate hiring and retention practices, compensation packages, and work/life balance for employees.

Partnering with a third-party logistics (3PL) provider offers another alternative to ensure you have the staff you need to keep your inventory moving. A 3PL can help to stabilize your transportation capacity and staffing, even in tight labor markets.

About Phoenix Logistics. Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. phoenix3pl.com

New research from Supplyframe confirms what we already suspected: The electronics supply chain continues to face high risk and is not likely to shed its woes in 2022. Thanks largely to the never-ending increase in demand for semiconductor chips, coupled with supply chain hangovers from pandemic related disturbances and new raw materials challenges relating to the Russia-Ukraine conflict, the grim outlook is here to stay for the foreseeable future, says the Supplyframe report. It also predicts three top risks for the electronics supply chain in 2022:

1. Component price increases due to materials shortages and manufacturing disruptions.
2. Longer lead times due to buffer inventory depletion.
3. Geopolitical rivalries between China and North America.

Breadboard Raises the Dough

Breadboard, a timely startup providing software that digitizes the supply chain for electronics manufacturers, recently secured $1 million in funding from Bienville Capital.

The new company, founded by CEO Zachary Feuerstein and CTO George Balayan, has created a solution that enables electronics manufacturers to generate instant quotes for their customers—which automates and speeds the lengthy RFQ process—and then organize the internal manufacturing and sourcing process.

The software helps manufacturers streamline RFQ delivery, automate bills of materials, calculate labor estimations, generate instant quotes, and process payments—and it is all customizable for each business. It also enables the manufacturer to seamlessly connect with suppliers and other supply chain partners.

As a result, Feuerstein and Balayan say, Breadboard users gain transparency into pricing, availability, and shipping times for all components.

With the urgent need for tools that aid in tackling supply chain concerns for manufacturers, Breadboard is well positioned for growth. The fledgling firm has also partnered with venture studio Fractal Software, which has supported the launch of more than 30 B2B software businesses.

Can We Save the Semiconductor Supply Chain?

Developing strategies to help strengthen the efficacy of the semiconductor supply chain is almost a national pastime at this point. Experts of all kinds have lent their brainpower to determining how to relieve ongoing supply chain pressures surrounding one of the most in-demand products on the planet. Renowned public policy organization The Brookings Institute is the latest to weigh in.

Instead of a focus on reshoring the semiconductor supply chain—an increasingly popular approach supported by recent legislation on Capitol Hill—the Brookings Institute espouses a two-pronged holistic approach to address semiconductor availability.

First, the United States should focus on deepening its high-tech collaboration with supply chain partners such as South Korea, Taiwan, or Europe. Second, the United States should amend immigration rules to permit more skilled workers to enter the country, augmenting the talent pool during a period of labor shortages and increasing the competitiveness of U.S.-based industry.

The Institute says these policies would help boost domestic production from 10-12% of the global market and increase supply chain resilience while minimizing potential efficiency losses from over-reliance on local manufacturing.

Its resistance to embracing reshoring as a solution centers around the excessive time it takes to build semiconductor manufacturing facilities, the likeliness that U.S. fabrication plants will not be profitable without government assistance, and ongoing labor shortages.

Embracing Just-in-Case Logistics

The supply chain turmoil in the electronics industry has been particularly crushing for electronics manufacturing service (EMS) companies—the ones making goods for original equipment manufacturers. Because they sit in the middle of the supply chain, EMS firms feel the crunch from both sides.

The best way for EMS companies to thrive today, according to recent thought leadership from Forbes Technology Council, is to embrace “just-in-case” logistics, defined as “relying on their own warehouses,stocked with excess inventory,to prevent shortages not only in finished products but also for spare parts and components” by Andreas Bubenzer-Paim, head of technology banking at Bank of the West/BNP Paribas.

Bubenzer-Paim recommends EMS companies adapt using six tactical steps to get to a just-in-case approach:

1. Encourage customers to shift away from placing frequent, smaller orders. Instead, EMS companies should get their customers to place larger orders to improve chances of securing needed components. That way, EMS companies can, in turn, place their own larger, less-frequent orders with their suppliers.
2. Use robotics and AI to help overcome supply chain inertia. Automating manual processes and streamlining human-machine interactions can help reduce the pressure on supply chains, and couples well with just-in-case inventory buffers.
3. Diversify across the globe. Having financial partners with a presence in key countries and regions can help manufacturers stay ahead of disruptions and maintain supplier relationships.
4. Consider reshoring. Following the lead of giants like Samsung and Intel, EMS companies should consider building semiconductor factories in the United States to localize talent, recoup losses, and improve supplier-manufacturer relationships.
5. Seek alternate financing mechanisms. EMS companies with cash-flow difficulties may benefit from financing channels that don’t require debt.
6. Provide shorter payment terms to suppliers. This helps ensure that suppliers are able to keep operating and providing the necessary components to the EMS industry.

A Pivot to Penang

Seeking to diversify beyond China for offshore manufacturing capabilities has been an ongoing strategy in the electronics sector—and Penang, Malaysia, is fast becoming a major player in the global semiconductor industry.

Embracing the area recently is TTM Technologies, a Santa Ana, California-based manufacturer of printed circuit boards (PCB), radio frequency (RF) components and RF microwave/microelectronic assemblies, which just broke ground on a $130-million manufacturing plant in Penang.

TTM selected Penang based on the region’s favorable conditions for investment and operating costs, customer proximity, and supply chain support. Penang was also attractive, the company notes, due to its well-established electrical and electronics industry ecosystem. Penang is now estimated to contribute approximately 8% of the global back-end semiconductor output, boasting a network of more than 3,000 local suppliers, according to economic development booster organization, InvestPenang.

“As an early-mover into Southeast Asia for the production of advanced technology PCBs, TTM is responding to our customers’ needs for supply chain resiliency, regional diversification and growth capacity,” notes TTM President and CEO Tom Edman.

The new, highly automated plant will serve TTM’s global commercial markets including networking communications, data center computing, and medical, industrial, and instrumentation. Being built on 27 acres of industrial land at Penang Science Park, TTM expects to be fully operational there by 2025.