How Manufacturers Can Strengthen Supply Chains’ Resilience
Since the onset of COVID-19 in 2020, supply chains have faced extraordinary challenges around the world. In the midst of shortages and disruptions, as well as global conflicts, how can manufacturers ensure that they receive the materials they need and deliver their products on time?
At a recent NAM event, attended by more than 75 executives from both manufacturing companies and association partners, Supply Chain Insights Founder Lora Cecere addressed the question of how the industry can build resiliency into the supply chain of the future. Here’s some useful advice from her keynote speech, called “Supply Chain Workshop: Connecting and Securing the Supply Chain for 2030.”
Defining resilience: As Cecere noted, in many cases manufacturers may have different ideas about what resilience represents—and it’s important to settle on a clear definition.
- “I define resilience as the ability to have the same cost quality and customer service given the level of demand and supply variability,” she said.
Differentiating supply chains: While most manufacturers talk about the supply chain as a unified system, Cecere encouraged participants to differentiate various kinds of supply chains from one another.
- “We have responsive supply chains that are all about time—things like flu vaccines and bathing suits,” which must be shipped during certain seasons, Cecere observed.
- “And then there’s the agile supply chain, which is very low volume and not predictable. We can’t measure that in the same way we measure the efficient supply chain, but we need to manage flow.”
- “We don’t have just one supply chain. We have multiple supply chains,” she emphasized.
Learn more: To hear more from Cecere, attend “Manufacturing in 2030: The Coming Data Value Revolution,” an event of the NAM’s digital-transformation arm, the Manufacturing Leadership Council, Dec. 6-7 in Nashville, Tennessee. Register here.
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For Critical Minerals, Companies Look to Old Mines
In the push for more critical minerals, governments and companies worldwide are looking to “a new but also old source”: closed mines, or brownfield sites, The Wall Street Journal (subscription) reports.
What’s going on: “[O]pening new mines takes years—particularly when faced with strong local opposition—and delays might hamper policymakers’ efforts to diversify these supply chains. Even with recent investment announcements, analysts are forecasting supply shortfalls.”
- Reopening shuttered mines is often a quicker and less painstaking process because it allows the companies to “avoid damaging new land and work with local communities that have a memory of economic activity the industry can bring,” as a source told the Journal.
A successful start: One Swedish mining company is seeking to reopen an old copper-and-zinc mine in Norway that closed 25 years ago owing to low copper prices. “Last month, the local municipality unanimously approved plans to reopen” the mine.
- Several American firms are now seeking to reopen closed U.S. sites in the Southwest, and other projects are being planned in Italy and Germany.
A “shift” in the U.S.: A U.S. company with plans to reopen an old gold mine in Idaho recently received funding from the Defense Department, which recognized the importance of the site as a source of antimony, a much-needed mineral in the defense sector.
- “The shift we are seeing in the United States is a growing recognition that we must secure supply chains, and a way to do that is bringing mining home and that means getting the public comfortable to bring mining home,” an executive at the firm told the Journal.
Factory Orders, Shipments Rose in August
New orders for manufactured goods increased in August after declining in July, according to U.S. Census Bureau data.
Factory orders: New orders rose 1.2% in August following a 2.1% decrease the previous month.
- Factory orders for durable and nondurable goods increased 0.1% and 2.1%, respectively, but declines in nondefense aircraft and components pulled down durable goods demand.
- Excluding transportation equipment, new factory orders jumped 1.4%, rising for the third month in a row.
Core capital goods: New orders for core capital goods—or nondefense capital goods excluding aircraft, a proxy for capital spending in the U.S. economy—increased 0.9% to a record high of $73.95 billion in August.
Factory shipments: Factory shipments rose 1.3% in August, marking the fourth consecutive monthly increase.
- Total factory shipments have risen 0.5% over the past year, dipping 0.9% year over year when transportation equipment is excluded.
- Factory shipments excluding transportation equipment have increased 1.0% year to date.
Shipments of core capital goods: Shipments of core capital goods rose 0.7% in August, to an all-time high of $74.38 billion, reflecting 2.6% growth over the past 12 months.
NAM Leads Inaugural North American Manufacturing Conference
On Sept. 19–20, the NAM convened the inaugural North American Manufacturing Conference in Washington, D.C., along with its counterpart associations from Mexico and Canada, the Confederation of Industrial Chambers of Mexico and Canadian Manufacturers & Exporters.
What’s going on: The conference provided an opportunity for North American manufacturing executives and government representatives to share perspectives on the opportunities and challenges facing the sector across the region. At the conference, industry leaders discussed the need to:
- Ensure that North America has the affordable and reliable energy needed to support the manufacturing industry;
- Support more regional competitiveness, greater growth and the success of the United States–Mexico–Canada Agreement; and
- Address regional workforce needs in the U.S., Mexico and Canada.
Deepening ties: On Wednesday, the NAM, CONCAMIN and CME signed a memorandum of understanding that will serve as a roadmap for future cooperation between the three organizations and support close economic ties between the U.S., Mexico and Canada.
- The memorandum calls for the organizations to share information about each one’s services and activities, and to work together to shape the continent’s future manufacturing agenda.
- In addition to leaders from the NAM, CONCAMIN and CME, speakers at the event included U.S. Trade Representative Katherine Tai, ExxonMobil Senior Vice President Neil Chapman, Toyota Motor North America Executive Vice President – Product Support and Chief Quality Officer Chris Nielsen, Rep. Adrian Smith (R-NE), Bombardier Head of U.S. Strategy Tonya Sudduth, Energy Transfer Co-CEO Tom Long and Caterpillar Inc. Chief Technology Officer and Senior Vice President of Integrated Components and Solutions Division Karl Weiss.
Common principles: “Shared values, shared prosperity” was a central theme of the conference, echoing President Biden’s remarks at the U.N. General Assembly earlier this week.
- “As president of the United States, I understand the duty my country has to lead in this critical moment; to work with countries in every region linking them in common cause; to join together with partners who share a common vision of the future of the world,” President Biden said in New York on Wednesday.
- “There’s never been a greater need for us to stand together,” NAM President and CEO Jay Timmons said. “The world is caught between different political and economic systems. Our system here in North America enriches lives and lifts people up into freedom and prosperity, while other systems oppress their people and rob them of their liberty,” he continued, adding that the USMCA, of which the NAM is a longtime advocate, serves as a reminder “of what we can achieve when we work together.”
Strengthening the region: Throughout the conference, discussions focused on three components of a successful North American economy—growth, resilience and competitiveness—and the critical role manufacturers play in that system.
- “Today, we live in a new reality,” CONCAMIN President José Antonio Abugaber Andonie said. “The commercial competition with China, the pandemic, the conflict in Ukraine … [all] place us before a second great industrial transformation in North America. … Some call it nearshoring, friend-shoring, ally-shoring or reshoring. No matter the name, the truth is that this phenomenon is modifying the structure of international industrial organization. North America is the epicenter of this transformation.”
- Added CME President and CEO Dennis A. Darby: “Manufacturers are an important driver of economic development and prosperity. We are key players in the changes and challenges of the 21st century.”
Maersk Introduces First Green-Methanol Container Ship
In a milestone for the logistics sector, Danish shipping firm Maersk recently unveiled “its first container vessel moved with green methanol,” CNBC reports.
What’s going on: “The new container ship, ordered in 2021, has two engines: one moved by traditional fuels and another run with green methanol—an alternative component, which uses biomass or captured carbon and hydrogen [for] renewable power. Practically speaking, the new vessel emits 100 tons of carbon dioxide fewer per day compared to diesel-based ships.”
- The ship is the first of a larger order of 25 due for delivery next year.
- Other shipping firms have placed orders for similar vessels.
Why it’s important: Because it’s a global industry—with approximately 90% of the world’s traded products traveling by sea—ocean shipping has typically been less receptive to transitioning to new energy sources, Danish Minister of Industry Morten Bodskov said, according to the article.
- For example, “[i]n June, a group of 20 nations supported a plan for a levy on shipping industry emissions. But China, Argentina and Brazil were among the nations pushing back against such an idea.”
Climate goals: Maersk aims to be “climate neutral” by 2040, making the green-methanol vessels a key part of its approximately 700-ship fleet.
However … “[A]nalysts are worried that Maersk and its competitors might struggle to find enough supply of green methanol. The fuel is scarce and costly to transport.”
The last word: “Manufacturers are leading the way on developing and scaling up new clean energy sources,” said NAM Vice President of Domestic Policy Brandon Farris. “The NAM continues to advocate for policies and programs that foster and encourage that innovation.”
House Passes Emissions-Rules Measure
In a victory for manufacturers, the House yesterday passed an NAM-backed bill that would prohibit states from banning the sale of new gas-powered vehicles, the Washington Examiner reports.
What’s going on: “Lawmakers voted 222–190 to pass the Preserving Choice in Vehicle Purchases Act, which would amend federal law to block state attempts to eliminate the sale of vehicles with internal combustion engines as well as prohibit the Environmental Protection Agency from issuing waivers that ban such sales.”
The background: In recent months, the EPA, National Highway Traffic Safety Administration and state of California have all proposed measures to limit emissions from light- and medium-duty vehicles.
Why it’s important: The range of frequently conflicting regulations is creating confusion and regulatory uncertainty for manufacturers.
- The Preserving Choice in Vehicle Purchases Act would eliminate that confusion by “harmoniz[ing] vehicle emissions standards,” NAM Managing Vice President of Policy Chris Netram told lawmakers. “When manufacturers have regulatory clarity, we can focus on what we do best—innovating, creating jobs and investing in America.”
What’s next: The measure now moves to the Senate.
Preparing the Supply Chain for Future Pandemics
Manufacturers can take specific steps to improve the resilience of the health care supply chain, the NAM’s latest health care study found.
What’s going on: The study—conducted by the Manufacturing Policy Initiative at Indiana University—analyzes data from the COVID-19 pandemic, when manufacturers in the U.S. had to produce large quantities of critical health care equipment under difficult, fast-evolving conditions.
Building resilience: The study found that to prepare the supply chain for a future disruption of similar magnitude, manufacturers should focus on seven areas:
- Speed: Manufacturers must be able to satisfy demand quickly.
- Information: Manufacturers require timely access to accurate information.
- Cost: Firms face the costs of taking action within the supply chain, as well as the costs of managing market unpredictability and policy environment uncertainty.
- Networks: Partnerships can support information sharing and networks to help manufacturers navigate the disruption.
- Size: Supply chain challenges can look different for small, medium-sized and new manufacturers than for larger, established firms.
- Technology: Tech can help manufacturers increase production, improve efficiency and speed up innovation.
- Flexibility: Responses can come from unexpected sources and need a flexible policy environment.
The NAM says: “Policymakers should utilize these lessons to bolster our supply chain for the next disruption,” NAM Chief Economist Chad Moutray said. “This analysis … reveals that there are key policy actions needed to strengthen the manufacturing supply chain. Research shows a more balanced regulatory agenda, with an emphasis on clarity, predictability and coordination, will help mitigate the effects of the next disruption.”
Chevron Now Majority Stakeholder in Hydrogen Project
Chevron Corp. has bought a majority stake in a federal government–supported “green” hydrogen project in Utah that, once completed, will “produce massive volumes” of the renewable energy source, according to E&E News’ ENERGYWIRE (subscription).
What’s going on: Chevron said on Tuesday that it had completed a deal with fuel-storage developer Magnum Development LLC to take over full ownership of the Utah salt caverns where green hydrogen production and storage is set to take place.
- This purchase gives the energy giant “a majority interest in the joint venture that is developing the [Advanced Clean Energy Storage] project.”
- ACES—in which Mitsubishi Power Americas Inc. and private-equity firm Haddington Ventures LLC are also partners—won a $504 million loan guarantee from the Department of Energy in 2022.
- The project is part of a larger effort by Chevron to develop emerging energy technologies through 2028.
Why it’s important: “We seek to leverage the unique strengths of each partner to develop a large-scale, hydrogen platform that provides affordable, reliable, ever-cleaner energy and helps our customers achieve their lower carbon goals,” Chevron New Energies Vice President Austin Knight said in a statement.
- The plan is to make the hydrogen in the salt caverns in Delta, Utah, “for use at a nearby power plant” looking to diversify its energy mix—and aiming to run entirely on hydrogen by 2045.
Another effort: In partnership with ExxonMobil Corp. and Shell PLC, Chevron is also part of a Texas industry group asking for $1.25 billion in 2021 Bipartisan Infrastructure Law funds to construct hydrogen “hubs,” large-scale demonstrations of hydrogen production, transportation, usage and storage.
A model project: “Currently under construction, the ACES project could become one of the western U.S.’s most important demonstrations of what a low-carbon hydrogen industry might look like,” ENERGYWIRE reports.
The NAM’s take: “Manufacturers view clean energy solutions, such as hydrogen, as an important part of our country’s energy present and future—and the industry is used to leading the charge in developing and scaling hydrogen projects for widespread use,” said NAM Vice President of Domestic Economic Policy Brandon Farris.
- “The NAM is committed to ensuring that the hydrogen tax credit and other incentives help build the appropriate market conditions for hydrogen projects to succeed.”
Factory Orders Declined, Shipments Rose in July
Factory orders for manufactured products declined 2.1% in July, after having risen for four consecutive months, while factory shipments increased 0.5%, according to U.S. Census Bureau data.
Orders: Durable goods orders fell 5.2% in July, mostly due to declines in orders of aircraft and aircraft parts.
- However … excluding transportation equipment, factory orders increased 0.8% in July, with durable goods up 0.5%.
- Nondurable goods orders rose 1.1% in the same period.
A spending proxy rises: New orders for core capital goods—nondefense capital goods excluding aircraft, a proxy for capital spending in the U.S. economy—inched up 0.1% in July to $73.60 billion, just shy of the record high of $73.87 billion in May.
- Year-over-year, core capital goods orders have increased 0.8%.
The long view: Orders for new manufactured goods have decreased 0.7% in the past year, with factory orders excluding transportation declining 2.5% year-over-year.
Shipments: July marked the third consecutive month of increases for factory shipments.
- But in the past 12 months, total factory shipments have declined 0.6%, or 2.3% year-over-year excluding transportation equipment.
- Core capital goods shipments fell 0.3% in July, pulling back for the second month in a row from May’s record high of $74.05 billion.
In related news: Economic activity in the U.S. services sector continued to grow last month, with the ISM® Services PMI recording its eighth straight month of growth, the strongest pace since February, according to Markets Insider.
PALIoT Takes on Supply Chain Challenges
Supply chain problems, PALIoT Solutions is coming for you.
This fall, the New-York-state-based startup, whose name derives from a combination of “pallet” and “IoT,” will begin production of its smart shipping pallets. According to company leaders, these products will do nothing less than revolutionize the way food and goods are transported.
From vision to reality: PALIoT cofounders Paul Barry and Richard MacDonald envisioned pallets “whose positive impact on the environment keeps increasing as more of them are manufactured and deployed,” according to the firm’s website.
- To accomplish this feat, the pallets had to be both far lighter and more durable than typical pallets, which are made of wood and nails.
- After significant research and development, Barry and MacDonald came up with the solution: a polyurea-coated, engineered-plywood pallet that was 20 pounds lighter than its traditional peers and contained a proprietary sensor capable of instant communication with the cloud, making inventory tracking a cinch.
The “secret sauce”: “The ‘secret sauce’ is essentially a smart mesh network,” said Barry, who hails from Ireland and has an electrical engineering and investment banking background. “The PALIoT pallets in a shipment will all talk to each other, say, ‘Hey, I’m here.’ And [after shipping,] because they know they’ve been on a truck, they know they have to report all that valuable inventory and environmental data back to the cloud.”
- PALIoT, which will rent its pallets to customers using a per-pallet, pooling model (with an optional subscription service), acquired exclusive global use of the mist® Mesh Networking protocol. This ensures that communication is highly secure and battery sensitive at all times.
- The company estimates it will initially produce between 650,000 and 700,000 pallets a year in the first phase of the launch.
Savings for all: PALIoT’s groundbreaking sensors promise to save buyers both resources and money.
- “Food producers see tens of millions of dollars a year in food waste,” Barry said. With PALIoT technology, those producers will be able to track their perishable food shipments’ temperature and humidity conditions, viewing that information in the cloud so handlers can take swift action to cut down on spoilage.
- And because real-time asset protection is a PALIoT priority, the pallets will help companies cut down on theft and losses. As Barry put it, “If a pallet gets stolen, we will know where and when.”
A “smart” solution: Typical asset-embedded IoT sensors fail long before the assets themselves, making them impractical for longer-term use. Not so with PALIoT’s pallets, which can be used for a decade before they will need to be “retired and recycled,” according to Barry.
- “How can you justify having an expensive piece of hardware with a battery that needs replacing every few years?” he continued. “Using a combination of communications technologies, we’ve been able to solve the key problems of battery life and cost for large-scale asset-pooling companies.”
What’s next: Having recently relocated its manufacturing operations from Colorado to just outside Rochester, New York, PALIoT has its sights set on doing business with the dairy farms of the Northeast. It also plans to expand its manufacturing footprint across the U.S.
- “Demand is not the issue,” Barry told us. ”People just want a better solution, and we think this is it.”