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Top 8 Supply Chain Challenges for Growing Product Manufacturers

Cole Dansie

Jun 4, 2021

Scaling as a product manufacturer is never easy, and is always far from simple. There are plenty of supply chain challenges that remain a constant hurdle for every company growing their product. But there are also emerging complications that every product manufacturer needs to be aware of.

Scaling as a product manufacturer is never easy, and is always far from simple. There are plenty of supply chain challenges that remain a constant hurdle for every company growing their product. But there are also emerging complications that every product manufacturer needs to be aware of.

We have compiled what we view as the greatest challenges for growing product manufacturers in 2021. Recognizing, understanding, and meeting these obstacles will be essential for the successful commercialization of any product.

Top Supply Chain Challenges of 2021:
1. Taxes & Tariffs
Tariffs are a substantial cost many growing product manufacturers do not consider until it is too late. The Office of the U.S. Trade Representative announced it will extend tariff exclusions on certain imports from China till Sept. 30th, 2021. Once that extension ends, many manufacturers might be hit with new importation costs they haven’t experienced since the start of the pandemic. Without an expert team in place, navigating the HTS codes is incredibly time-consuming and bears the risk of unplanned costs if any mistakes are made.
When it comes to taxes, scaling product manufacturers must keep in mind that each U.S. state has a different tax rate that they will be held responsible for. Though you do not need to watch for changes in taxes as often as tariffs, one mistake can lead to disaster domestically.
2. Increasing Resiliency
Most product manufacturers have focused on lean sourcing over the last decade. An unintended result is that many are operating with less safety stock, striving for just-in-time inventory replenishment. With the prevalence of single-sourcing, one disruption can easily lead to their product missing from shelves

3. Superficial Supply Chain Understanding
Last year revealed that many product manufacturers have only a surface-level understanding of their sourcing, shipping, importation, warehousing, and distribution. With continued supply chain disruptions in 2021 (from the Suez Canal to component shortages), it is becoming increasingly vital that product manufacturers have a comprehensive understanding of their product’s journey from sourcing to sales. Otherwise, the next disruption could cripple their supply chain in unexpected and unmitigated ways.
4. Need To Expand Sources
While focusing on creating as lean of a supply chain as possible, many companies have practiced single sourcing for materials or complete products. One optimal way for companies to build resiliency is by expanding their supply chain sources to mitigate the risk of interruptions.
Being able to manage the cost of expanding sourcing to strengthen the supply chain will be a challenge for many product producers and likely reliant on cultivating the right partnerships.
5. Understanding and Meeting Customer Expectations
We have already reached a point where many customers consider paying for shipping as a thing of the past. Even next-day or same-day shipping is considered to be a given rather than a unique benefit.
Understanding what your customers consider “standard” within your field is essential to being competitive in the marketplace. Having an established line of communication back-and-forth from your company to your customer is the best way to have a reliable understanding of their expectations
6. Decentralized Shipping
In 2020, three-quarters of domestic freight was transported by truck. The trucking industry remains vastly decentralized.
Product manufacturers need to have optimized strategies for working with multiple independent trucking firms. Having the ability to collect, compile and analyze data from multiple partners is a major challenge facing product manufacturers.
7. Transportation Capacity
There is no denying that the United States currently has a truck driver shortage. Right now, over 55% of drivers are over the age of 45 and the number of new workers joining the field cannot meet the rate of those retiring. Adding to the transportation congestion are backed-up ports (see graphic for current wait times at port), and cargo trapped in factories without containers or vessels to ship the goods overseas. These issues are expected to continue throughout 2021. 8. Continued Disruptions
The pandemic coming to an end does not single the end of disruption to the international supply chain. One major risk continues to be natural disasters. In 2020, 3 million acres of forest burned in the California Wildfires, a record number of named storms hit the Gulf of Mexico, and Southeast Asia experiences an unusually long monsoon season. Manufacturers can expect and need to prepare for, weather disruptions globally in 2021. Currently, a shortage of semiconductors has crippled some auto manufacturers. This shortage is a prime example of how one component disruption can cause an entire industry to almost buckle. Not to mention the unforeseeable delay caused by the blockage of the Suez Canal. In short, the number and variety of disruptions in 2021 has already been incredible and product manufacturers should be prepared for continued strains to their supply chains

Successful Commercialization:
Successful commercialization in 2021 will require tackling these challenges. Each one can cripple a growing product manufacturer's chance of successful scaling. Starting the process of commercialization without having a plan to overcome these hurdles will most likely lead to disaster.

The key to meeting these obstacles will be having the right people in the right place at the right time. Growing manufacturers will be relying on the expertise of their supply chain management team more than ever this year. But with labor shortages, the inherent cost of building such a team, and the time commitment needed to train a highly-skilled SCM team will mean partnering with the right company is the best option for most product manufacturers.
Working with Vessel will be the success factor for many scaling product manufacturers. Schedule a meeting with our team to see how easy commercialization can be with the right team in place.

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