As a product manufacturer, scaling is far from simple. There are plenty of supply chain challenges that remain a constant hurdle and shift continuously.
We have compiled our view of the greatest challenges for growing product manufacturers in 2021. Recognizing, understanding, and meeting these obstacles is essential for the successful commercialization of any product.
Top Supply Chain Challenges of 2021
1. Taxes & Tariffs
Tariffs are a big cost that 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 until Sept. 30th, 2021. Once the extension ends, many manufacturers may be hit with new importation costs. Without an expert team in place, navigating the HTS codes is incredibly time-consuming and bears the risk of additional 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 are held responsible for. However, changes in tax do not happen as often as changes in tariffs.
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 a product missing from the 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 channels. With continued supply chain disruptions in 2021, from the Suez Canal to component shortages, it is becoming increasingly important 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 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 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 is a challenge for many product manufacturers and relies 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 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 from your company to your customer is the best way to have a reliable understanding of expectations.
6. Decentralized Shipping
In 2020, three-quarters of domestic freight was transported by truck. Because 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 shortage of truck drivers. 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, ports are backed-up (see graphic for current wait times at port) and cargo is trapped in factories without containers or vessels to ship overseas. These issues are expected to continue throughout 2021.
8. Continued Disruptions
The pandemic winding down does not signal the end of disruption to international supply chain. National disasters persist as a major risk. 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 experienced an unusually long monsoon season. Manufacturers should expect and 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 a disruption with just one component can affect an entire industry. The number and variety of disruptions in 2021 has already been incredible and product manufacturers should prepare for continued strains on their supply chain.
Successful Commercialization
Successful commercialization and distribution in 2021 will require tackling all of the above challenges. Each case can cripple the chance for growing product manufacturer to achieve scale. Starting the process of commercialization without having a plan to overcome these hurdles will likely lead to vast challenges.
The key to meeting these obstacles is having the right people in place at the right time. Growing manufacturers will rely 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 team, partnering with a company such as ourselves is the best option for most product manufacturers.
Working with Vessel is 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.