
Why UK OEM and solution providers must rethink manufacturing partners, supply chains, operations and logistics
COVID-19 has delivered both market and supply chain upheaval for many OEM sectors and Brexit will exacerbate matters. We still do not know the operating parameters that will be in place on Jan 1 2021. OEMs and their suppliers in particular are vulnerable on several counts. We look at mitigating actions to put in place now.The risks are real and considerable, and the key action is to ensure they do not become an existential threat to your organization. What might Chief Strategy Officers (CSOs) consider? How will Chief Operations Officers (COOs) act? What will Chief Product Officers change?
A growing demand meets supply challenges
The rise in adoption of cloud computing is certainly driving the growing demand for compute, storage, networking, and security across data centres and enterprise server rooms. Service providers, IT services companies, and solution providers will still need to source physical infrastructure components from ODM server manufacturers, branded OEM equipment providers and OEM server appliance companies.These OEM companies will still need to source from component manufacturers and distributors. For such OEM companies that have established distribution systems and globally connected supply chains, the political turmoil in various nations and their stability matters greatly.Expect more disruption from changes in value chains and consumption models
COVID-19/Brexit are themselves subjects for PESTLE analysis. Suffice to say that each of these factors is in play and any one of them is liable to disrupt your processes. It is highly likely that a combination of them will impact every UK manufacturing business, and therefore OEM suppliers too, whether they source and manufacture within the UK or EU.Economic uncertainty and fluctuations due to COVID shutdowns present risks leading to demand volatility and currency variations. Social factors and sentiments in choosing supplier relationships, apart from quality and technological efficiency, are already impacting what gets made and where. The digital transformation of the manufacturing sector of Industry 4.0 initiatives aims to bring greater productivity and efficiency across entire supply chains. While green initiatives are intended to protect the environment, the result is the development of more energy-efficient products, from 3nm chips to alternative cooling options like immersion-cooled servers or natural wind tunnelling. We can only anticipate that this will impact server and rack design and technology.Disruptions abound when we couple these PESTLE factors with changes in consumption models and competitive movements of the players across the entire ecosystem of the ICT industry. Deep-seated changes that only recently appeared a distant possibility are now likely to happen sooner and with more frequency. Developing resilience and agility is a key priority.Addressing the threats to OEMs
Higher component and supplies costs brought on by import tariffs, and logistics bottlenecks due to customs delays, are the two most obvious threats. Tier 1 suppliers are just as susceptible to disruption as OEMs themselves and therefore close collaboration is advisable.Sometimes called “alternate futures”, envisioning different multiple futures is an important step to developing the type of agility needed to successfully navigate the challenges ahead. If business owners and CSOs identify and prioritize uncertainties identified in something like the PESTLE analysis, and then model possible outcomes, they can at least lay down skeleton plans to be fleshed out and implemented should the need arise.Times have been relatively good for the past 20 years or more in terms of a stable manufacturing environment throughout the EU. Procurement then tends to focus solely on costs, value and ease of logistics, while risk assessment is often treated with a light touch.The first line of defence against the oncoming real threats is to draft strategies for risk transfer, avoidance, or reduction now by examining these areas:- Manufacturing partners
- Supply chains and Operations
- Logistics – inbound and outbound
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