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Industry Trends

Driving manufacturing excellence with an efficient and flexible supply chain that supports your business objectives is challenging. Minimizing inventory and lead times while maximizing the top line with quick-to-market new products is crucial to staying ahead of the competition. Learn how important business trends are impacting companies in your industry.

Reducing Costs to Increase Gross Margin
Electronics and electrical equipment manufacturers continue to look for ways to further streamline operations and eliminate waste and cost. Many companies are pursuing reduced operating costs and increased flexibility in manufacturing by implementing continuous improvement initiatives such as lean manufacturing and Six Sigma. These operational methods are aimed at eliminating unnecessary processes in not only the manufacturing processes, but all supporting processes as well. This has a significant impact on finished goods inventory since significantly less product will be stored at distribution centers (DCs) as companies can quickly make many models of product.

These processes result in smaller quantities of each SKU being shipped to the DC, but much more frequent shipments from the factory to the DCs. Transit time between the manufacturing locations and the DC must be minimal in order to keep adequate stock levels at the DC ultimately to meet customer demand.

Increased Use of Global Manufacturing
In order to be cost and price competitive in the market, manufacturers are increasingly moving component and/or final assembly production to facilities outside of the U.S. This is especially true for labor-intensive products where labor rate differences are substantially lower outside of the U.S. Overhead operating expenses are significantly lower as well, resulting in a much lower overall cost structure. Substantial savings for high-volume materials can be realized from procuring components and raw materials from Asia. The shipping complexity of sourcing product from overseas has created new challenges for companies who have traditionally only used domestic suppliers.

Shipping costs can increase substantially as a result of global vendors, manufacturing sites, and customers. High-value, low weight, and/or sensitive products like electronics products generally are shipped by air, while heavier, lower-valued products are shipped via ocean. Customers must evaluate the added inventory carrying cost and transit time when evaluating shipping choices from international locations.

Immediate Availability of Product
Customers demand and expect product to be shipped immediately upon request. Build-to-order products (made to customer’s specifications) are requested with very little time for manufacturing and delivery. Manufacturers must be extremely responsive to these needs as well as last-minute changes. Manufactures must invest in product designs that are well suited for quick manufacturing and be supported by effective order management, planning and procurement, and manufacturing processes. Flexibility in all these processes provides the ability to change as needed by the market place.

In addition, quick response for replacement product is expected by the customer. With the function of electronics and electrical equipment providing power, light or communications to an industrial, commercial or residential setting, malfunctions cause immediate hardship to the customer. Manufacturers must be prepared to provide the specific product needed by the customer at a moment’s notice.

Consolidation of Electrical Wholesaler and Distributors
The electrical equipment manufacturing industry’s products are generally sold through electrical distributors or industry wholesalers. Not only do they select which manufacturer’s products to stock and advertise, they also control the volume of product readily available to the end-user. These companies typically work on a very low margin, making it challenging for the small privately owned distributors to be profitable. As a result, the largest distributors have been acquiring the small independent distributors to gain market share and market dominance. Using large centralized distribution centers, they can service the market by quickly moving product to service locations across the U.S.

This results in changing shipping patterns for outbound product from the manufacturer. It may result in larger shipments to a regional distribution center or in many smaller shipments to individual distributor locations. Ultimately, it may impact the production and supply chain cycle and the need for added flexibility within it to quickly respond to market demand created by wholesalers/distributors.

Industry Programs & Events

FedEx frequently provides complimentary educational programs for customers in the manufacturing sector. Participants gain insight from experts with new ideas on important supply chain issues. Look for upcoming activities in your area.

National Manufacturing Week
Chicago, Illinois, September 2007
FedEx joins thousands of manufacturing professionals at the annual National Manufacturing Week event each year in Chicago. At the 2006 event, FedEx engaged attendees in leading sessions on lean logistics, international trade and RFID uses and applications. Members of the National Manufacturing Association are eligible for exclusive shipping discounts on FedEx express, ground and LTL shipments. Learn more about NAM at http://www.nam.org. Make your plans now to join us at the 2007 conference and trade show.

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Industry Associations

National Association of Manufacturers (NAM)
The Association for Manufacturing Excellence (AME)
National Electrical Manufacturers Association (NEMA)
Electronics Supply Chain Association (ESCA)
Manufacturers Alliance