It’s been a rough year for the traditional supply chain, which according to Merrill Lynch has become ripe for disruption. Demand for the products made with a network of specialized partners around the world has soared, and as a result, more of the global supply chain that comprises the bulk of global manufacturing has been affected by a decline in quality, delays in product availability, or both. In a report titled The Rise of New Growth Corridors, Merrill Lynch cites various economic drivers including China’s increasing influence on world trade, internet-based services that previously couldn’t be delivered in real time, and growing consumer demand in emerging markets as reasons why conventional manufacturing and supply chains are under pressure.
A number of companies that don’t rely on traditional manufacturing methods and have direct access to newer markets, services and suppliers are faring better than traditional manufacturing giants.
ExxonMobil has been present in Africa for more than a century, but the company has also steadily expanded in recent years. Exxon opened its largest refinery on the continent in March in the Algiers refinery complex in Ivory Coast. It currently employs about 650 workers, and plans to invest $4 billion in the next five years, according to a company representative.
Robert Kraft, owner of the New England Patriots, is a model for the company as it spans international borders. His stake in Kraft Foods, which encompasses brands like Oreo, Trident, and Smartfood, makes it a direct customer to Kraft Heinz. Kraft’s Ben & Jerry’s ice cream is also sold around the world.
“You can have multiple flavors like you can in China, you can have many volumes, you can have a wide availability of products across the globe and the consumer here does understand that,” said Ken Tanz, Kraft Foods’ chief marketing officer. The concern for companies in traditional supply chains—namely, that they will find their products in less than ideal supply chains—is one that shareholders should be aware of, Merrill Lynch notes. The traditional supply chain relies almost exclusively on production by companies that aren’t closely interconnected.
At first, this can be viewed as a disadvantage because more production lines might mean more difficulties in meeting market demand. However, Howard Hartl, chief executive officer of the Wayzata, Minn.-based brokerage BrokerageSystem.com, says that there are advantages to companies that do not have traditional manufacturing.
“In high performance manufacturing, there is no efficiency tradeoff because high-performance manufacturers actually maximize their supply chains,” Hartl says. “Manufacturers can gain competitive advantages because they have another method of delivery and the companies that use standard manufacturing can’t overinvest in high-performance manufacturing because they’re already too deep in their manufacturing chain.”
Through high-performance manufacturing, companies can gain efficiencies, analyze supply chain risks better, and add quality and value to products by buying in more than one location. The field could be larger than apparel or sports equipment, Hartl says.
“It’s a very new field and you can find many opportunities in high-performance manufacturing,” Hartl says. “When you have higher performance manufacturing, you can actually avoid some of the pitfalls of the lower-performing supply chain, and you can be part of the solution.”