Creating a More Resilient Supply Chain

Global shortages are hitting virtually every part of the composite supply chain. Prices are rising, and emerging industries are pushing the limits of available materials. With the supply chain causing concern well before the global COVID-19 pandemic wreaked havoc by shutting down borders, manufacturers have begun to recognize that the traditional approach to supply chain management must change. A lack of logistics transparency has proven particularly problematic in the complex composites supply chain. “I think the COVID-19 pandemic was eye-opening for everybody,” points out Thorsten Wuest, assistant professor for smart manufacturing at West Virginia University. “It unveiled the underlying issues that have been building for quite a while.” One of the primary issues is limited visibility into the supply network. Greater supply chain visibility allows companies to track raw materials, components, sub-assemblies and final products as they move from supplier to manufacturer to consumer – from production to end use. Having access to the inner workings of their supply chain helps companies make informed decisions about their operations and reveals possible risks in the existing chain. It can also open doors to new business partners, as members of the Utah Advanced Materials & Manufacturing Initiative (UAMMI) have learned. UAMMI is driving a nationwide effort to connect composite manufacturers with customers and strengthen localized supply chains to help companies respond more quickly to changes in demand. Despite the current challenges, including raw material shortages, there are ways for companies to build new levels of supply chain resiliency by assessing their manufacturing ecosystems, digitizing information and evaluating and growing their pool of suppliers. Ultimately, they can gain greater control over their supply chain, remain competitive and ensure that customers have the right products at the right locations and the right time. Weathering Supply Shortages As is the case for many industries right now, composites fabricators and their clients are witnessing a range of raw material shortages and resulting price hikes. For example, prices for styrene and petroleum-based composite materials began climbing even before winter storm Uri hit the Gulf Coast in February 2021, shutting down U.S.-based refineries and petrochemical plants key to resin supply. Babu Vineeth, vice president of the Composites Association of New Zealand, reports limited availability of resin options due in part to supplier monopolies among Asian material suppliers. While the U.S. trade war with China drove delays and price increases around some Asia-sourced materials, China’s increasing consumption of the materials it once largely exported is adding to supply bottlenecks. Supply delays from China have led to an extreme shortage of fiberglass rovings, Vineeth adds. “It is something that composites players are absolutely keeping an eye on,” says Brandon Fitzgerald, director of client engagement for Lucintel, a global management consulting and market research firm specializing in the composites industry. “There's less supply coming out of the Asia-Pacific region that was once a hub of low-cost raw material for the rest of the world. Now they're consuming much more internally, and that's leading to certain price increases globally.” This shift in consumption also impacts carbon fiber availability, as short-tow fibers are largely sourced from Asia. “It’s very hard to source materials for specialist applications, including aerospace-grade carbon fiber,” Vineeth says. “Local suppliers never stock it and, in most cases, there is significant lead time from overseas.” Material availability isn’t the only impediment manufacturers face. Fitzgerald notes that local and regional freight bottlenecks – particularly in the U.S., where the trucking industry has been hit hard by labor shortages – have made it increasingly difficult to procure certain raw materials cost-effectively. Today’s global shipping container shortage, driven by COVID-induced border shutdowns and trade imbalances, is only adding to the existing problem. Keeping all this in mind, Wuest notes that composites fabricators have the added difficulty of managing some raw materials’ comparatively short shelf life. “They do not last forever,” he says. “That might cause issues with demand in the downturn, especially in industries where they use prepregs.” Vineeth says local manufacturers are adapting to these risks by increasing their raw material stock levels. “Most local suppliers have placed advanced orders with overseas providers to avoid supply delays,” he says. Fitzgerald echoes this sentiment. “A lot of people are putting in orders right now because they want to try to get ahead of the price increases they see coming as a result of shortages in the market,” he says. “People have backup suppliers, they have tertiary suppliers, they have emergency plans – but now they're having to resort to them and it's creating additional costs.” At present, suppliers seem to be passing most costs on to customers, but in some industries those customers are struggling with their own challenges in meeting demand. Evaluating the Ecosystem OEMs face tremendous disruption today, and that should give manufacturers reason to pause. Management consulting firm Oliver Wyman is projecting that the COVID-19 pandemic will impact the aviation industry’s growth for the next decade. Boeing has already reduced its 10-year market outlook for new aircraft by 11%. In automotive manufacturing, plant closures due to COVID followed by critical semiconductor shortages are causing production delays to mount. In the midst of these delays, virtually all major automotive OEMs are beginning their transition to electric vehicles. This move is driving component manufacturers to reevaluate their offerings to remain competitive. Given these changes, Wuest suggests now is the time for composites companies to evaluate their manufacturing ecosystems. Typically, industries with only a few suppliers or consumers have a vested interest in keeping the entire ecosystem healthy, he notes. It’s not uncommon for OEMs or Tier 1 suppliers in some industries to actively talk to their competitors about sharing components. “They try to find a solution together because they all know if that supplier goes bankrupt, they are all left without anyone that can produce the quality product needed,” Wuest says. There is already a great deal of collaboration along the composites value chain, Fitzgerald adds. “It's not easy to work with composites, and there are knowledge reservoirs in different places, so there's a lot of collaboration that happens throughout the value chain.” As manufacturers touch base with suppliers in the year ahead, Fitzgerald advises asking about the health of these companies and determining how to support them during these disruptions. “Provide your supplier with your material forecasts well ahead,” Vineeth advises. For suppliers, he suggests, “Work along with customers and plan production and supply arrangements based on their forecasts. Inform customers well ahead if the expected delivery dates are not achievable.” In today’s challenging supply environment, information is valuable. “Sharing data is sharing power,” Wuest says. “Everybody proclaims that data is the new gold, yet most have not figured out how to use that gold.” Growing Digital Connectivity Parimal Kopardekar, director of the NASA Aeronautics Research Institute, offers a suggestion for better deploying data. “Lack of digital network connectivity to lower tiers have challenged demand aggregation and forecasting-related considerations,” he says. “If lower tier suppliers could understand the forecast better, they can aggregate the raw material sourcing much more efficiently. Sharing the demand forecasting with lower tiers is critical to overall efficiency and throughput.” He suggests that a lack of credible forecasting and forecast sharing is partly to blame for the limited supply of carbon fiber materials and resins available to meet automotive and aerospace demand in particular. “Lack of high-volume production with high-quality materials continues to be a bottleneck,” he adds. Shifting to a digital network will be key to providing stronger data. However, Wuest warns that while digitization provides useful transparency into supply chain movement, it doesn’t ultimately improve the way companies source. Simply applying disruptive technologies to drive improvement, Wuest cautions, is an overly simplistic approach. “If you use advanced technology in an old and not very aligned process, it's a very high-tech bad process,” Wuest points out. “You need to revisit your processes and reimagine how they should look, and then technology will provide the means to do it.” Wuest advises suppliers to reimagine processes by putting the customer at the center of the transaction and determining how to give that customer the best experience possible, á la Amazon. Digitized solutions, and the data transparency they afford, can then help create a better customer experience. More digitized supply chain solutions will also support manufacturers in finding alternate materials to reduce bottlenecks – a potential win for smaller manufacturers. “I think performance-based characterization will help [manufacturers] look for alternative products where different composite make-ups could be useful,” Kopardekar says. “If you look at end-to-end advanced air mobility systems, composites could have a significant play at vertiports, aircraft, seats and many other areas. Composite manufacturers can focus on how they can offer substitute materials that will meet the performance in wider industries, targeting horizontal growth in adjacent industries.” Expanding Your Supplier Pool Vineeth agrees that manufacturers should think about alternate sources. “If possible, try to source locally available alternatives or modify the process to utilize an alternative grade of products,” he says. However, finding those alternates has traditionally been difficult in the composites industry. That too is changing. In late 2019, the Utah Advanced Materials & Manufacturing Initiative formally launched the supply chain database tool it had been developing for years to connect the state’s small and rural manufacturers with business opportunities and bolster localized supply chains, which helps companies reduce the risk of waiting on overseas orders and become more nimble in responding to fluctuations in product demand. With support from the Utah Industrial Resource Alliance and other organizations, UAMMI launched CONNEX^™ UTAH, an online supply chain tool to connect manufacturers with advanced material and manufacturing suppliers across the state and, through its integration into the National Association of Manufacturers’ Manufacturers Marketplace, the world. Suppliers can also connect on the CONNEX marketplace to find buyers seeking their services. The initiative, which was born in part out of a Department of Defense grant focused on improving the supply chain for critical defense industry components, included approximately 150 composites and advanced materials manufacturers when it was launched. That has since swelled to more than 8,000 companies across all of Utah’s manufacturing industries. The system has become a template for several other state-based databases. Among many other features, CONNEX hosts an exchange center where manufacturers list a need and member suppliers are notified of the opportunity. “For example, Northrop Grumman needed to find someone with a vertical turning lathe that could mill parts from 30 to 80 inches,” explains Alan Davis, creator of CONNEX UTAH. “The supplier had to have certain certifications and meet other criteria. The application notifies suppliers that this opportunity is out there.” The result, Davis adds, is a tool that provides visibility to suppliers and supports even small suppliers in building connections with large customers. This visibility has been sorely lacking, says Davis. CONNEX’s first test case helped one of the state’s largest manufacturers source a specific composite component. The company was ready to award a $70 million contract outside of the state, having scoured Utah for suppliers that could meet its specific needs. After running a quick, filtered search through CONNEX, the company found its ideal supplier, carrying all required certifications, government clearances and fabrication capabilities. The supplier was located within two miles of the manufacturer’s facility. “They had the excess capacity, they had everything they needed to deliver the contract, they just didn't know the opportunity was there,” Davis says. Access to data is a key way for suppliers to attract the attention of manufacturers that are pivoting to respond to supply chain disruptions. It also provides small manufacturers insight into their supply chain risks. “There's functionality in the CONNEX platform that allows users to visualize their supply chain, which has really been important, particularly to the smaller manufacturers that don't typically have access to that kind of a tool,” Davis explains. “Within CONNEX, you can visualize your supply chain, and we'll flag any issues.” This might include single supplier risks, a particularly useful feature as CONNEX can then identify alternate suppliers, as well as companies that might be on a government watch list. “This is an area of risk that’s particularly difficult for most organizations to see because a Tier 1 supplier doesn’t often have much visibility into Tier 2 and hardly any visibility into Tier 3,” Davis notes. Looking to the Future In rethinking processes, Wuest sees promise for an issue that’s long been discussed within the composites supply chain – recyclability. Factoring in the shortage of raw materials today and a strengthening commitment to climate change from manufacturers across all industries and nations, he sees particular promise for a project soon to launch within ACMA. Wuest is among the researchers examining reverse supply chains to see how products at the end of life can be remanufactured in a “more sustainable, more value-adding way, instead of a value-reducing way.” The project is taking a two-pronged approach. “We are developing a new method to remanufacture composite parts, then we will deploy a decentralized supply chain to bring together sources and consumers of the remanufactured parts to replicate a cascade model,” Wuest explains. The cascade model refers to stages within a product lifecycle, specifically recovery, remanufacturing and end of life. “Remanufactured products still provide value,” Wuest explains. “So they stay in the cycle longer and can reduce the impact on the environment.” More importantly, remanufactured products may someday provide a sourcing alternate for manufacturers that currently only have access to raw materials. Fault lines have been growing in the composites supply chain. The global pandemic simply shone a light on existing problems – and solutions. “We've all been scrambling during the pandemic to figure out what do about our supply chain,” says Davis. “In truth, the solution has been in the works for the last eight or nine years. We don't have to start from scratch. We can start from where we are, which is a wonderful thing.” This begins with a shift in mindset. Manufacturers can continue to operate the way they do today, passing cost increases to customers until they reach a breaking point. Or they can decide to invest in a change, touching base with key partners up and down the value chain to determine how they can add value. “Supply is often seen as a cost factor and not necessarily as a value-added operation,” Wuest says. “I think that mindset is shifting now, and the pandemic is probably partly to blame – or praise – for that. It has brought supply chain issues to the forefront. People are now talking about it, understanding that maybe we need to think, as a nation, about what we want to have direct access to and control over.” These conversations about risk and value should likewise be taking place among composites industry manufacturers and suppliers.