One of the few certainties of 2020 is that attitudes to risk have changed, including in logistics. The fragility of complex global supply chains, based on the pursuit of the lowest manufacturing cost, has been exposed, leading to increased interest in reshoring. Resilience has become the new Holy Grail.
As we enter an economic downturn, how should manufacturers in the highly competitive tire sector respond to this new landscape? It might be tempting to adopt a ‘hibernation’ approach, but lack of investment now will surely store up consequences for later. Instead, tire producers should scrutinize their operations, rebalance their capacity in the most appropriate locations and focus on improving those processes where investment will have the most impact.
Reshoring of manufacturing
An emerging trend to help achieve supply chain resilience is the reshoring of manufacturing capacity – or, perhaps, near-shoring to the continent or region. Reshoring can be direct (moving production back home) or indirect, where an organization decides to increase capacity at home instead of abroad. Even before the complications imposed by the pandemic, there were a number of drivers for reshoring, such as rising labor costs in offshore locations, customer expectations of shorter lead times and the need to customize products for local consumers.
Some reshoring has taken place over the past decade – as rising wage costs in China and other previously low-wage parts of the world eroded the benefits of offshoring – although this was more evident in the United States than in Europe, due largely to lower energy costs in the US. Reshoring is not without difficulty or cost, however. Many nations have lost key manufacturing skills due to previous offshoring, so they can face labor and skill shortages, as well as more stringent health and safety regulations in their home market.
Automation slashes inventory
Higher labor costs, skill shortages and the need to modernize existing plants all point to an obvious solution: automation. Within a tire factory, automated material handling systems can connect the various production processes to enable a more efficient material flow. Materials arrive at each process step just in time, cutting out delays and bottlenecks. This avoids the need for large buffers between the process steps, reducing work in process and inventory levels dramatically – and thereby, crucially, reducing risk and building the resilience that can deliver competitive advantage in the future.
Cimcorp’s Dream Factory solution, for example, is an end-to-end automated handling solution for tire factories that optimizes material flow while providing total control, real-time visibility and full traceability. Dream Factory enables optimal utilization of a tire plant’s most valuable process systems, such as the building machines and curing presses. At Sentury Tire’s factory in China, for example, Dream Factory increased plant utilization from 72% to 96.5%
Sweating brownfield assets
In a downturn, reshoring is likely to lead to investment in brownfield plants rather than greenfield sites. How does this affect manufacturers’ ability to automate? Well, brownfields are undoubtedly trickier for all kinds of investment but the modular design of Dream Factory lends itself to installation in existing plants, even if the building layout is antiquated and constrained. The solution is highly space-efficient, with a layout typically taking up to 50% less space than in a conventional tire factory. By retrofitting automation in a brownfield plant, tire producers can avoid the cost of a greenfield site and sweat their existing assets.
As well as concentrating investment in those areas where it will deliver most impact, manufacturers need to prioritize those investments with the fastest return on investment (ROI). Dream Factory scores highly here, with its modular design concept allowing rapid installation, early production start and reduced time to market. At Tigar Tyres‘ plant in Serbia, for example, payback began only 9 months from order placement, while at Sentury Tire’s factory in Thailand the first line delivered began production just 12 months after groundbreaking and subsequent lines took just a month each to install.
As globalization crunches into reverse gear, automation and digitization will be the means by which tire manufacturers build smarter and more resilient supply chains.
Author Don Heelis