Many remember when the original equipment manufacturing industry (OEMs) was hit hard during the onset of the COVID pandemic in early 2020. Within many markets, including but not limited to electronics, cars, trucking, and computers, the demand increased dramatically while the labor remained dangerously low. While the initial effects of the pandemic have faded away, its lingering presence can still be felt in 2021. Here are the five biggest challenges that original equipment manufacturers face in 2021.
5 Biggest challenges for Original Equipment Manufacturers
1. Competition for Supplies
As stated above, original equipment manufacturers were hit very hard with global semiconductor shortage in 2020 due to COVID-19. From cars to smartphones, everyone needed semiconductors, leading to a massive shortage in supplies, stemming from large customer demand. Not receiving the necessary components from OEM part sources has all but ground production to a halt. While the supply chain for components is still slowly ramping up, this is leading to manufacturers building to meet customer orders for OEM parts, rather than creating products over capacity. Inventory management and early risk identification of finite supplies could also benefit OEMs by reducing competition for supplies.
2. Limited Production Capacity
The severe lack of components has led to OEMs tightening their inventory management, significantly impacting and reducing the manufacturing capacity. With no OEM replacement part to be wasted, efforts to conserve resources increases the amount of time for products to be made due to wait times. OEMs need to learn how to make more product with less, which is proving harder to do in a market that demands more consumer products. Finding the right process may lead to redesigned products with less material.
Many industries are moving to full automated systems for manufacturing/remanufacturing and full data analysis systems. While this is a move in the right direction, overhead for these kinds of revamps can be costly, especially for OEMs who are lagging behind upgrading their systems. The automatization process can initially be a strain on resources, budgets, and new-product development. In order to counter this, many OEMs contract single vendor solutions as a supply chain partner (such as a 3PL or contract manufacturer). These partners already have automated processes to improve their manufacturing process, business capacity, and efficiency, giving the OEM the ability to upgrade their own systems at their leisure. 3PLs can also provide warehousing for the remanufacturing industry in a variety of product categories.
3. Quality and Labor Issues
Being the only manufacturer of a certain part has upsides, such as being the only producer in a certain market range. However, in the current market conditions, also a nation-wide labor shortage, increasing production on a reduced staff will inevitably cause quality issues or lack of products. Which may in turn lead to dissatisfied OEM customers who may ultimately switch brands. To counter this, OEMs and their 3PLs need to invest in quality management systems. These systems are necessary and can be a large investment that produces savings of up to 50% if complexity and redundancy could be reduced from internal systems. Quality and environmental management systems such as ISO 9001 and ISO 14001 are internationally recognized programs that boost both efficiency and reputation.
5. Loss of Experience
As the older baby boomers are transitioning out of the office floor and younger generations are taking their place, it is evident that there is a prevalent lack of knowledge with those coming in. In some cases, the older generations have been in their position for so long that it has caused there to be no opportunity for the younger generations (Gen X/Millennials/Gen Z) to gain meaningful experience in the OEM industry. Because of this neglect, there is a high level of risk to the industry if no action is taken to close this gap. OEMs need to be more intentional about hiring and training from within rather than focusing on external searches for talent.
In the currently changing societal landscape, challenges for OEMs in 2021 are only going to get harder. But it is the hard work and resolve of this industry that refuses to quit that makes it so impressive, even in the midst of the global shutdown that occurred only last year. In spite of the many challenges ahead, there are still solutions to be found.
One of many solutions that can alleviate much of the struggles outlined above include outsourcing to a reliable 3PL, such as NewStream Enterprises. 3PL’s serve as a source of skilled labor that reduces your turn times with OEM warehousing, distribution, and kitting and packaging for all OEM products. NewStream ensures that all products are completed with ISO 9001 and 14001 compliances, as well as using comprehensive technology integrations to meet your outsourced sub-assembly and assembly needs, including maintenance kits. We invest heavily in all of our employees, preferring to promote from within, so that the level of industry knowledge only increases as we build up our leaders. From vendor-managed inventories to utilizing comprehensive technologies to deliver maximum inventory turns, NewStream Enterprises is positioned to be the best-in-class choice for providing value added services to boost YOUR increasing aftermarket parts sales.