MIT Forum for Supply Chain Innovation launches Manufacturing Innovation Consortium

The MIT Forum for Supply Chain Innovation has launched the Manufacturing Innovation Consortium in its latest effort to unite academics and industry members.

The consortium will be directed by the Forum’s Technology Advisory Board, which was formed in mid-2012.

The consortium will bring together members of the global manufacturing and retail industry to collaborate on industry challenges and share research insights in data science, technology and supply chain optimization conducted by the Forum’s founder, MIT professor David Simchi-Levi.

“There are two major trends: labor cost and risk,” Simchi-Levi said in a recent interview. “There is increasing risk of supply chain disruption in part because of successful lean initiatives. But there is also risk in offshore locations due to a significant increase in labor cost in developing countries. For a period of about 10 years, costs in china year over year were up almost 20% while in the US over the same period we saw an annual increase of only 3%. If companies made sourcing decisions 10 years ago in an effort to move to low-cost manufacturing locations they probably need to revisit those decisions.”

Automation factors heavily into labor considerations, since the proliferation of automation throughout the world means costs are less about where an item is produced. “It is not about low cost manufacturing,” Simchi-Levi said, “it is about people who interact with technology.”

Organizations join the MIT Forum to evaluate whether they need to change their manufacturing strategy, and, as Simchi-Levi noted, there is a clear trend toward re-shoring. In September of 2012, a survey of about 300 manufacturing companies asked if they were considering moving manufacturing facilities from overseas back to the US. At the time, 31% did not respond at all, citing sensitive strategic concerns. Another 33% were considering re-shoring, and 15% had already made the decision to move.

The survey was repeated in 2014 where about 13.5% again said they had already made the decision to move some manufacturing stateside. Those considering made up 18% of respondents. “That is still a big number, and a big impact,” Simchi-Levi said. “It is a change in the way companies manage the supply chain.”

What the survey does not tell you, Simchi-Levi said, is what kinds of jobs are coming with the facility, or the number of jobs there will be once combined with new automation.

More importantly, product characteristics should inform the structure of a network, according to Simchi-Levi. “Upstream and downstream integration across the supply chain is not enough,” he said. “There are interactions between the regular supply chain, which is concerned with the flow of product, and the development supply chain, which has to do with new product introduction. When we think about integration, it’s not just in the physical world. It’s about continuity between the development supply chain and the fulfillment supply chain. One affects the other.”

Data science and machine-learning techniques can have a profound impact on current industry business models and can quickly help companies achieve a competitive advantage, Simchi-Levi said. “I look forward to sharing the Forum’s insights and research with our Manufacturing Innovation Consortium and getting feedback to help direct our research agenda.”