Building Resilient Supply Chains: Key Factors for Success

In today’s fast-paced and ever-changing business landscape, the resilience of supply chains stands out as a critical determinant for success. Disruptions can be unpredictable due to unforeseen circumstances requiring companies to adapt quickly and build robust supply chains capable of weathering challenges and ensuring optimal continuity.

Recognizing its importance, CONNSTEP recently commissioned a report from global consultancy firm Ernst & Young to evaluate the supply chain resilience in Connecticut’s aerospace, shipbuilding, and medical device sectors. The state’s three highly concentrated manufacturing business sectors collectively employ over one-third of its manufacturing workforce.

The report examined four pivotal factors influencing supply chain resilience across these sectors: innovation, in-state sourcing of manufacturing inputs, employment/workforce pipeline, and cost considerations. Here are some key insights from the assessment: 

Innovation

While Connecticut ranks among the top three states nationwide in innovative research activity, its performance in commercializing research and product development throughout the supply chain lags behind, positioning it in the mid-range among states. This underscores the potential for substantial returns on investment in efforts to drive innovation further down the supply chain.

Connecticut OEMs source a smaller percentage of their complex inputs from in-state suppliers compared to counterparts in other states. This trend is influenced by the high-cost business landscape of Connecticut, leading many suppliers within the three sectors to specialize in producing commoditized items like machined metal products. While these products are integral to OEMs’ operations, they often encounter pricing pressure over time, potentially leading to reduced sales unless accompanied by increased product innovation.

In-state Sourcing of Manufacturing Inputs

The sourcing of manufacturing inputs locally or within the state offers advantages such as reduced transportation delays, mitigated geopolitical risks, and bolstered support for the local economy. Advanced components from their suppliers with industry and OEM-specific certifications, a strong manufacturing pipeline of highly skilled labor, and access to innovation networks can help sustain this type of sourcing among the three business sectors.

From a number’s perspective, aerospace OEMs in Connecticut currently procure approximately 20% of their inputs from local suppliers, marking a decline of nearly 7% since 2011, with an anticipated flat trajectory in the coming years. Similarly, the shipbuilding and medical device sectors source around 10% and 9% respectively of their manufacturing inputs from Connecticut suppliers, slightly lower than the nationwide average for each industry.

Employment/Workforce Pipeline

Despite a healthy workforce across all three manufacturing sectors, Connecticut has experienced a slight decline in employment in two of the sectors. In aerospace, employment in Connecticut declined by less than half of 1% compared to national growth of just over 1%.

Employment in medical devices in the state dropped just over 1.5% compared to the nationwide decline of just under half of 1%. Conversely, shipbuilding in Connecticut experienced a 4% increase in employment compared to 2% nationally, largely driven by submarine production and maintenance.

Aging and retirement are also concerns for Connecticut manufacturers including those evaluated for the assessment. The good news is that despite the aging of the state’s supplier workforce, new talent continues to enter the aerospace, shipbuilding, and medical devices industries.

Cost

Connecticut’s high-cost environment to live and work poses challenges across various fronts, including housing expenses, which exceed those of benchmark states by 5-14%. As a result, increased housing costs and the high cost of living in Connecticut can potentially drive up wages demanded by employees.

Rising operating and raw material costs, coupled with increasing competition from out-of-state, were identified as significant hurdles for suppliers in the state. These escalating costs and competition present the greatest challenge to most suppliers’ operations in Connecticut including their ability to hire and compete for talent.

Conclusion

Supply chain resilience is imperative for navigating today’s complex and volatile business environment. Prioritizing innovation, local sourcing, workforce development, and cost-effective risk management strategies enables companies to fortify their supply chains against disruptions and maintain workflow continuity. Embracing these key factors not only enhances operational efficiency but also fosters long-term sustainability and competitive advantage for Connecticut manufacturers.

Click here to view the full Ernst & Young assessment report on supply chains in Connecticut’s aerospace, shipbuilding, and medical device sectors.

Source: Ernst & Young “Innovate to Compete” assessment report for CONNSTEP, February 2024

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