OMCO SUMO Insights
As we head into the summer of 2022, global supply chain and labor issues continue to affect most manufacturers. The war in Ukraine has wide reaching impacts on materials and energy. Covid lockdowns are back in the Shanghai area — the center for China (and global) manufacturing of bearings and other important components used in food & beverage processing and packaging equipment.
Food processing companies short on labor are often facing long waits for installation of food and beverage automation equipment. Food & Beverage original equipment manufacturers (OEMs) are dealing with longer lead times for bearings and other components and assemblies. Pricing and shipping costs are higher. There’s a general rush to find alternative suppliers. Even among the largest OEMs. There’s pressure on manufacturers to compromise on standards for materials, processes, and sustainability. The silver lining is that the impact on global logistics offers the opportunity for development of new and better global supply chains and collaboration.
For Food & Beverage OEMs, managing procurement and supply chain in the current environment can be even harder than in other industries. The food and beverage industry has guidelines or requirements on materials such as food-grade stainless steel, special blocks, seals and lubricants. Stainless steel equipment is essential in food and beverage processing and packaging. Engineers can’t just swap it out with another material. Stainless steel prices and lead times are high. Russia and Ukraine account for 7.5% of global iron and steel exports, and Russia is a major global producer and supplier of nickel. Some stainless steel buyers right now are just focused on getting the material, with pricing as an afterthought.
And there is intense customer and investor focus on sustainability in the Food and Beverage industry. Manufacturing and products must be sustainably made with ESG (Environmental, Social, Governance) goals in mind. Leading OEMs are doubling down on their ESG goals and standards, even amid current supply chain and labor challenges. For example, JBT Corporation, a leading manufacturer of food and beverage equipment, just issued in April 2022 its First Comprehensive ESG Report outlining key achievements in four focus areas: Sustainable Solutions, Operations, People, and Governance. “JBT’s advanced process and application knowledge allows us to engineer innovative products and solutions to help our customers in their sustainability journeys. Our products…are helping some of the largest companies in the world take meaningful steps toward achieving their environmental goals.”
Even after current events are resolved, what are the chances something else will happen again that impacts regional or global supply chains? No procurement organization can prepare for all possible contingencies. But knowledge, trackable metrics, and transparency are the foundation of any strategic sourcing and supply chain strategy. Its especially important for Food & Beverage OEMs to have clear, ongoing metrics on all suppliers. No one wants to be surprised by low-quality shipments or negative supply chain publicity.
In the real world of trading agencies, inter-company trading, and sub-manufacturers, who really is making your components and assemblies? What materials and processes are they using? Are they really sustainable? Not every bearing buyer is aware that most bearing brands rely on a complex supply chain, often with numerous workshop factories that feed product to larger suppliers. Compromises on materials and processes commonly occur without explicit direction and oversight. For more information, see OMCO SUMO’s recent article “Top Five Mistakes Bearing Buyers (Unknowingly) Make to Cut Costs.”
Buyers need an objective source of data (at the company and factory level) to verify how and where the product is made. To address this critical need, OMCO SUMO launched in 2Q21 our proprietary ESG Ratings Report for Chinese Ball Bearings. This quarterly report is based on our decades of on-the-ground operations, close partnerships and sustainable sourcing throughout China and Asia, including detailed information about the ESG footprint and activity at hundreds of bearing and subcontracted component factories, brands they supply, and all local certifications.
There’s lots of pent-up demand for automation and other equipment for food and beverage processing and packaging. To meet it OEMs need to develop a truly global, sustainable, resilient and redundant supply chain for key components (like bearings). Options may include manufacturing in China, India, Taiwan, and US manufacturing and assembly. And there are opportunities to consolidate suppliers and reduce costs and process steps by incorporating bearings and other components into castings, mounts, or engineered assemblies. We’d love to hear from you about ways OMCO SUMO can support your food & beverage equipment strategy with manufacturing and sourcing of bearings, value-added engineered assemblies, conveyor chain, and other motion-related solutions.
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OMCO SUMO is a manufacturer and global OEM supplier focused on ESG and sustainable sourcing for bearings, engineered assemblies, and motion-related components across all industries requiring mechanical power transmission. Established in 1964, with our extensive experience and global supplier networks from over 50 years in business, we are deeply knowledgeable and passionate about helping customers achieve sustainable sourcing and ESG goals, focusing on both the integrity of product performance and the corresponding influence on human rights, the environment, and fair business practices. OMCO is the first and only provider of proprietary ESG ratings within the power transmission industry covering an extensive and expanding network of manufacturers throughout Asia that provide high-quality lower-cost products, and often sharing the same supply chain with well-known premium brands without the accompanying overhead. Our goal is to support our customers with transparent values-driven business practices that help achieve sustainability of the triple bottom line: people, profit, and planet.