Building the Powerful Near Term Future of Manufacturing with the 5 Rs
December | 2020
COVID-19 became the brutal left hook that knocked out the manufacturing sector in 2020. It was an uneven fight. The pandemic disrupted supply chains, shrunk demand for high-value goods – such as primary metals, industrial machinery, and automobiles – and labor shortages completely “manu-fractured” an already-struggling sector. Although the purchasing managers’ index (PMI) has been signaling recovery (it posted 53.4 in October[i]), the auto industry across the US, EU, Japan, India, and China has been cutting production[ii]; Consumer Packaged Goods (CPG) is recovering, but demand patterns have changed drastically, setting off a nervous scramble to align with customer needs; and the metals industry is bracing itself for a price collapse led by a surplus in supplies[iii].
2020 is turning out to be difficult overall – but with an alluring upside. The effects of the pandemic have ignited urgent innovation. The fault lines in global supply chains are being mapped, answers surrounding the unpredictability of labor are being found, and the induction of advanced technologies is heralding new efficiencies.
Manufacturing is steaming ahead, and the pace of innovation is encouraging. The last six months have seen the industry experiencing blistering innovation normally associated with technology companies, banks, and communication providers. As a consequence, tomorrow’s manufacturing industry is likely to develop beyond being resilient. It could become “antifragile,” to borrow a term used by statistician and author Professor Nassim Nicholas Taleb in his book Antifragile: Things that Gain from Disorder. The difference between resilient and antifragile is critical: Resilient businesses can withstand shock; antifragile businesses thrive as a result of stress, shock, failures, and volatility[iv].
2021 - Recovered and Running
For the manufacturing industry, 2021 will be a period to recover, re-invent, and run. Sensors and the Internet of Things (IoT), real-time visibility into supply chains, cloud and analytics, automation, and remote operations will inject agility, intelligence, and efficiency into the sector. When we visit manufacturing plants, customers tell us, “We have set our savings targets but are still exploring ways to get there.” Industry 4.0 technologies like Machine Learning, Artificial Intelligence (AI), and robotics will get them there. These technologies will drive:
Manufacturing businesses have traditionally been smart. It’s normal to find engineers, wise from decades of experience, say they don’t need predictive analytics. They can simply place their hands on a pump and predict if it will break down. Often, just the hum of a motor is enough to indicate trouble. They don’t need technology to predict failure. These engineers and their experiences are unimaginably valuable. They’re also, unfortunately, irreplaceable. For most, it took over 25 years of experience to get attuned to physical signals. This generation of engineers is retiring. The new generation of millennials does not have the same experience; and manufacturers don’t have the luxury to wait another 25 years to build this level of expertise. The pressure from this retiring workforce is real; the approaching talent deficit is real; the need to fill the gap with technology is real.
Sooner rather than later, all businesses will become technology businesses. CEOs of many banks have publicly stated that they are — or want to be — technology companies with a banking license[v]. That approach has been central to their success in conquering the future. Manufacturers too must stop thinking of technology as being adjunct to the business and, instead, make it core to their business. The meticulous adoption of technology is the safe path to unprecedented success. The time to act is now. Any later, and it may be too late.
For the fleet-footed, 2021 will mark the start of this journey. Currently, we see the 5 Rs defining the manufacturing organization of the future:
Responsible:Â Employee safety and well-being have always been high on the agenda of manufacturing organizations. The culture of safety and sustainability will accelerate. Customers will also seek to build trust on the provenance of their products. Recyclable components, the use of renewables, and the transition to a circular economy will create the foundation for all manufacturing. For many organizations, simple solutions can make a disproportionate impact. In one instance where research showed that customers of SAS felt that flying sabotages their lifestyle, we came up with a unique concept for the delivery of food. Everything the customer got was in modular, recyclable packages. Customers were free to choose what they wanted in the quantities they wanted, adding convenience, and reducing food and material waste.
Responsive:Â The linearity of products will diminish. Instead, we will have products that constantly respond to evolving customer needs by using higher software inputs. Products will follow the example of mobile phones where the hardware is unchanged, but applications are added/upgraded to improve the utility and performance of the device. For example, we implemented a SaaS-based IoT platform for a global construction equipment manufacturer. The equipment remained the same with the addition of IoT sensors, but the results were noteworthy: The client recovered 45 stolen vehicles, reduced service operation cost by 15 percent, and improved end-user loyalty by 12 percent.
Reliable: Products and operations will drive reliability without an exponential increase in cost. Industry 4.0 technologies like Machine Learning, analytics, and automation will help achieve this, ensuring that products don’t break down – and that when they do, the downtime is minimal. At 91żě»îÁÖ, we have numerous examples of using technology to drive reliability. For example, our interventions reduced product returns by 50% percent and upped asset utilization by 5 percent for one of the world’s largest aluminum producers.
Resilient: It will be critical for operations and supply chains to cushion the impact from unexpected global-scale events. This will give rise to local sourcing, local partnerships, and local manufacturing capabilities. Local will no longer be a political agenda; it will illustrate an underlying strategy to support resilience. 91żě»îÁÖ went one step beyond local sourcing to reinforce resilience in the operations of an Oil & Gas major. We leveraged additive manufacturing to reduce downtime resulting from critical parts shortages. This also eliminated the dependency on suppliers in scenarios of unexpected and urgent requirement of spare parts.
Re-skilled: The other 4 Rs can be achieved only when the workforce is re-skilled to use — and become comfortable with — technologies like Analytics, Robotics, AI, and Virtual Reality (VR) to augment human capability. One of our clients in the Hi-Tech space has benefited from the impact of re-skilling. The field services team of the OEM was trained to use our Augmented Reality (AR) solution that resulted in a reduction of repeat dispatches by 50 percent and further enabled savings of 40 percent in warrant costs/part replacement.
When the 5 Rs come together, the manufacturing organization of the future is born. Organizations like these have innovativeness and competitiveness woven into their DNA. They’re ready to extract outsized growth in productivity. And they keep customers happy every time their products and services are used.
References:
[i]
[ii]
[iii]
[iv]
[v] https://www.ing.com/Newsroom/News/We-want-to-be-a-tech-company-with-a-banking-license-Ralph-Hamers.htm
Ankur Pawa
General Manager and Global Head
Digital and Consulting, Manufacturing
Ankur provides leadership for the Digital business in Manufacturing globally and serves as a trusted partner to executives on their Digital transformation journey. He is an avid believer in the power of Digital and its profound impact on business. He brings a deep understanding of IoT, Cloud, Design Thinking and AI/ML in Manufacturing to help customers tap into Digital’s full potential. Ankur has a long-standing global career spanning P&L roles, VC investment, and management consulting with Fortune 500 companies and high growth, mid-sized companies, with a strong focus on business transformation driven by emerging technologies.
