Intro
Manufacturing industry is having another watershed moment after its first one introduced by the automobile assembly line almost a 100 years ago.
Manufacturers need to transform themselves into asset-light companies, with localized operations, and a strong customer focus. Digital technologies will drive these initiatives, making for more resilient, innovative, and intelligent manufacturers. Manufacturing industry’s digital journey is imperative for recovery post COVID.
How COVID changed everything for Manufacturing
The global manufacturing Purchasing Managers’ Index (PMI) from IHS Markit has slumped from 47.3 in March to 39.7 in April, its lowest since the height of the global financial crisis in March 2009.
The automotive industry reported over 90% plant shutdowns and it will get back to 2019 sales levels only in 2021, according to several forecasts.
Aircraft manufacturers and their suppliers stare at a bleak future as airlines have put their orders on hold. Stalled infrastructure projects imply that the industrial machinery business will take a long time to rebound as also the associated construction, housing, and other segments.
Only selective chemical industries supplying to pharmaceuticals, hygiene and personal protection industry, and agricultural business provide a silver lining.
The manufacturing industry is unique in its absorption of digital – from products with software-enabled features to harnessing the abundance of data from connected smart products and assets, enterprise operations and customer engagement. This makes the manufacturing sector a very large consumer of digital capabilities and the high digital quotient provides a lever to transform business operations.
The concept of ‘agile manufacturing digital enterprise’
While agility in manufacturing is not new, in the post COVID-19 era, it will evolve with the distinct characteristics and driven by digital journey.
Manufacturing has led many other industries in digital transformation investments. The discrete and process manufacturing industries together spent an estimated $340 billion on technologies and services that enable digital transformation – IDC .
- Reducing friction in manufacturing value chain: Manufacturing industry shall adopt a model where research, design, build, manufacture, sales, and service can be conducted anywhere. This requires companies to develop networked businesses beyond one-to-one collaborative engineering, contract manufacturing, or distribution rights.
- Creating resilient supply chains: Supply chains will become more cognitive and automated (machine first), sensing risk on the supply side as well as shifts in demand patterns.
- Adaptability: The product mix will evolve rapidly in response to market stimulus.
- Consumer-driven business models: A blurring of boundaries between industries, largely around customer-centric constructs, will push companies to build partner ecosystems that satisfy the demand for ‘frictionless experience’ by end customers.
- B2B2C business models: Manufacturers seek to get closer to the end customer and own the experience for life in order to capture value.
Future Manufacturing Enterprise
Another aspect of the future manufacturing enterprise is how the entire ecosystem and value chain will regain its equilibrium once the initial turbulence caused by the COVID-19 crisis settles down. In its wake, a new multi-layered system dynamic, or manufacturing world order, will arise. It is highly unlikely that the form and shape of the operating model or value chain will be the same as before.
Technology will play a key role in defining the business, customer experiences, and product or service behaviors of the agile manufacturing enterprise. Not only will the firms need to demonstrate resilience to come out of the crisis, but they will also need to adapt their business and operating models for the future and initiate multiple transformation interventions.
- Resilience through strategic cost management: This is because cost optimization has been a dominant theme of competitive advantage for manufacturing enterprises for a long period of time and will continue even in the post COVID-19 era. This trend will be further accelerated by establishing global economies of scale, lean thinking, and increasing levels of automation, among others.
- Adaptability through new services, processes, and technologies: Firms that started early on their digital journey will ride out of the crisis faster. A strong technology backbone that includes planning for automation and cybersecurity will help firms in supply chain and manufacturing operations cope with the aftereffects of the pandemic.
- Purpose-driven transformation: The COVID-19 pandemic will restructure and redefine the roles and responsibilities of future manufacturing enterprises in whatever form – be it connected and autonomous systems, predictive and prescriptive diagnostics, products and assets-as-a-service – for long-term gains.
Manufacturing firms that are focused on personalizing products, have established platforms to leverage ecosystems, and harness data to build insight-driven enterprises will stand out from the rest.
IMSS 3A Digital Strategy for Manufacturers
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