Manufacturing is at a turning point. Still recovering from the impacts of the pandemic, the industry now faces immense geopolitical and economic disruption. In the opening plenary session of the Power of Unified Manufacturing event, Stefanie Naujoks, IDC, Research Director, Manufacturing Insights Europe and CGI’s Annette Trenz, Helena Jochberger and Nicole Zethelius explore some of the key challenges manufacturers face in today’s volatile and uncertain global market and the role of technology and data in overcoming them.
This article provides highlights from the discussion.
Data ecosystems, standards and frameworks
It will no longer be enough for manufacturers to work independently in the future. They will need to collaborate in ecosystems and share data to improve the customer experience, product quality and shop floor operations. However, sharing data requires standardization and frameworks to ensure data sovereignty.
The good news is that several initiatives address standardization in the industrial context. “A key aspect of sharing ecosystem data relates to establishing trust, which is a subject of concern and the focal point of many conversations with manufacturers,” says Stefanie. She cites Gaia-X in Europe as a promising initiative of a data ecosystem that supports data sharing in a secure and trusted environment while ensuring data sovereignty. Helena cites Catena-X as another good example of an industry-wide data ecosystem. While challenging, both ecosystems rely on businesses working together to achieve agreed outcomes and a commitment to common goals that are strong enough to bring value to its participants.
Collecting data is never an “end goal,” but a means to achieve various goals, including sustainability, says Helena. Moreover, data ecosystems will be critical for manufacturers to generate new revenue streams while transforming, which the 2022 CGI Voice of Our Clients (VOC) reveal is a focus area for manufacturers. She adds that collaborative ecosystems underpinned by data can also support organizational resilience in today’s dynamic and volatile environment.
However, manufacturing is transforming at a much slower pace compared to other industries. According to this year’s VOC insights, manufacturers are 8 percentage points behind the all-industry average of 25% in producing results from their digitization strategies. This slow progress is of particular concern given the considerable challenges ahead, including sustainability.
The business value of sustainability
Unsurprisingly, sustainability is top of mind and has emerged as the top trend and business priority for manufacturers in the 2022 VOC results.
“Sustainability is no longer an added value; it is an imperative,” states Nicole, noting that manufacturers must address emerging environmental sustainability and climate change legislation. “Companies will need to prove externally—with validated data—their activities around environmental, social, anti-corruption, diversity on company boards as well as sustainability factors on product governance, such as reducing carbon emissions and circularity,” she says.
A significant lever to accelerate the transition to cleaner energy is the Green Deal, which is pushing manufacturers, financial institutions and other large companies to reduce their emissions by 35% by 2030. “The manufacturing industry needs to collect environment, social and governance (ESG) data along their entire value chain, not only to report and mitigate but also to make scalable change in these areas,” says Nicole and adds that it “all boils down to actionable data.”
In the past, manufacturers designed products based on cost and performance, but in the future, sustainability and recyclability will be the USPs, with technology as a key enabler. “Utilizing digital technologies and platforms enables manufacturers to reduce CO2 emissions in the supply chain, decarbonize production and engage in initiatives that relate to reselling or reusing components,” says Stefanie. Helena adds that user behavior will also need to be considered when rethinking how products are produced.
Building supply chain resilience
The pandemic and recent geopolitical disruptions have revealed the fragility of supply chains. “The need to adapt supply chains to become more resilient is imminent,” says Annette. Stefanie says for some manufacturers local sourcing can be an option and part of the overall sourcing strategy. “However, what we are seeing is manufacturers are increasing stock levels or “safety stock” to prevent production standstills rather than actually relocating sourcing. Likewise, de-globalization strategies are failing because of skyrocketing energy prices,” she adds.
This year’s VOC findings confirm that de-globalization and repatriating production are not significantly high-impact macro trends for manufacturers. However, half of the manufacturing executives are looking to reconfigure their supply chain in some form.
For supply chains to become more resilient, manufacturers must make them more transparent and agile, says Stefanie. Some strategies to improve supply chain agility include flexible transportation options, product design supported by multiple sourcing of components, inventory strategies like sharing warehouse capacity and supply diversification on all three tier levels. Technologies such as cloud, IoT, data analytics and automation play a key role in enabling supply chain resilience.
Addressing demographic and social changes
Another critical challenge relates to social demographic changes, including aging populations and talent shortages. Paradoxically, with digital acceleration, the industry urgently requires skills for new technologies. “The industry needs to rethink the integration of underrepresented populations into the labor market and reconsider new learning and training concepts,” says Annette. Stefanie adds that in addition to meeting skills gaps, manufacturers need to enable new ways of working (remote or hybrid) and ensure a uniform employee experience for all.
With multiple generations comprising the workforce today, manufacturers face the new challenge of meeting each group’s needs. Helena says this can be addressed through motivation, leadership and a long-term learning mindset.
Can sustainability help in attracting new talent? Nicole says companies must consider ways to bridge the skill gap and invest in their employees and communities. “Businesses that are more transparent, inclusive and engaging with their employees are showing lower attrition rates,” she notes. More sustainable companies will appeal to the “Purpose Generation”.
Practical steps to secure future success
- Ensure resilient operations: “Manufacturers must ensure they have resilient operations, not just in terms of their supply chain, but also a resilient workforce and back-office operations. They must have capabilities and strategies in place to build upon any change conditions,” says Stefanie.
- Acquire relevant and actionable data: Manufacturers need to go beyond short-term decision-making and “carbon tunnel vision,” says Nicole. Emerging legislation, geopolitical instability, supply chain disruption, the rise of carbon trade and shifting consumer behavior are all intertwined in corporate sustainability. Relevant and actionable data can help navigate these shifts and balance economic, environmental and social pillars within the business.
- Adopt data-driven scenario planning: While data is vital, contextual data must not be overlooked as it helps build different scenarios. “The world is unpredictable, so we need to work in approximations, which is why we need different scenarios. And while the reality may diverge from the scenario, the approximation can help make us more resilient,” says Helena.