The supply chain interruptions and resulting price inflations of 2021 have made manufacturers switch strategies in 2022, adopting more responsive models to remain successful in a changing market. Analyzing this post-pandemic situation in manufacturing identifies six tech developments that will ensure strong resilience for the years ahead.
1. Cloud computing adaptation means security is embedded
Choosing the right software can be challenging for a manufacturer, especially when technology applications are developing at a rapid rate. Add to this the growing chance of cyberattacks, which means that organizations must constantly maintain and update their security.
Naturally manufacturers want the latest features and enhancements to make themselves competitive. But with so many software platforms involved in running a business, this is complex, labor-intensive, and costly, making it difficult to adhere to a ‘Best of Breed’ approach to business systems and putting security at risk.
One of the main advantages of cloud computing is the ability to have all users in one database. This simplifies control of permissions and access and dramatically improves system security. Manufacturers should look for providers and partners who can offer a solution for all their business processes in one place, with security updates and innovation embedded into the core product.
2. Integrating data for more efficient analysis
Robot orders increasing 67% in Q2 2021 is an indication that connectivity to production machines is high on every manufacturer’s agenda but creating a single source of all gathered data remains a serious challenge for the industry. That is why working with solution providers who can help join the disparate systems will be important to optimizing the collection and analysis of the vast quantities of data generated by systems and machines.
2022 and beyond will see more manufacturers linking manufacturing machines and connected tools into their business systems, so they’ll be able analyze the data within their business solution software. This will give parts of the business access to machine data that they couldn’t see before.
3. Supply-chain management shifts
The pandemic has caused many disruptions in supply chain logistics and change must happen. First manufacturers working to Just in Time (JIT) who have experienced many interruptions will have to consider buffering inventory-critical components to cover erratic supply. This must be done carefully as the size of the buffer needs to move with forecasts and demand, to minimize the impact on cashflow where margins are tight. The use of safety stocks and reorder-point planning are not flexible enough now to cope, so manufacturers will need more advanced calculations based on predicted demand and proven capacity.
Second, many businesses relying on critical, single-source raw material will be forced to change their business models to cope and remain in business. Manufacturers need to look at their supply chains to make them more resilient with all the tools they have at their disposal.
4. Proximity sourcing and more
The once fast, efficient, reliable, and cheap shipping network (accounting for 90% of global trade, 70% of it in containers) was thrown into disarray in 2021. This led to “container-geddon” pushing freight rates to a record highs and prompting some exporters to raise prices or simply cancel shipments altogether.
In 2022, manufacturers will look for greater diversity and flexibility in supplier partnerships, as well as where (and perhaps more importantly how) they source materials, goods, and services. For example, setting up new clusters of national and regional production, also known as “proximity sourcing”, which is an approach clothing retailer Zara is known for. In food and beverage, we’ll see manufacturers focus on building stronger relationships with more local suppliers and those specializing in fresh foods, where shelf-life is particularly short, will invest in small-print vertical farming.
Technology and automation will be important, too. In some cases, additive manufacturing (AM) will help gain manufacturing independence from China and therefore long-haul container shipping. During the pandemic, AM started filling some of the supply chain gaps globally. In fact, the ease at which 3D printers can switch from producing one component or product to producing something completely different makes it easy for manufacturers to address at least a portion of their supply-chain bottlenecks.
But hardware and material innovation have outpaced software development, so software will have to catch up if it’s to appeal to a wider range of manufacturers. In essence, we will see a shift toward shorter supply chains to counteract container-geddon.
5. Increased operational efficiency, data improvements
As customer awareness about sustainability, “green washing”, and carbon emissions is rising, many businesses have been forced to prove their ESG accomplishments and switch some strategies to become more transparent and meet regulatory pressures. At the same time, working from the outside in, governments and the financial markets are making significant investments to address climate change.
To meet these requirements, data will be paramount. For manufacturers this means they will require access to more accurate, detailed, and timely data, not only looking at organization-level emissions, but also granular emissions associated with manufacturing processes, the transport of raw materials and product, and the usage and disposal of products as they come to their end of life.
Being able to report on granular data will be part of doing business going forward, and technology will be a key enabler to capturing, cataloguing, and sharing this data across the value chain. Some manufacturers are already making use of technologies like IoT, Big Data, and AI today, but technologies are advancing at immense speed, and we can expect more tech-driven insights to help companies address sustainability issues going forward.
One thing is certain: sustainability will require measurability, upstream and downstream, and manufacturers will need to leverage technology strategically, not only to drive end-to-end data transparency but also tp report on it as and when needed.
6. Leveraging data for durability and forecasting
Many manufacturing professionals consider data collected in the past two years to be irrelevant – spoiled by the pandemic and supply-chain disruptions. Conversely, industries like food-and-beverage, saw orders skyrocket and may think it best to disregard the unusual data patterns, so they don’t produce overly optimistic (and therefore unreliable) forecasts for the upcoming 18 to 24 months. Both courses of action would be a mistake.
Covid-19 has been a truly global event, affecting demand as well as supply and should not be confused with previous supply chain disruptions, such as the 2011 floods in Thailand, which was much more localized, lasted a relatively short amount of time, and mostly impacted supply, not demand. Manufacturers should learn from their experiences over the past two years: the pandemic is by no means over, and the next disruptive event could be just as unforecastable and sudden.
Using these past data patterns and predictive analytics to run what-if scenarios and analyzing comparable events and simulations will help quantify the likely impact of a potential event on company revenue, and overall performance, as well as the wider supply chain. This will allow manufacturers to focus on the business impact across regions, channels, and customer profiles rather than the event itself. Here, technologies such as machine learning can help dramatically improve forecasting accuracy, minimize human error, and disregard irrelevant data to begin with.
These tech-focused industry predictions and developments will help to mitigate risk in an uncertain post-pandemic world and help to future-proof the industry against any further disruption. Manufacturers that have learned the lessons and can operate in 2022 with experience, insights, and strategies that they have never had before.
Digital technology is enabling businesses to level up their service, increase flexibility, and form quick manufacturing responses in a future that – the recent past has shown – we can never predict.
Maggie Slowik and Andrew Burton are Industry Directors for Manufacturing at IFS, an enterprise software solution developer and supplier of ERP, EAM, FSM and ESM platforms to businesses worldwide.
