What manufacturers can do to avoid the pitfalls of another “black swan event”? IAA’s interview with Suraj Kamath, Director Industry Consulting – Manufacturing APAC, SAS, discusses these issues and more.
As Covid-19 moves from being a pandemic to being endemic, economies are gradually opening to preserve gross domestic product (GDP) and growth. Majority of manufacturers in ASEAN are gearing up and starting to make investments to position for the returning increased demand.
From a supply chain perspective, over the next three to four years, ASEAN manufacturers’ main concerns will be increased competition, increased internal costs, and demand variability.
IDC research indicates that improving resilience in business, operations, and supply chain is a top priority for manufacturers.
IAA’s interview with Suraj Kamath, Director Industry Consulting – Manufacturing APAC, SAS, discusses these issues and more.
1. What are the key factors manufacturers need to keep a watch for in 2022?
Suraj Kamath (SK): Over the past two years, the manufacturing sector has been badly hit by the pandemic. The shift to Work-from-Home meant FMCG demand switched from commercial products and packaging to residential demands.
One of the best examples is the toilet paper panic. It was not just that the supply was low and consumer anxiety was high, but a key factor was that demand shifted exponentially and dynamically. The typical demand for larger rolls for commercial buildings switched to smaller rolls for residential and consumer use. The pandemic was a “black swan event” – an unpredictable event where demand suddenly changes depending on the markets, supply and channels as well as the packaging. The supply chain just could not respond to such a dynamic shift. Such events while unpredictable, may also become more frequent, arising out of future political, climate, and societal risks and being able to respond effectively is essential for manufacturers.
The other key factor is that the pandemic will continue to pose a challenge for manufacturers in 2022. Lockdowns and other health precautions may continue to keep workers away from factories and contribute to supply chain disruptions. To survive, manufacturers have to be flexible and resilient. While 2022 may see the region’s classification of Covid pivot from pandemic to endemic, a return to pre-pandemic normality is highly unlikely. The manufacturing sector must still anticipate operational disruptions and be ready to find and deploy innovative solutions to meet the challenges.
2. What are the foreseeable challenges with the returning increase in demand?
SK: Manufacturers have already learned a lot about managing remote and hybrid workforces, and have taken steps to streamline their operations. They will need to maintain this focus on efficiency since the return to growth in demand, while the pandemic is still affecting workforce availability, is sure to cause bottle-neck situations.
I hope not to see factories closing down as we go forward, but the pandemic will continue to cause unpredictability in workforce availability, so manufacturers need to become expert at managing a hybrid working environment effectively and efficiently.
Also, as borders start reopening and governments ramp up vaccination rates across the globe, manufacturers will meet stiffer competition, higher costs, and demand variability.
Demand variability means manufacturers must learn to be dynamic and able to respond to sudden changes in the demand for goods. One good example is the toilet paper panic, mentioned above.
Supply chains must be more flexible and able to turn on a dime when demand changes.
3. How can businesses use advanced analytics to avoid disruption to their operations and supply chains?
SK: One of the key factors in staying resilient in 2022 is the importance of investing in digital capabilities. IDC predicts that by 2023, one in three companies will generate more than 30 percent of their revenues from digital products and services.
Manufacturers who are not ready to embrace digital themselves seem to have taken note, with many conversations now focused less on foundational capabilities such as digital data capture and dashboarding, and more on evolutional capabilities such as AI-based forecasting, predictive maintenance and data-driven dynamic optimisation that drive specific organisational priorities.
Businesses can leverage on analytics to look at demand forecasting. Analytics allows businesses and manufacturers to visualise data to spot patterns and gain insights related to sales, shipments, pricing and time to market for example. They can even use analytics to optimise transportation costs and create scenario planning to better manage resources and improve operational efficiency.
4. What technology and data strategies can be adopted to keep manufacturers ahead of the curve?
SK: Manufacturers need to adopt the following technologies to stay ahead of the curve:
- Using data to drive decisions
Data integration is key. That means data needs to be aggregated and available for analysis from the entire supply chain, including from external suppliers, distributors and point-of-sale. As manufacturers plan their data strategy, they have to be thinking what decisions they want to make based on the data, and build a data analytics framework and infrastructure around that.
- Technologies around Artificial Intelligence (AI) and Machine Learning (ML)
Artificial Intelligence (AI) and Machine Learning (ML) are going to be key technologies for manufacturers to stay ahead of the curve. The technology is easily available and much more accessible today for manufacturers. It is imperative that AI and ML become part of the analytical models that underpin the decision-making process. The models have to be embedded and operationalised in decision-making processes and their data strategy.
- Move to the cloud
Data sharing across supply chain participants is critical for manufacturers to achieve both visibility and responsiveness, and it is imperative that they utilise the cloud to provide that platform. We have seen increasing numbers of manufacturers moving to the cloud over the last few years as they realise the benefits it brings to them in these challenging times. Cloud will continue to be a technology that manufacturers have to embrace.
5. How can manufacturers be digitally prepared for the challenges of 2022 in order to be agile in the new fast paced trading environment?
SK: As manufacturers embrace the challenges of the new year, they need to look at three critical elements:
- The right mindset
Manufacturers have to adopt a digital first and a data driven mindset, and invest in digital capabilities to yield greater returns on investments, even if it’s hard to quantify at the start.
- Technology as an enabler
Manufacturers must firstly adopt a holistic view and identify how different initiatives are associated. This will provide clear guidance on the overall objectives and give a view of the complexity and dynamics across the people, processes and technology journey.
They must streamline and prioritise internal and external data points. This means establishing a clear data strategy and process of integration for internal and external data points, to gain insights toward the overall landscape and identify opportunities and areas for optimisation.
They will also need to create a strategic plan for innovation. This plan must allow continuous innovation across IT/OT and be integrated across platforms of IIoT/AIoT, cloud, and AI. This allows a steady stream of development and a road map for products and services.
- Build a true digital roadmap, starting with a valuable use case and execute quickly
Finally, they need to identify and apply a technology layering investment approach – identifying quick win use cases and technology that can assist in solving problems and then scaling the implementation accordingly. The technology must be able to integrate and build on existing technology investments.
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