Using Advanced Analytics and Data-Driven Insight to Reduce Manufacturing and Supply Chain Vulnerability
Contributed by Suraj Kamath, Director Industry Consulting – Manufacturing APAC, at SAS, a leader in data analytics.
Before Covid-19 upended the region’s economy, manufacturing was one of ASEAN’s most important sectors. In 2019, it accounted for an average of more than a third of the grouping’s GDP. This trend has been driven by the long-term growth of minimum wages in China, leading to orders for more labour-intensive products shifting to less expensive locations.
However, measures adopted by governments to curb the spread of coronavirus infections led to a sharp contraction in manufacturing activity. Manufacturers have had to deal with demand disruptions, as work-from-home measures shifted FMCG demand away from commercial products and packaging to residential. Some sectors have seen demand drop precipitously while others, such as semiconductor manufacturing, are running beyond capacity while trying to keep workers safe. Repeated lockdowns and movement restriction orders have disrupted production and also created supply chain disruptions for downstream industries.
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Data from IDC clearly shows that manufacturing firms which invested in digital capabilities have fared better on both revenue and profit performance than their non-digitally capable peers. Manufacturers themselves seem to have taken note, with many conversations now focused less on foundational capabilities such as digital data capture and dashboarding, to evolutional capabilities such as AI-based forecasting, predictive maintenance and data-driven dynamic optimisation that drive specific organisational priorities.
As Covid-19 moves from being a pandemic to being endemic, economies are gradually opening in order to preserve GDP and growth, accelerating vaccine rollouts while still managing outbreaks with localised, targeted restrictions. It’s encouraging to note that a 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. Manufacturers need to plan capacity strategically, use a tactical approach for their central planning and use local planning for operation.
What Will Be Required?
IDC research indicates that improving resilience in business, operations and supply chain is a top priority for manufacturers. The need for resilience is clear, even beyond the pandemic, with disruptions due to extreme weather events, trade wars, and shifting consumer demand drivers becoming more frequent. Investment moves must be comprehensive and involve the entire organisation, from operations to supply chain, in order to preserve business continuity and consistent product supply in the event of short and long-term disruptions.
The future for the manufacturing industry calls for data and insights to be able to deliver outcomes. In the race to recovery and improving production performance, manufacturers will require innovation, agility, and connected assets, the building blocks for assimilating data and insights for strategic decision-making to bring manufacturing to the next level.
Crucially, this calls for a “data-led” digital transformation which involves a culture shift that may challenge some manufacturers’ mindsets. Driving agility, flexibility and resilience in manufacturing also means that manufacturers need to exit the ‘point solution’ mindset, and think of end-to-end data-to-decisioning platforms. To thrive in an uncertain business environment requires the enterprise to be working off a single-source-of-truth, collaborating seamlessly through a data analytics platform, and integrating data-driven decision models into business processes.
What Must Manufacturers Do To Create A Resilient Supply Chain?
There are several key elements in driving supply chain resilience. First is integrating data from the entire supply chain, including from external suppliers, distributors and point-of-sale data where available. Then, these data elements must be combined with automated AI-based forecasting to derive a highly granular baseline forecast, reducing forecast error to low single digits.
Manufacturers need to simulate multiple possible scenarios based on new data coming in, and have mitigation plans in place for major risks, for example, a major supplier being unable to deliver as expected. Integrating and operationalising these workflows into a digital supply chain twin will provide timely decision support into the purchasing, production scheduling, logistics and replenishment processes.
These elements help build a resilient platform for both manufacturers and suppliers. The way forward for supply chain resiliency is to adopt an end-to-end digital supply chain practice, providing a fully automated feedback loop.
Top Three Priorities For Manufacturers In Supply Chain
The top priorities for manufacturers going forward will be to reduce operational risk and improve resiliency, introduce better operational methods and improve supply chain performance. To do this, manufacturers must plan holistically at three levels:
Strategically, their capacity planning requires them to develop an economic outlook for the business, focused on anticipated future demand. They must create capital investment plans to expand or flex capacity, or remove excess capacity. Then they need to develop detailed production plans for each production facility, to achieve the supply chain objectives, and finally execute decisions & monitor the actual vs planned capacity results.
Their tactical central planning should embrace forecasting quarterly/monthly demand for each market and region, and the development of detailed supply chain plans and production schedules. They must ensure adequate capacity for developed schedules and reduce stock-outs and unsold inventories.
Finally, their local operational planning requires modifying monthly plans to meet weekly/daily realities, managing operations to meet immediate production and delivery requirements, and operating efficiently and safely at minimal cost.
Four Steps To Recovery
The route to recovery lies in four steps. Manufacturers must firstly adopt a holistic view and identify the association of different initiatives. This provides clear guidance on the overall objectives and view of the complexity and dynamics across people, processes, and technology journey.
Next, 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.
The third step is the creation of a strategic plan for innovation. This plan must allow continuous innovation across IT/OT and integrated across platforms of IIoT/AIoT, cloud, and AI. This allows a steady stream of development and road map for products and services.
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 scaling the implementation accordingly. The technology must be able to integrate and build on existing technology investments.
As we adapt to the pandemic and evolve towards an endemic, manufacturers in ASEAN will be pushed to take these critical steps to reduce the plunge in production and ride the upward curve in the oncoming market recovery. Those that invest in the right technology and gain the agility necessary to adapt to the new trading environment will become more resilient and digitally fit for the future.
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Featured photo by Joshua Mayo on Unsplash
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