COVID-19 became the brutal left hook that knocked out the manufacturing sector in 2020. It was an uneven fight. The pandemic disrupted supply chains, shrunk demand for high-value goods – such as primary metals, industrial machinery, and automobiles – and labor shortages completely “manu-fractured” an already-struggling sector. Although the purchasing managers’ index (PMI) has been signaling recovery (it posted 53.4 in October[i]), the auto industry across the US, EU, Japan, India, and China has been cutting production[ii]; Consumer Packaged Goods (CPG) is recovering, but demand patterns have changed drastically, setting off a nervous scramble to align with customer needs; and the metals industry is bracing itself for a price collapse led by a surplus in supplies[iii].
2020 is turning out to be difficult overall – but with an alluring upside. The effects of the pandemic have ignited urgent innovation. The fault lines in global supply chains are being mapped, answers surrounding the unpredictability of labor are being found, and the induction of advanced technologies is heralding new efficiencies.
Manufacturing is steaming ahead, and the pace of innovation is encouraging. The last six months have seen the industry experiencing blistering innovation normally associated with technology companies, banks, and communication providers. As a consequence, tomorrow’s manufacturing industry is likely to develop beyond being resilient. It could become “antifragile,” to borrow a term used by statistician and author Professor Nassim Nicholas Taleb in his book Antifragile: Things that Gain from Disorder. The difference between resilient and antifragile is critical: Resilient businesses can withstand shock; antifragile businesses thrive as a result of stress, shock, failures, and volatility[iv].
2021 - Recovered and Running
For the manufacturing industry, 2021 will be a period to recover, re-invent, and run. Sensors and the Internet of Things (IoT), real-time visibility into supply chains, cloud and analytics, automation, and remote operations will inject agility, intelligence, and efficiency into the sector. When we visit manufacturing plants, customers tell us, “We have set our savings targets but are still exploring ways to get there.” Industry 4.0 technologies like Machine Learning, Artificial Intelligence (AI), and robotics will get them there. These technologies will drive:
- The domestic manufacturing agenda
- Supply chain resilience and business continuity
- New revenue streams to boost sales
- Products that deliver next-gen experiences
- Higher levels of sustainability and eco-friendliness that customers demand
- A greater focus on employee safety
- Efficiency gains in operations
Manufacturing businesses have traditionally been smart. It’s normal to find engineers, wise from decades of experience, say they don’t need predictive analytics. They can simply place their hands on a pump and predict if it will break down. Often, just the hum of a motor is enough to indicate trouble. They don’t need technology to predict failure. These engineers and their experiences are unimaginably valuable. They’re also, unfortunately, irreplaceable. For most, it took over 25 years of experience to get attuned to physical signals. This generation of engineers is retiring. The new generation of millennials does not have the same experience; and manufacturers don’t have the luxury to wait another 25 years to build this level of expertise. The pressure from this retiring workforce is real; the approaching talent deficit is real; the need to fill the gap with technology is real.
Sooner rather than later, all businesses will become technology businesses. CEOs of many banks have publicly stated that they are — or want to be — technology companies with a banking license[v]. That approach has been central to their success in conquering the future. Manufacturers too must stop thinking of technology as being adjunct to the business and, instead, make it core to their business. The meticulous adoption of technology is the safe path to unprecedented success. The time to act is now. Any later, and it may be too late.
For the fleet-footed, 2021 will mark the start of this journey. Currently, we see the 5 Rs defining the manufacturing organization of the future: