Manufacturing reimagined: from improved productivity to profitable growth

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Katy George, Senior Partner, McKinsey & Company


  • Manufacturers are revamping their growth strategies as COVID-19 continues to cause uncertainty.
  • Maximizing productivity is no longer enough.
  • Instead, they should look to Fourth Industrial Revolution technologies to increase resilience, sustainability and growth.

Global disruptions and instabilities, supply-chain breakdowns, and heightened customer demand for digital-first experiences are speeding the Fourth Industrial Revolution (4IR) forward. While the COVID-19 pandemic continues to drive significant uncertainty, manufacturers are revamping their growth strategies with a renewed appreciation for how operating models determine strategic outcomes.

Maximizing productivity is no longer enough. To support any hope of lasting competitive advantage, companies know their operations must achieve more than ever before: stronger resilience, faster innovation, higher customer satisfaction, more-engaged workforces. And it all needs to happen at once.

That means making the most of digital transformation across the entire manufacturing organization, including support functions. Whether it’s ahead of the digital curve or lagging behind, no manufacturer is immune to the automation revolution that COVID-19 is accelerating. But to truly reimagine manufacturing for a sustainable, digitally-infused future, companies must find pathways that extend value through novel customer experiences, with scalable technology that supports the business goals.

That’s a tall order when the majority of organizations have struggled to prove attractive return on investment and move beyond pilot-testing technology, and have little to show despite efforts to digitally transform. In fact, 74% of companies reported getting stuck in pilot mode in the past year—a sharp increase compared to 56% in 2019.

What do the companies representing the other 26% have in common? They took bold steps to embrace agility and innovation, integrating transformative 4IR technologies across multiple facets of their operations. These frontrunners comprise the Global Lighthouse Network, which now includes 54 lighthouses representing 4IR leaders in advanced manufacturing.

They represent players in sectors including semiconductors and automotive, consumer packaged goods, and medical products, and even process industries such as mining, and range in size from established global blue-chips to businesses with fewer than 100 employees. They also include both brownfield sites that have been upgraded, as well as new greenfield builds. Their success shows that regardless of a business’s size, digital transformation is possible and the resulting growth is sustainable.
manufacturing, production, coronavirus, pandemic,

What is the World Economic Forum doing to help the manufacturing industry rebound from COVID-19?

The COVID-19 global pandemic continues to disrupt manufacturing and supply chains, with severe consequences for society, businesses, consumers and the global economy.

As the effects of coronavirus unfold, companies are asking what short-term actions they need to take to ensure business continuity and protect their employees. How should they be preparing for the rebound and increasing their manufacturing and supply systems’ resilience?

The World Economic Forum, in collaboration with Kearney, brought together senior-level executives from various industry sectors to identify the best response to the COVID-19 crisis. Their recommendations have been published in a new white paper: How to rebound stronger from COVID-19: Resilience in manufacturing and supply systems.

Read the full white paper, and more information in our Impact Story.

Companies are invited to join the Forum’s Platform for Shaping the Future of Advanced Manufacturing and Production. Through the Platform’s work, companies can join with other leaders to help find solutions that support the reconfiguration of global value chains post-COVID-19.

Several factors play crucial parts in the successful adoption of 4IR.

Shift from an atomistic to a holistic approach

Technological advancements have accelerated our ability to “test and learn.” Many organizations, however, have found themselves stuck in this phase. The activation of 4IR technology can’t occur in a silo: business processes, management systems and people systems will continue to evolve together as they are integrated with a digital system. Therefore, engaging the broader organization is how true digital transformation occurs.

Lighthouses move with speed beyond individual use cases, integrating several together into broader applications that compound the collective impact. The testing and learning process is fast: just four to six months is enough time for a minimal viable product to show real value. Then the team scales what works and scraps what doesn’t.

At a 60-year-old plant in the US, Schneider Electric implemented 4IR technologies such as augmented reality, remote monitoring and predictive maintenance to achieve a complete end-to-end transformation of its operations. Deployment of new software has increased visibility into operations, reducing unplanned machine downtime and eliminating 90% of paperwork. The changes start with the supplier network and reach end-to-end through to customers, improving customer satisfaction by 20%, raising demand forecast accuracy by 20%, and reducing energy costs by 26%.

These changes do require targeted investment. While initial use cases can still be hosted on legacy IT infrastructure, for example, more advanced ones require capabilities that most legacy infrastructure is not able to provide. But advances in analytic tools often mean that the additional infrastructure required is relatively modest. Moreover, scaling successfully usually goes hand-in-hand with the establishment of a clear governance structure built on a foundation of capabilities that brings together pockets of skills from multiple parts of the organization. These human factors matter at least as much as the hardware and software decisions the company makes.

Keep the workforce at the core of digital transformation

Indeed, contrary to headlines about robots replacing human workers, the opposite is true—the adoption of 4IR technologies actually creates more new jobs. What changes are the tasks workers undertake. This means that the main effect of increasing automation is not to replace jobs, but to redefine them—changing the skills and capabilities workers need to perform them.

Ways of working are also evolving at lighthouses. The imperative for rapid development and deployment of new solutions requires companies to accelerate the adoption of agile methodologies, using small, cross-functional teams and rapid, iterative processes. The critical link lies in companies’ ability to upskill talent at the same scale and pace as technology.

The skill profiles of their entire organizations will likely shift. For example, advanced manufacturing roles that require a combination of deep domain expertise and digital skills—such as analytics translators or product owners—would change a company’s long-term talent strategy, necessitating the need for in-house capability building. The most successful manufacturing companies have defined learning journeys for different roles, and encourage employees to go above and beyond those journeys through continuous learning and exploration of areas of interest.

Strategies like tiered pathways for upskilling ensure workers remain connected, integrated, and directly involved with transformations, while equipping workers with the expertise needed to contribute to future innovation.

Image: World Economic Forum Future of Jobs Report 2020

Define objectives for bottom-line impact, eco-efficiency

While industry leaders recognize a need to reduce the environmental footprint of their organization, they’ve struggled to define actions with a clear business case for investments to do so. Applications of 4IR technologies are already improving our response to global challenges, such as climate change and pandemics. In addition to reporting productivity increases of up to 90%, lead-time reduction of up to 80%, and a halving of time-to-market, lighthouses also see energy efficiency improvements of up to 50%.

Recent advances in manufacturing that combine technological innovations with emergent business models provide an opportunity for companies to build a carbon-neutral manufacturing ecosystem—while also driving profitable growth. Many of these increased efficiencies work towards reducing waste, resource consumption, and emissions.

The consumer-goods manufacturer Henkel aims for “climate-positive” sustainability, with a goal of tripling its value creation in relation to its environmental footprint by 2030. The company’s efforts engage a data-driven strategy and digital end-to-end platform based on advanced cloud technology. It connects all locations worldwide in real-time to form an ecosystem that has led transformed its factories to be more integrated, cost-effective, sustainable, and efficient—translating to a sustainability footprint that’s 36% smaller. As a result, Henkel has seen a 10% reduction in processing costs and a 25% reduction in logistic costs.

The Fourth Industrial Revolution is no longer hype: it’s fully here, enabling real gains in productivity, sustainability, agility and speed-to-market. Manufacturers that choose to reimagine their growth strategies by embracing the advances are setting new benchmarks. Those that do not risk falling behind in an uncertain and increasingly threatening competitive landscape.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

THE ROAD TO GANESHA

At Davos, UN chief urges ‘big emitters’ to take climate action

In Bahrain, Global Forum for Entrepreneurs and Investment examines empowerment of women, youth through innovation

UN chief hails victory of ‘political will’ in historic Republic of North Macedonia accord

COP21 Breaking News_05 December: UN Secretary-General Announces “Climate Action 2016” Partnership

‘Repeated attacks’ could close down key hospital in eastern Libya, says WHO

UN chief highlights action across borders for ‘stable and prosperous Eurasia’

Half the world’s population is still offline. Here’s why that matters

Here’s why China’s trade deal with Mauritius matters

Bangladesh, South Africa and Bolivia all beat the US for women’s representation in politics

Climate change and its adverse impacts on health

Autonomous vehicles could clog city centres: a lesson from Boston

Speeches of Vice Premier LIU He and Vice President of the European Commission Jyrki Katainen at the Press Conference of the Seventh China-EU High-level Economic and Trade Dialogue

Time to make a fundamental choice about the future of healthcare

Thinking throughout HIV: changing a perspective

OECD Steel Committee concerned about excess capacity in steel sector

Building a European Health Union: Stronger crisis preparedness and response for Europe

4 rules to stop governments misusing COVID-19 tech after the crisis

Syrian Government’s ‘different understanding’ of UN role, a ‘very serious challenge’ – Special Envoy

Illicit trade endangers the environment, the law and the SDGs. We need a global response

LGBTQ+: The social evolution of a minority

Seaweed, enzymes and compostable cups: Can ‘Big Food’ take on plastic and win?

Coronavirus: the Commission mobilises all of its resources to protect lives and livelihoods

The EU prepares for the end of LIBOR: the Commission welcomes the agreement reached between the European Parliament and the Council on financial benchmarks

Our healthcare systems are ailing. Here’s how to make them better

Hiring more female leaders is good for profits. Here’s the evidence

Which countries get the most sleep – and how much do we really need?

Cancer research put at risk by General Data Protection Regulation? The possible dangers of a data privacy EU mania

Finland has just published everyone’s taxes on ‘National Jealousy Day’

Fighting against the Public Health System dismantling means guaranteeing assistance to all

8th Euronest Assembly: the future of relations with Eastern partners

Germany may prove right rejecting Commission’s bank resolution scheme

Parliament criticises Council’s rejection of money laundering blacklist

Revamp collective bargaining to prevent rising labour market inequalities in rapidly changing world of work

Summer pause gives time to rethink Eurozone’s problems

China in my eyes

Why 2020 will see the birth of the ‘trust economy’

Costa Rica is one of the world’s happiest countries. Here’s what it does differently

Providing mental health during pandemic times

Four ways Artificial Intelligence can make healthcare more efficient and affordable

Closing the gaps in accelerating women’s rights: the role of medical students

Does Draghi have another ace up his sleeve given his Quantitative Easing failure?

Youth Internationalization: part of everyday life in JADE

The link between air pollution and COVID-19 deaths

Execution of juvenile offender in Iran ‘deeply distressing’ – UN rights chief

Protecting farmers and quality products: vote on EU farm policy reform plans

What’s needed to ensure maternal health for women in vulnerable populations

Historical success for the First ever European Presidential Debate

Trump declares emergency and WHO urges speed – latest coronavirus updates

Joint U.S.-EU Statement following President Juncker’s visit to the White House

10 months were not enough for the EU to save the environment but 2 days are

European Junior Enterprises to address the significant skills mismatch in the EU between school and employment

Schools must look to the future when connecting students to the internet

The European Sting’s 2018 in most critical review

Mental health in midst of a pandemic: can we help?

EU ready to relinquish its internal tax havens

Why youth unemployment is so difficult to counter

‘Maintain calm’ and ‘exercise patience’ UN envoy urges, as Nigeria heads to polls

Why the 21st century’s biggest health challenge is our shared responsibility

Eurozone: Negative statistics bring deflation and recession closer

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s