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 Milestones

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

Why flexible workspaces are the key to winning the talent war

“France will be there, it will always be there!”, French President Hollande says in a rather disorganised speech; the Sting reports live from World Economic Forum 2015 in Davos

Getting people with disabilities into work requires data

Business management: how can you introduce new ideas?

Trump’s Russophiles under investigation, Europe remains ‘en garde’

The new Kiev rulers ask $35 billion from the West

Coding in Namibia: UN supports young women’s computing career dreams

Healthcare’s a human right, not ‘a privilege for the rich’ UNAIDS argues at Davos

Why precision medicine is the future of healthcare

Medical students: catalysts to close the gender gap

New book honours UN women who made HERstory

Cameroon: Clear ‘window of opportunity’ to solve crises rooted in violence – Bachelet

Around 52 million in Near East, North Africa, suffering chronic undernourishment, new UN food agency report reveals

WEF Davos 2016 LIVE: The health of capitalism won’t be the only worry for those who head for Davos

Mergers: Commission approves Varta AG’s acquisition of Energizer’s divestment business, subject to conditions

Environmental labelling, information and management schemes are central to the circular economy

Negotiated two-State solution still ‘the only option’ for Palestine: Guterres

Air pollution: How to end the deaths of 7 million people per year

4 ways blockchain will transform the mining and metals industry

Pollution could be harming every part of your body. Here’s how

UN human rights ruling could boost climate change asylum claims

A Sting Exclusive: “The competitiveness of Europe depends on a digital single market”, EPP President Joseph Daul highlights live from European Business Summit 2015

Mergers: Commission opens in-depth investigation into proposed acquisition of Transat by Air Canada

MEPs want ambitious funding for cross-border projects to connect people

WHO chief underscores need to address climate change following visit to Bahamas

Humanitarian aid: €7 million for disaster preparedness in Southern Africa and Indian Ocean region

2018 Golden Pen of Freedom Awarded to Maria Ressa of the Philippines

Who is first (and last) in the race to build a workforce fit for the future?

We won’t win the online security war without people power

4 ways the circular economy can help heavy industry reduce emissions

EU prepares a banking union amidst financial ruins

A ‘strong and united Europe’ has never been more needed, declares UN chief Guterres

Here are five ways we can make mental healthcare better

Guterres expresses ‘grave concern’ following explosion at large political rally for reform-minded Ethiopian Prime Minister

Coronavirus: Commission concludes exploratory talks with Valneva to secure a new potential vaccine

2013, a Political Odyssey: What future for Italy?

3+1 issues to haunt tomorrow’s EU Summit

‘Good enough’ global cooperation is key to our survival

5 amazing schools that will make you wish you were young again

FROM THE FIELD: Finding refuge in the ‘beautiful game’

There is a forgotten solution to climate change that we must invest in – nature

Coronavirus: a Disease that spreads as fastly as its fake news

How data is transforming the way we care for the ocean

This German supermarket’s shelves are filled with food other stores won’t sell

How trust and collaboration are key in India’s last mile response to the COVID-19 crisis

The European Sting writes down the history LIVE from G20 Leaders’ Summit in Turkey

At UN, Middle East countries discuss steps towards regional nuclear-free zone

Banking package: Parliament and Council reach an agreement

Coronavirus vs flu: how do they compare?

Autumn 2020 Economic Forecast: Rebound interrupted as resurgence of pandemic deepens uncertainty

Globally, youth are the largest poverty-stricken group, says new UN report

How a bionic arm is helping one little girl enjoy the things most take for granted

If you build it, they will come: Why infrastructure is crucial to tourism growth and competitiveness

7 steps to becoming a ‘CEO Academy’

Towards the Rise of the United States of the Atlantic?

How personalized care can tackle the late-life loneliness epidemic

Vaccines: contract between European Commission and AstraZeneca now published

There is no greater sorrow on earth than the loss of one’s native land

Are we letting politicians play with migrants’ health?

Mobile technology facilitating social distance in the middle of a pandemic

More Stings?

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