Disruption Meets its Match with Industrial Manufacturing

Last year, when we took on the challenge to help both ourselves and our clients to become more resilient, we looked to nature for inspiration. We didn’t know how 2020 would unfold and how being resilient would become the most critical trait for all of us as we fight a global pandemic. Today, to be able to sense and respond to market changes, to evolve, and be resilient continuously, is an imperative. Transforming into Live Enterprises – companies that are life-like, responsive, resilient beings- require significant organizational mindset and approach changes. The manufacturing sector is no different.

From the outset, manufacturing has upended the industry, enhanced the quality of life, and created mass employment. Digital technology has over the past few years, disrupted manufacturing from within and altered its intrinsic character. Yet, for the first time, manufacturing is experiencing disruption on a global scale in the aftermath of the Covid-19 pandemic. The lockdown has shrunk production capacities, disrupted global supply chains, and increased complexity of demand fulfillment and logistics.

Over the last few weeks, I have been reassessing the state of manufacturing in the midst of the new norm while also reflecting on how the industry can respond to disruption by capitalizing on digital technology.

Smart factory ecosystem. The norms of social distancing and sanitized workspaces will compel industrial manufacturers to pivot to a hyper-smart factory environment with minimal human interventions. A digital thread running through manufacturing, inventory, and asset maintenance, will power more and more enterprises to sense and respond to demand, optimize operations, and drive sustainable manufacturing.

Always-connected products. With more and more focus on remote monitoring and servicing, the field service industry will transform significantly. Connected Product ecosystem will become a need than a desirable trait for manufacturers. For instance, the heating, ventilation, and air conditioning (HVAC) industry will hasten a ‘comfort-as-a-service’ model to calibrate room temperature, share over-the-air updates, and undertake preventive maintenance.

Consolidation of Flexible Pricing Supplier Services.  Organizations will look to build stronger and more strategic relationships with a select few system integrators in their ecosystem. This will create consolidation in the IT services industry and necessitate the need for holistic models that goes beyond technology towers like application and ERP as a service, network as a service, device as a service and so on. Clients will have lesser but much deeper relationships with a few select system integrators

Renewed Focus on Information and Cyber Security: If there is one way, the current pandemic has changed our way of working, it is in the space of remote working and collaboration. I expect this trend to continue as remote working becomes an accepted norm. This will in turn will put an enormous focus on organizations to enhance their information security and privacy.

Servitization. Smart manufacturing enterprises will retain their competitive edge by gaining the mindshare as well as the wallet share of consumers through servitization. These digital enterprises will combine the Industrial Internet of Things (IIoT), artificial intelligence (AI), and advanced data analytics to provide a broad spectrum of services based on annuity/fees across their product range and cultivate customer loyalty.

B2B2C marketplace. With lesser dependency on in person outlets, the need for manufacturers to enhance their digital presence, digital presence and ability to sense market sentiments and demands will increase. Industrial manufacturers will explore new B2B2C business models where digital enterprises directly serve the addressable market. This customer-oriented model will help manufacturers become more responsive to the needs and service requirements of end consumers. Significantly, the dynamics of direct customer engagement will allow manufacturers to prevent erosion of profit margins.

Localization driven by additive manufacturing. The logistics industry was already undergoing a transformation before the crisis. The current crisis will accelerate the move towards more and more additive manufacturing. It will spur a wave of product localization, where the major parts of the core product are manufactured closer to the end consumer. At the same time, peripheral components will be sourced from a global supply chain. Industrial manufacturers equipped with a wide array of 3D printers can roll out a broad spectrum of product lines with niche customization to command premium pricing.

Product innovation. The disruption caused by the pandemic provides an opportunity for industrial manufacturers to innovate at a product level. For instance, an ATM manufacturer will need to rethink product design and ATM functionality. Shortly, drive-in ATM kiosks may require customers to use a mobile app to conduct transactions instead of the kiosk keypad to withdraw freshly minted currency notes via a sanitized envelope.

As more and more incumbents begin to function like digital natives, the need to drive intuitive decisions, build responsive value chains, and deliver perceptive experiences, all at scale, will become imperative. As manufacturing grapples with disruption, there is an opportunity to deploy digital smarts at scale and re-imagine the product and service experience to remain resilient and relevant.