Future of Manufacturing
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Much has been said about Industry 4.0, and how it has revolutionized the manufacturing world by providing manufacturers with opportunities to utilize advanced tools and technologies throughout the product lifecycle. There’s no doubt that Industry 4.0 has enabled manufacturers to increase operational visibility, reduce costs, expedite production times, and deliver exceptional customer support.
However, as 2021 rapidly approaches, it’s time to turn our attention away from Industry 4.0 and toward Industry 5.0. Where the fourth industrial revolution focused on using technology to optimize the means of production, the fifth is all about connecting man and machine — that is, collaboration between humans and smart systems. Depending on who you ask, Industry 5.0 is either on the immediate horizon, or it’s already here, its arrival accelerated by the onset of the COVID-19 pandemic.
Regardless which viewpoint you subscribe to, there can be no doubt that manufacturers must continue to embrace change in order stay ahead of competitors and win market share in an ever-evolving industry. Those who wish to not just survive, but thrive, must leverage the latest technologies and trends.
Employee Safety Becomes a Top Priority
It almost goes without saying that employee safety is a — if not the — leading trend for manufacturers heading into 2021. Workplace safety has, of course, always been a priority for manufacturers, but it takes on new significance in light of the pandemic. In addition to basic safety precautions, such as enforcing social distancing measures on the production floor and ensuring that workers sanitize their workspace, manufacturers must closely and carefully monitor who enters and exits their facilities, and which individuals or equipment they interact with. This has led many manufacturers to in-source facilities maintenance and management and placed increased emphasis on traceability, which requires manufacturers to reclaim internal equipment data from OEMs.
This renewed focus on employee safety even extends as far as field service; in order to minimize contact, technicians will need to be more prepared for each job so that they can quickly complete open work orders. It wouldn’t be at all surprising if there were a dramatic increase in manufacturers’ first-time fix rates as a result. We also predict that this trend will have a direct effect on supply chain visibility, as manufacturers demand greater transparency from suppliers as they work to track issues and claims throughout the manufacturing process.
IoT is (Still) THE Big Thing
Though the Internet of Things (IoT) is becoming a more common, widespread technology in the manufacturing industry, it remains at the top of trends lists year after year for its adaptability and innovation — and this year is no exception.
IoT, which entails the interconnection of unique devices within an existing internet infrastructure, has enabled manufacturers to make informed, strategic decisions using real-time data and achieve a wide variety of goals, including cost reduction, enhanced efficiency, improved safety, product innovation, and more. According to a study from the MPI Group, nearly a third (31%) of production processes now incorporate smart devices and embedded intelligence. Additionally, 34% of manufacturers have plans to incorporate IoT technology into their processes, while 32% plan to embed IoT technology into their products.
“IoT and predictive analytics are having a major impact on manufacturing, offering exciting new opportunities for connecting operations and transforming business processes,” said Michael Strand, Senior Vice President at Hitachi Solutions America. “Innovation is driving business growth, and technology is enabling manufacturers to evolve with an increasingly digital-first business landscape.”
COVID-19 has brought renewed interest to IoT technology due to its remote monitoring and predictive maintenance capabilities. From a public safety perspective, it’s impractical, if not impossible, for field service technicians to show up on job sites on a moment’s notice; every work order must be meticulously planned well in advance. IoT-enabled devices make it possible for manufacturers to safely monitor equipment performance at a distance and identify potential issues before a malfunction even occurs; they also enable technicians to gain a complete understanding of the problem at hand and come up with potential solutions before they arrive at the job site, so they can get in and get out that much faster.
Predictive Maintenance Keeps Production on Track
Speaking of predictive maintenance, a breakdown in critical equipment is costly to manufacturers in terms of repairs, downtime, and loss of productivity. A whopping 98% of organizations report that a single hour of downtime costs them over $100,000.
98% of organizations report that a single hour of downtime costs them over $100,000.
Therefore, it’s vitally important for manufacturers to ensure that all equipment functions at optimal performance levels — and many are turning to predictive analytics and predictive maintenance to do so.
Predictive maintenance is proven to reduce unplanned outages and to extend machinery life by years. Predictive analytics enables manufacturers to monitor equipment performance using any number of performance metrics and to automate the data collection process using IoT technology. This insight provides manufacturers with a better understanding of how systems work and when they will fail, enabling them to administer predictive maintenance and save valuable time, money, and resources in the process. You can even conduct monitoring tests while equipment is in operation, which means there’s no loss of production due to equipment shutdown.
Shifting Focus from B2B to B2C
In recent years, many manufacturers have opted to transition from a traditional business-to-business (B2B) model to a business-to-consumer (B2C) model. The B2C model boasts a number of appealing benefits, including:
- Increased Profits: Companies can get the full manufacturer’s suggest retail price (MSRP) rather than wholesale prices for their products.
- Faster Time to Market: Rather than contend with the lengthy traditional retail sales cycle that requires them to lock-in product development far ahead of order and delivery, manufacturers can rapidly prototype, test, and push products to market, giving them a distinct competitive advantage.
- Brand Control: B2C eliminates the risk of a manufacturer’s brand being diluted or misrepresented by third parties.
- Price Control: Manufacturers have the opportunity to reinforce their MSRP.
- Better Customer Data: Selling directly to consumers enables manufacturers to collect customer data that can ultimately result in better products, stronger relationships, and increased sales.
To effectively sell direct to consumers you’ll need to select a platform for your eCommerce operations that supports both your B2B and B2C sales platforms. It will have to deliver on order fulfillment and tracking, secure payments, customer service management, and sales and marketing activity tracking while providing a 360° view of all your B2B and B2C customer interactions.
Manufacturers Plan Their COVID-19 Exit Strategy
The unfortunate reality of COVID-19 is that certain products and the companies that manufacture them will disappear from the marketplace, never to return. Those manufacturers that do manage to survive will have had their strategy slate wiped clean, meaning there’s no time like the present to start planning a pandemic exit strategy. Gartner breaks its post-pandemic planning framework into three phases, referred to collectively as “The Reset”:
- Phase 1, Respond: Immediate actions required to keep people safe and essential business functions operating
- Phase 2, Recover: Restart activities: reopen, rehire, rebudget, resupply; create a plan to restore scalable state
- Phase 3, Renew: Strategic, durable execution across the organization; use learnings and emergent patterns from prior phases as elements of a new foundation
Gartner also identifies five possible pathways businesses can take to reset depending on how they’ve been affected by the pandemic: Organizations that have been hard-hit by the pandemic are advised to reduce or permanently retire operating models that have been pushed to the point of breaking. Organizations thrown into chaos due to sudden surges in demand can expect demand to return to pre-pandemic levels in the near future. Others are advised to reinvent themselves, either by focusing on new lines of business or refocusing capacity. Finally, organizations with digitalized business units would do well to rescale.
Manufacturers must figure out where their products fall within this five-point scale and plan accordingly. Heading into 2021, we can expect to see a lot of forecasting around future revenue as manufacturers roll into recovery and adapt to the “new normal” — this will require manufacturers to readjust forecasts, assess impact to business, and determine where to retool, rescale, or draw back. Given the vast diversity that exists within the manufacturing industry, it’s safe to say that no two companies’ COVID-19 exit strategies are likely to look the same.
A New Approach to ERP
Enterprise resource planning (ERP) planning systems have become a mainstay amongst manufacturing companies due to their ability to streamline processes through automation, to provide accurate, real-time information, and to reduce costs. That said, COVID-19 has fundamentally changed the way in which manufacturers engage with and utilize their ERP systems.
We’ve seen a growing number of manufacturers layer agile applications on top of their existing ERP systems, rather than try to make ERP do it all. For example, many of our manufacturing clients here at Hitachi Solutions have approached us to create Power Apps for everything from employee safety apps to back-to-work systems; these temporary solutions sit on top of our clients’ ERP systems and enable them to adapt to the new normal of COVID-19 without having to go through a multi-year development process.
We’ve also seen manufacturers take a data-driven approach to ERP upgrades. This approach enables manufacturers to move data forward, consolidate around modern data platforms, and build tangent functions on top of their existing data model without having to perform a full replacement or make any significant changes to their existing ERP, resulting in a faster time to value.
Manufacturers Gain Greater Visibility into Big Data
Renewed interest in IoT and increased emphasis on predictive maintenance means big data is an even bigger trend than ever before; we can likely expect almost every surface to be transformed into a sensor for data collection in order to generate real-time insights for manufacturers. The ability to collect data from a multiplicity of sources, combined with increasingly powerful cloud computing capabilities, make it possible for manufacturers to slice and dice data in ways that provide them with a comprehensive understanding of their business — an absolute essential as they work to reevaluate their forecasting and planning models and develop a successful COVID-19 exit strategy.
VR & AR Support Touchless Service Model
COVID-19 has proven to be a major obstacle to the field service arms of manufacturing companies, preventing technicians from going to job sites to install equipment or administer repairs. Fortunately, assistive technology such as augmented reality (AR) and virtual reality (VR) has made it possible for technicians to provide remote assistance by sending customers AR- and VR-enabled devices and walking them through basic troubleshooting and repairs.
For many manufacturers, this presents an exciting opportunity. In the past, customers were often reluctant to explore touchless service options and instead preferred the convenience of having a technician come onsite to complete a repair. Now, due to COVID-19, more customers are open to this idea, enabling manufacturers to evaluate new processes and procedures with the long-term goal of making them permanent fixtures. In the end, customers and field service technicians benefit from the reduced risk of exposure, and manufacturers benefit from exploring new lines of business.
3D Printing Makes Production Faster & Cheaper
Although it might seem to the general public like something out of a science fiction novel, 3D printing has been a staple in additive manufacturing for almost 40 years. These days, manufacturers depend on 3D printing to support prototyping — a highly cost-effective way for product designers to test and troubleshoot new products — and to produce items on demand rather than have to manufacture and warehouse them.
3D printing has also transformed the expensive and time-consuming process of tooling. Historically, it took months for manufacturers to create the molds, jigs, and fixtures necessary for the mass production of heavy equipment, and many manufacturers depended on the support of tooling companies headquartered overseas. Now, thanks to 3D printing, manufacturers can complete tooling onsite in just a matter of days; this has made 3D printing a fixture in the automotive and aerospace manufacturing industries in recent years.
Manufacturers Reevaluate Shoring & Sourcing
Prior to COVID-19, reshoring — that is, bringing imported goods or materials back to domestic production — was already well on its way to becoming common practice amongst U.S.-based manufacturers. According to some reports, as many as 749,000 jobs were brought back to the U.S. between 2010 and 2018 as a result of reshoring.
There are a number of reasons for this:
- The economies in many go-to offshoring countries have become stronger in recent years, leading to an increase in wages for their citizens.
- Countries in which labor remains inexpensive lack the infrastructure to support complex manufacturing operations.
- The cost of transportation continues to rise.
- Manufacturers are now able to utilize advanced software programs and robotics to automate many of the processes that once required human intervention.
We can now add COVID-19 to that list.
“COVID-19 has really gotten people’s attention,” said Harry Moser, President of the Reshoring Initiative, an organization founded to promote manufacturing repatriation. “COVID-19 has revealed the U.S. dependency on offshore manufacturing, especially China. […] As the pandemic shows, we can suddenly be in the impossible position of not having enough critical supplies. That is not because we didn’t try it; it’s because we had almost no base from which to build here in the U.S.”
Similar to how COVID-19 has prompted a renewed reshoring effort, it has also led manufacturers to reevaluate sourcing. The pandemic has caused significant disruption to the global supply chain, making it more challenging for manufacturers who source from other countries — China, in particular — to get a hold of materials. This has prompted many manufacturers to diversify sourcing by adopting a “China, Plus One” strategy or near-sourcing. Near-sourcing, also known as local sourcing, is the process by which a business brings operations closer to where its finished product is sold; in manufacturing, it typically refers to the sourcing of raw materials from domestic suppliers.
We can expect both reshoring and near-sourcing to be leading trends heading into 2021, as manufacturers attempt to reduce or eliminate entirely dependencies on foreign materials. These trends will not only help manufacturers remain resilient to future COVID-related disruption should other countries shut down a second time, they’ll also provide a much-needed boost to the U.S. economy.
The Job Market Remains Uncertain
We’ve all seen news stories about mass layoffs and furloughs as a result of COVID-19; naturally, the manufacturing industry has also been affected, however, the degree of disruption varies from one manufacturer to the next based on what they sell. Companies that produce non-essential goods have seen a significant reduction in staff, while those that produce essential goods have actually had to scale up, add product lines, and hire new workers in order to satisfy demand. Those that have had to reduce their workforce have turned to IoT automation and product line and factory process optimization in an attempt to keep things as close to business as usual. Optimization, in particular, allows for cost control and profitability, which are essential for companies whose sales are down.
Looking ahead, manufacturers will likely continue to reevaluate their workforce based on shifts in demand. Those companies that find themselves in a position to hire will likely have their sights set on highly data-focused employees. Though this type of employee is likely to be a rare find due to the ongoing shortage of tech-savvy talent, companies like Hitachi Solutions are producing easy-to-use technology that will create new opportunities for employees of all backgrounds.
COVID-19 has changed the world — and the manufacturing industry — as we know it. Manufacturers that intend to survive in this new era must fully embrace Industry 5.0 and reimagine the future of their companies — and the sooner, the better.
To start developing a forward-thinking strategy that incorporates these and other manufacturing trends, contact Hitachi Solutions today.
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