McKinsey: Managing Unprecedented Disruption in Manufacturing
Companies that realise the full potential of the innovations and advances at the core of the Fourth Industrial Revolution have a significant advantage in navigating four durable shifts that are critical to managing unprecedented disruption in the global manufacturing industry, a report by McKinsey has found.
Citing evidence from a select collection of leading-edge organisations in the Global Lighthouse Network (GLN), the report says that it is clear how lighthouse factories can help entire organisations navigate their modernisation journeys, inspiring and catalysing change amongst partner organisations along the way.
This growth is reflected in data that shows that the GLN now comprises of 54 sites, with ten sites added in Q3 2020 alone. This growth reflects the accelerating adoption of core 4IR technologies, and their infusion into the daily manufacturing and supply-chain operations, as organisations act on the new urgency to remain competitive – even as others fall behind, it highlights.
The GLN includes companies that have achieved 4IR advances within the four walls of factory sites or have effectively implemented end-to-end (E2E) digitisation across the value chain. In both cases, 4IR technology has powered the reimagination of manufacturing and supply chains across industries and sectors.
An essential part of this success has been the dedicated focus on workforce development and capability building through a variety of means, the McKinsey report says. Organisations that have prioritized their people by transforming the nature of work through intentional upskilling and/or reskilling efforts, have been the ones to benefit the most, it adds.
With recent world events, particularly the COVID-19 pandemic, causing significant disruptions on a scale unprecedented in modern times, there have been calls for a ‘great reset’ across all sectors of the global economy: a decisive set of actions that will not only delivery value to companies, but will also benefit society as a whole.
This has been most evident in the way leading companies have responded to supply chain shocks that have uncovered operational vulnerabilities. These companies have used the crisis as a transformative opportunity to implement the advances of technology and adopt new ways of working, which has enabled them to adapt quickly during disruption, while remaining viable and operational.
The report points out that even before the massive disruptions imposed by the pandemic, the gap between 4IR frontrunners and the majority was growing rapidly. There are now four durable shifts in manufacturing and supply chain that have emerged as particularly critical, it says:
- Improved agility and customer centricity across E2E manufacturing and supply chains facilitates faster recognition of customer preferences. This, in turn, enables quicker adjustments to manufacturing flows at next-generation, small-scale modular plants to allow higher levels of customization.
- Supply-chain resilience provides a competitive advantage, requiring connected, reconfigurable n-tier supply ecosystems and regionalization.
- Speed and productivity are attained through increased levels of automation and workforce augmentation coupled with upskilling and reskilling efforts.
- Eco-efficiency is increasingly considered a must-have to remain in business and ensure compliance with an increasingly complex regulatory landscape.
“It is in this context of unprecedented challenge that lighthouses serve as models of transformation and beacons of light that can guide us through the storm into a stronger, more resilient future. These organizations are leading the way by demonstrating how to reimagine and rebalance operations into the next normal. They are showing us how companies can provide value not only to their shareholders but also to a broader set of stakeholders including workers, consumers, and the environment—indeed, society at large,” the report says.
“Perhaps most importantly, today’s challenges make clear that lighthouses are not at the end of their transformation journeys—they are only just starting to unlock the true potential of 4IR technologies. As the network of lighthouses grows, its light will shine brighter, helping even more organizations be better prepared to weather the inevitable future storms, whenever and wherever they occur,” it concludes.
Gartner: Leaders Lack Skilled Smart Manufacturing Workers
With organisations rapidly adopting industry 4.0 capabilities to increase productivity, efficiency, transparency, and quality as well as reduce cost, manufacturers “are under pressure to bring their workforce into the 21st century,” says Gartner.
While more connected factory workers are leveraging digital tools and data management techniques to improve decision accuracy, increase knowledge and lessen variability, 57% of manufacturing leaders feel that their organisations lack the skilled workers needed to support their smart manufacturing digitalisation plans.
“Our survey revealed that manufacturers are currently going through a difficult phase in their digitisation journey toward smart manufacturing,” said Simon Jacobson, Vice President analyst, Gartner Supply Chain practice.
“They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must. However, intuition, efficiency and engagement cannot be sacrificed. New workers might be tech-savvy but lack access to best practices and know-how — and tenured workers might have the knowledge, but not the digital skills. A truly connected factory worker in a smart manufacturing environment needs both.”
Surveying 439 respondents from North America, Western Europe and APAC, Gartner found that “organisational complexity, integration and process reengineering are the most prevalent challenges for executing smart manufacturing initiatives.” Combined they represent “the largest change management obstacle [for manufacturers],” adds Gartner.
“It’s interesting to see that leadership commitment is frequently cited as not being a challenge. Across all respondents, 83% agree that their leadership understands and accepts the need to invest in smart manufacturing. However, it does not reflect whether or not the majority of leaders understand the magnitude of change in front of them – regarding technology, as well as talent,” added Jacobson.
Technology and People
While the value and opportunities smart manufacturing can provide an organisation is being recognised, introducing technology alone isn’t enough. Gartner emphasises the importance of evolving factory workers alongside the technology, ensuring that they are on board in order for the change to be successful.
“The most immediate action is for organisations to realize that this is more than digitisation. It requires synchronising activities for capability building, capability enablement and empowering people. Taking a ‘how to improve a day in the life’ approach will increase engagement, continuous learning and ultimately foster a pull-based approach that will attract tenured workers. They are the best points of contact to identify the best starting points for automation and the required data and digital tools for better decision-making,” said Jacobson.
Long term, “it is important to establish a data-driven culture in manufacturing operations that is rooted in governance and training - without stifling employee creativity and ingenuity,” concluded Gartner.