PwC: how manufacturers can stay competitive amidst COVID-19
Manufacturing global takes a look at PwC’s strategy for manufacturers looking to gain a competitive advantage amidst the disruption of COVID-19.
When it comes to a crisis like COVID-19, PwC’s Global Crisis Center explains that short term reactions around mobilisation, medium term stabilisation efforts and long term strategizing and transformation plans are required.
“However, we believe manufacturers should strategize now on how they can transform and position their organisation in ways that will give them a competitive advantage and help create greater resilience in a post-crisis world. This ought to be done on the heels of the disruption, throughout the crisis and during recovery,” says PwC.
The strategy for manufacturers
Dealing with disruption
“The timeline for the disruption stage of the pandemic is not fully known, given the number of factors involved: the virus’ contamination period of at least two weeks, asymptomatic carriers, limited testing, and no vaccine or treatment,” comments PwC.
However the company does stress that there will be a recovery at some point, with government and fiscal policies likely to aim for a V-shaped recovery curve.
According to a recent survey conducted by PwC in the US, “67% of CFOs of industrial products companies plan to take advantage of government support programs provided by the CARES Act, with tax payment deferrals and extended tax deadlines cited as the most common types of support they’re considering. Yet, it is unclear to what degree such measures will help mitigate the disruption unleashed by the virus.”
However, the company highlights that given the unclear nature and length of the current disruption, it’s important for leaders to plan a course of action for the eventual recovery, helping them to get ahead of the curve quicker.
Although it may seem premature, PwC highlights that it is important to gear up for this next stage, otherwise it may be too late for manufacturers if they wait until
Many businesses are still focused on the triage-like disruption. While the economy is still in dire condition, it may seem premature or even incongruous to be gearing up for the next stage of the operations strategy cycle: recovery. However, we believe it may be too late if manufacturers wait to act until there are clear signs of a recovery.
“That’s a lesson gleaned from the US recession a decade ago, when the global economy was crossing the same threshold we’re now facing. The companies that emerged from that recession strongest (which we call the leaders), moved faster, decisively and more agilely during the recovery phase than their laggard peers.”
According to PwC analysis, leaders:
Set their course in 2009 and by 2010, ramped up their efforts
Increased capital expenditures by 27% and accessed cash and liquidity
Set M&A targets on distressed companies or suppliers
Identified growth areas of the business and committed capital
This helped organisations to rebound quicker than their peers. “This time around, it’s important to be mindful of such lessons,” comments PwC.
“These leaders focused on transforming operations through recovery, improving the areas that drive growth and agility.”
“Throughout the recovery period, the global effects of the COVID-19 outbreak will reveal changes (some may be permanent) to consumer behaviors and supplier positions. Companies that quickly and thoroughly understand these changes can create a distinct competitive advantage in this next stage of the life cycle,” states PwC. “COVID-19 has been a dramatic reminder that businesses need to be nimble to respond to sudden shifts in demand. Leaders will codify learnings from the disruption and recovery parts of the cycle, and accelerate their transition toward smart, adaptive and resilient ecosystems.”
“At the height of the COVID-19 pandemic, governments and citizens turned to industrial manufacturers for critical support — and the industry responded. Companies quickly ramped up production and innovated to produce ventilator parts and personal protective equipment in large volumes. That underscored how crises provide opportunities for businesses to earn trust and enhance reputations,” comments PwC.
The company explains that post crisis it will be important for companies to build on the trust they have established and seize the opportunities to help reshape the markets and their competitive positions.
“Those that get this right will come out on the other side with very different operations, products and services than they had before COVID-19 hit,” adds PwC.
Traits that will set them apart include:
Decision support tools, for speed and agility in decision-making
Investment in advanced supply chain technology, for clearer and near-real-time visibility in production, inventory and supply
Refocused products and services
Ramped-up application of digital technologies to understand and anticipate customer behaviors
Strengthened and diversified value-chain ecosystems
“Because no economic shock is the same, predicting the future is a fool’s errand. However, while the sector may now be grappling with a different sort of economic crisis, it can be sure of one thing: There will be a progression of waves in this crisis, but it will have an end-point. Forging a well-informed strategy on how to get through the waves of this crisis and then executing on that strategy will help chart a course through what now may seem unnavigable and choppy waters,” concludes PwC.
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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.