COVID-19 has been manufacturing’s most ruthless and demanding teacher — but which lessons will last?
There’s one word in the post-pandemic business lexicon that deserves to be retired: unprecedented. In this century, no other health crisis has slammed industry as viciously as the coronavirus, but that doesn’t mean the resilience of global manufacturing hasn’t been well and repeatedly tested.
In the past 25 years, the industry adapted to the impacts of terrorism, the global banking crisis, geopolitical instability, social media, and a slew of other evolutionary events. Working through calamity and change is nothing new, and, for the successful, the tough lessons learned lead to higher achievements.
By mid-2020, leaders in manufacturing and supply chain had been pummeled not just by sudden change, but by schadenfreude. Despite generating lots of buzz, soundbite pontificators did little to offer workable solutions to sophisticated problems or to clear paths to recovery. (We told you that big data/single sourcing/offshoring/reshoring/the length of your supply chain/ad nauseum was risky!)
In contrast, the actual work being done in the trenches was extraordinary, and often heroic.
Now that this most recent period of accelerated adaptation has calmed, leaders are learning pandemic’s lessons, and shaping them to align with their capabilities and goals. A trio of lessons — apart from the common ones we’ve already learned about remote work, agility, and flexibility — stand out from the crowd.
- The gap between surviving and thriving can be bridged by Industry 4.0. There are many reasons why some companies were able to flex and move rapidly to meet the demands of instant disruption and others were not. However, there appears to be at least one significant difference between those that rose and those that didn’t: the use of automation, robotics, and digital technologies that define Industry 4.0.
In the universe of early adopters, fast followers, and latecomers, a McKinsey survey of manufacturers identified three pandemic-driven outcomes of their strategies. Early adopters who had scaled their digital technologies were the champions, able to move swiftly and accurately to keep their operations performing as expected. Fast followers who were still scaling were somewhat hampered, with the pandemic acting as a reality check. Those who hadn’t started their digital transformations were given a very serious wakeup call.
At the pandemic’s six-month mark, McKinsey surveyed 400 global manufacturers and found that Industry 4.0 helped 94% of respondents keep their operations up to speed; 56% said the tech had been essential in handling their responses to the crisis. Past surveys showed that digitization efforts varied by industry, but in 2020 there were common priorities across industries and geographies, such as manufacturing efficiency, flexibility, and agility.
As for the progress of industry sectors, transportation, logistics, and travel firms broke through during the pandemic, with 17% successfully scaling Industry 4.0 technologies, up from 8% in the prior year. CPG, energy and materials companies showed the least progress, while automotive continued to dominate in their at-scale application of these technologies.
- Simulation technology can significantly improve business outcomes. With lockdowns and travel restrictions stranding manufacturing execs who would normally make in-person visits to factories, simulation technology rose to the challenge. When travel was unrestricted, site visits were crucial, especially when troubleshooting or contemplating line changes and facility configurations that could potentially clog production lines, derail business unit goals, and cost a great deal of money to implement.
Simulation technology does have its share of challenges, including its complexity, slow performance pace, and the need for special training to effectively use the technology. It’s not simple, but the payoffs for manufacturers have proven to be significant.
Paul Baldassari, executive vice president of strategic programs and asset management with manufacturing and supply chain solutions provider Flex Ltd., pointed to simulation technology’s ability to run multiple thousands of scenarios, testing variables and constraints to match the right tech to the right process. For one client, the use of a digital twin helped optimize production scheduling to make ambitious production goals, increasing efficiency and slashing changeover time.
“This project reaped multiple benefits for the customer by implementing simulation, including time savings, operational benefits, technology benefits, business benefits, and project management benefits,” Baldassari said.
- Supply chain resilience requires investment — and justification. “We very routinely think about capex for new facilities. We think about investing in training for employees to reduce time and increase efficiency. We don’t often think about investing in resilience itself,” said Stanley Griffis, Bowersox-Thull Endowed Professor of supply chain management at the Michigan State University Broad School of Business, in a recent MSU podcast on lessons from the pandemic for supply chain management.
Making investments to cover every supply chain “what if” is an unrealistic approach Griffis doesn’t recommend, but matching the right investments to the most likely probabilities is an absolute necessity. In addition to considering the effects of disruption, how to contain it, and how to stabilize operations, investing in the early discovery and information phase of supply chain security is key.
“When your supplier begins to have financial trouble, has a union strike that might be on the horizon, if you find out about that earlier, if you have better information about the impacts of that, it may allow you to avoid disruption,” he said. Early knowledge can help companies strengthen their supplier bench, but that research can be challenging to justify.
“GM spends a fair amount of time looking into the future to see what things their war room should be ready for, but investing in these types of things give us a system that hopefully we get to use, so we need to invest in the right places,” Griffis said. “The collateral benefits need to be recognized as well. We have to be able to build a business case for why these types of Investments are appropriate.”
Mike Uskert, Chief of Research within the Gartner supply chain practice looks at investing in resilience this way: “It’s always very difficult within supply chain to pitch a business case based on cost avoidance. It has always been easier to pitch a business case around cost reduction.” The pandemic, Uskert stressed, revealed the criticality of building cases based on risk and cost avoidance.
It will take time to see if any of the lessons learned have staying power. Uskert is interested in human psychology, and his insight on behavior may provide clues to the length of that timeline.
“It seems to be that the professional conscience has a three- to five-year memory horizon,” he said. “It will be interesting to see whether the things that are very important now actually end up being the things that we invest in and close the gaps, or whether in three to five years or 10 years we find ourselves in the same situation.”