Manufacturers are used to dealing with turbulent market conditions. Complex customer requirements, tightening regulations. But the current world situation is a sea of uncertainty that can sink even the best performing manufacturers.
New technology, improved planning, and better use of data have created great opportunities for manufacturers to adapt. Analyzing key market insights, IFA uncovered his five factors outlining how manufacturers can become more resilient.
1. Manufacturers turn to technology to make smarter use of ESG
As a measure of a company’s environmental, social, and governance initiatives, ESG has become an important factor in how investors, partners, customers, and employees assess and evaluate an organization.
By 2024, ESG will form the sphere of 70% of manufacturers using digital technology to track their ESG Scope 1 and 2 emissions and improve the accuracy of their Scope 3 metrics.
For manufacturers, the main focus now is on the environment, or the “E” dimension of ESG, with the ultimate mission to show progress towards decarbonisation. In January 2022, he predicted that 75% of manufacturers would prioritize decarbonization as part of their sustainability efforts.
Manufacturers voluntarily comply with reporting, even if it means dealing with a complex set of reporting regulations, ratings and disclosure frameworks. At the recent IFS Sustainability-focused Customer Day, participants typically presented three major reports: the Global Reporting Initiative (GRI), the European Union’s Corporate Sustainability Reporting Directive (CSRD), and the CDP Climate Change Programme. Demonstrated adherence to standards and frameworks. Additionally, we see work on the Science-Based Target Initiative and the Corporate Net-Zero Standard.
The ESG landscape is evolving and regulatory frameworks are already emerging to standardize the reporting and disclosure of ESG metrics in jurisdictions around the world.
In the United States, the Securities and Exchange Commission (SEC) is in the process of finalizing mandatory climate risk disclosure legislation, requiring SEC registrants to disclose climate-related information in their annual reports.
The SEC mandates emissions reporting, and these, along with other ESG disclosure requirements that will be tightened in 2023 and 2024, will require all manufacturers to be prepared to report.
However, we find that most manufacturers currently lack the ability to track their Scope 1, 2 and 3 emissions. This is primarily due to the fact that we are manually collecting these metrics from within our organization across entities and various systems, using Excel as our repository and analysis tool.
This year, manufacturers will make major investments in technology to automate and incorporate consistent, comparable, and credible carbon metrics as part of enhanced ESG disclosure.
This is easier for scope 1 and scope 2 emissions from sources owned and controlled by the organization, while scope 3 emissions remain a challenge for most people, but are less of a priority. It does not mean.
This means that scope 3 emissions (all emissions indirectly generated by a business) can, on average, account for up to 75% of a company’s total greenhouse gas (GHG) emissions, making climate-related Because it represents the majority of the risk.
2. Digital twins will be a key part of the manufacturing landscape
By 2024, many manufacturers will appoint resources to digital science roles to support the development of digital twin strategies. The amount of data collected is growing exponentially as applications and machines become more integrated.
An estimated 127 new devices are connecting to the internet every second, projected to be 79.4 zettabytes of data by 2025.
Not all of these new connected machines are used in manufacturing. However, it is certain that machines and devices connected to the Internet generate an enormous amount of data with each other. This data is the basis for real-time decision-making and must be understood, controlled, managed and checked for accuracy. This will require new skills.
Manufacturers recognize the importance of data. In fact, a new role has emerged for the Data Scientist (Chief Data Officer), whose role is to understand data and how it is used. They are responsible for understanding the accuracy of the data, where it came from and its impact on day-to-day operations.
Manufacturers in this role can advance their data transformation journey and harness the power of the digital twin in their business.
3. Digitization can help mitigate macroeconomic turmoil
With global supply chain shortages, soaring prices, and economic recessions, digitization is increasingly being looked to as a way for businesses to weather the geopolitical and macroeconomic turmoil. His 60% of manufacturers plan to expand their digital investments beyond the “purgatory of trials” to increase business value.
To what extent have manufacturers been able to use technology to protect their business performance? We’ve covered the basics. Reduced costs, increased operational efficiency, and faster time to market are the primary benefits. But are manufacturers really making the most of their digital transformation investments?
A recent IFS/IDC study asked manufacturers to self-assess their digital maturity. The survey found that 75% consider themselves digitally mature. A McKinsey & Company study found that many manufacturers are stuck in pilot purgatory. This means that they have not been able to scale successful pilot programs or take full advantage of new tools and technologies to generate meaningful benefits and business outcomes. Differences between the two studies point to a shortfall in developing a true long-term, business-wide vision of the value that digital transformation will bring.
The pervasive toe-dip pilot created the “try before you buy” mentality, separating digital technology from business as usual. Other reasons include lack of leadership and strategy, siled implementations, and a technology-first (vs. business-first) approach. These findings are further complicated by the findings that he 62% of manufacturers struggle to articulate his ROI of digital technology.
With unpredictable market dynamics continuing this year, manufacturers should start reassessing their digital transformation strategies to prevent further depletion of investment and effort.
This requires focusing on real business needs, use cases, and challenges, integrating the pilot into mainstream business processes, and deploying it across the wider manufacturing network.
An additional drawback of pilots is the effect on talent. Digital skills remain trapped and to realize the full value of digital transformation, manufacturers must also focus on accelerating their workforce enablement plans for digital skills. Without this, projects will likely have to be postponed, resulting in slower time to ROI and risking loss of support from management. In addition to building in-house skills, manufacturers need to help attract, build and retain digital skills from a fast-changing industry to create a competitive advantage.
The IFS/IDC study also showed that digital transformation, when envisioned and executed well, can have a significant impact on an organization’s revenue and profit performance. First, it’s time to get into the details, focusing on business rather than technology.
4. Enhanced connectivity paves the way for increased productivity
New production machines are significantly easier to connect to business systems. Manufacturers who have invested in the latest machines and been able to connect them to their business enterprise systems have seen impressive results impacting their bottom line. By 2025, he two-thirds of manufacturers will be able to digitally enhance their legacy assets and connect them to manufacturing execution system (MES) systems to improve productivity.
However, not all manufacturers are in this fortunate situation. Many companies have large and expensive production machines that were built before computer integration was standardized. These manufacturers are at risk of being left behind by those farther along their digital transformation journey. These companies need to take action to modernize operations and integrate assets into broader systems by adding sensors throughout and real-time visibility into asset performance.
This asset modernization approach is often cost-effective as it requires no capital expenditure (CapEx) investment and allows for a smoother transition to digital transformation without compromising the value provided.
The growing demand for sensors in conventional machinery indicates a renewed focus on MES deployment in the coming years.
5. Artificial intelligence will grow in importance to influence better decision-making
As manufacturers continue their digital transformation efforts, the amount of data available today is growing exponentially. Contributing to this journey and helping to interpret this data is artificial intelligence (AI). What was once conceived only as cinema fiction has become a modern reality for many manufacturers. By 2025, he 40% of manufacturers will use his AI to enhance business decisions.
Beyond the physical world of robotics, drones, and self-driving cars, it’s the invisible that’s really changing, influencing the way manufacturers around the world think and act. AI and machine learning enable manufacturers to make smarter, more accurate, and actionable decisions. This essentially means that standard production lines will become more autonomous as each moving part will be able to think independently and act on future information such as weather forecasts and consumer spending habits. It will be possible. It is this smart thinking that enables manufacturers to become leaner and more agile.
The scale of AI growth is clear. The AI market is reported to be worth his $16.3 billion by 2027, and this growth could see 40% of manufacturers using AI to contribute to critical decision-making processes. But is this just the tip of the iceberg? We hope to see AI go even deeper to significantly improve factory efficiency, train staff, and meet sustainability goals.
For many on the AI journey, the benefits are already visible. For those just starting out, knowing where to start can be a daunting task. Making old factories smart? Adding sensors to warehouses or using algorithms to predict consumer habits? yeah.
Manufacturers of all kinds are being forced to rethink how they operate. In reality, the current level of uncertainty created by geopolitical events, disruptions in the supply chain, and subsequent reactive consumer behavior make this a “what if?” question. not. But it’s clear that resilience, agility, and adaptability depend on technology to enable “when?” businesses to remain relevant and profitable.