If ever there was a time for the manufacturing industry to futureproof themselves and their supply chains, that time is now. Recent global events have created unprecedented change, forcing companies to look for ways to embed security, resilience, and agility into their operations – and more often than not, the answer lies in IT.
Recently, I presented in a webinar at the IDC’s Manufacturing Summit 2022 – here’s what I had to say about the challenges manufacturers are facing and how these challenges are driving digitization trends.
From pandemics and geopolitical unrest, to skyrocketing energy costs, inflationary pressures, cybercrime and more, it’s undeniable that manufacturers are facing a storm of disruptions – all whilst having to continually adapt their operations in response to digitization trends and sustainability regulations.
But there are four key challenges that, above all, appear to be driving the trends that we are seeing in changes to operations and IT spending. They are: supply chain disruption, cybersecurity threats, digital transformation, and the pressure to go green.
Supply chain disruptions
The greatest manufacturing challenge remains supply chain disruptions. The China-US trade war, the Suez Canal blockage, ongoing raw material shortages, and, of course, the Covid-19 pandemic are just a few examples that clearly highlight the vulnerability of supply chains. A recent Statista survey found nearly 72% of businesses are suffering detrimental effects related to the pandemic .
As a result, manufacturers are now beginning to remodel supply chains beyond the next disruption, with agility and resilience as key priorities. To minimize dependency on trade routes impacted by disruption, manufacturers must accelerate their supply chain resilience strategies, and to increase agility, they will need to consider intensifying partnerships with smaller organizations and startups.
But where do IT trends fit into this landscape? Well, many organizations are now looking to invest in new technology; adding automation into their supply chain to reduce costs and increase efficiencies, or leveraging the cloud in order to scale and adapt to changing demands. Intelligent analytics are also becoming a priority as companies seek to harness proactive risk monitoring to minimize downtime and ensure business continuity.
Cybersecurity threats are on the rise, with more than 50% of organizations reporting a third-party data breach already in 2022 . And increasing cyber-attacks mean an increase in the risk of disrupted enterprise and factory operations.
These rising threats are leading the industry to develop new levels of preparedness, and trends are showing that cybersecurity will once again be the top investment priority in 2023 . Reports show that 82% of organizations will invest more in cybersecurity in 2022, with nearly one quarter budgeting at least 10% more than in 2021 .
But threats are getting more and more complex, and IT security is only as good as the weakest link in the organization, which, more often than not, is the human factor, where a lack of digital skills and security talent can have an impact. Trends are indicating that higher investment in cloud and managed security services will be required in order to reduce this threat. A recent report by Forbes predicts that 77% of cybersecurity spending will be for externally managed security services by 2026 .
The manufacturing industry is probably one of the most complex verticals due to its many different employee segments and dependencies. Hence, the transition to a full digital organization is a challenging process.
Many manufacturers are still in the process of digitally transforming and are facing new competition from tech vendors who are already operating in a digital-first world. In order to compete, manufacturers need to make this transition into the digital business era. And in order to succeed in this transition caused by AM, IOT, and digital twins, manufacturers must modernize their infrastructure. This means, legacy applications will be replaced with new modern applications as well.
The role of digital technologies will change significantly as manufacturers continue to move into the digital business era, from being an enabler of digital transformation to becoming a central component of digital-first strategies – and IT spending will increase accordingly. According to a recent survey almost 80% of UK-based manufacturers have increased their spending on digital technologies in the last two years, with a similar number planning to do so in the next two .
The pressure to go green
Sustainability as a key priority for manufacturers is no longer optional. Driven by European legislation, manufacturing organizations must embed sustainability targets into their operations.
But the pressure to go green goes beyond having to comply with new regulations; sustainability is in fact a huge driver for growth. A recent survey revealed nearly 90% of Gen X consumers said that they would be willing to spend an extra 10% or more for sustainable products, compared to just over 34% two years ago . And these consumers aren’t just focusing on the end-product, therefore the entire value chain has to be realigned with better governance in place. As more manufacturers connect the dots between sustainability and profits, we can expect this trend to continue.
How does IT spending have a part to play here? While technology is a main emitter of C02, there are numerous IT solutions that can be utilized to drive sustainability targets. From automation, digital twins and cognitive tooling to the benefits of hybrid working solutions, digitizing operations has the potential to significantly reduce carbon footprints in the manufacturing industry.
So, what approach can manufacturers take to address these challenges and continue to compete as these trends take effect? To guarantee long-term and sustainable growth and to become more efficient, agile, and resilient, successful manufacturers will not only need to use digital technologies to execute strategic business priorities — they will also have to put in place digital-first strategies and use new digital technology to compete and to accelerate growth.
IDC have identified three key pillars on which to build a digital-first strategy. Manufacturers that aim to transform into a truly digital business need to ensure that all initiatives scale, have impact by delivering measurable outcomes, and are trusted.
Sponsored by Citrix, IDC have published the whitepaper: “Mastering the Storms of Disruption in the Manufacturing Industry”. To read the full IDC whitepaper and learn more about how to build scale, impact and trust, click here.
Watch Saša Petrovic, Digital Strategy Director at Citrix, present his vision for managing the storms of disruption at the IDC Manufacturing Summit 2022: