UK manufacturers are operating under extremely challenging conditions. But as Maddie Walker, UK & Ireland Industry X Lead, Accenture, explains, meeting these challenges will lay a strong foundation for the future.
As if the last two years had not thrown up enough obstacles for UK manufacturing, firms are now contending with spiralling energy prices. The issue is one of the most challenging facing businesses in the sector, especially those in industrial areas that are energy intensive. “It’s been a massive hit for a lot of these companies in terms of thinking about how they operate efficiently,” said Walker.
Even before the war in Ukraine, the lack of material supplies, breakdowns in logistics and inflationary pressures were already testing the economic recovery, with resurging demand and precautionary hoarding overwhelming supply chains.
Ongoing supply chain challenges relating to COVID-19 lockdowns in China are aggravating the situation. For instance, the semiconductor shortfall, which was expected to resolve in the second half of 2022, is now expected to persist.
As a result of these and other challenges, Accenture calculates that continued supply chain disruption could result in a potential €920bn loss to GDP in Europe by 2023. As firms manage shipping delays and rapidly increasing prices for components and raw materials talent shortages are exacerbating the shock to supply.
“We’re seeing a shift. The lingering effects of the pandemic and ongoing disruption means that many manufacturers are now focusing on operational efficiency programmes,” Walker continued.
All the time, of course, manufacturers must ensure that their products and processes are sustainable. This is to meet both the UK government’s net zero goals and customer demand, which is increasingly in favour of green, circular, and sustainable practices.
The manufacturers that will thrive in the coming years will be those that use the mitigation of energy, price, sustainability, and supply chain challenges today as a platform to do things differently tomorrow.
An obvious example of this was the huge shift to digital platforms at the start of the pandemic, which for many companies marked a profound transformation. In one such project, a consortium of manufacturers came together to build new ventilators to help address the shortage at the start of the pandemic.
At the heart of the successful build and distribution of the Smiths Group ventilators that arose from the project was a digital Enterprise Resource Planning system (ERP), which tightly integrated supply chain, operations and purchasing functions, and powered a Procure-to-Pay accounts cycle. This automation brought greater efficiency, coordination, oversight, and governance across the process from start to finish.
Walker continued: “Companies that have the launchpad to fully digitise their way of working and can think in a very agile way, will be more successful in streamlining and operating their manufacturing sites and in producing goods more cheaply. That will prove decisive given the opportunities they face.”
These diverse and compelling opportunities include a rise in ‘micro factories’ closer to the consumer end-market and a re-thinking of supply chains end-to-end; upskilling the workforce to manage more automation and robotics, the virtualisation of the product and manufacturing collaborative processes powered by the combination of cloud, analytics, and now the metaverse; and the acceleration of new value chains and partnerships that drive sustainability with increased sovereignty.
However, a recent Accenture survey of 1,500 manufacturing executives spanning 14 manufacturing and production industries indicated that most organisations still have a long way to go on this journey. Only 38% said they had deployed at least one digital technology to digitise engineering and manufacturing during the period 2017-2019. An additional 32%, on average, were planning to deploy at least one such project during the period 2020-2022.
The impact on product design and build
Not only will manufacturers have to rethink ways of working, but they will also having to take a closer look at how products are made and built, and what components and raw materials are used. Again, there are some exciting trends emerging from a product design and development perspective.
Accenture recently acquired Netherlands-based company, Vanberlo, which has a focus on sustainable and ethical product design and solutions. The company played a key role in developing a refillable deodorant stick for Unilever.
In addition, within the consumer goods sector the type of packaging that is used is equally important from a sustainability perspective, and the convergence of smart and connected technologies is turning humble packaging into a real source of value for businesses. Packaging is no longer what surrounds the product. It’s increasingly becoming an extension of the product itself.
“When we talk about product design and development let’s think hard about how we optimise the type of products that we build, create, design and shape so that they are fit for a sustainable future and are less reliant on materials that have to be carried around the globe,” continued Maddie. “If manufacturers can get that right they can really reduce waste and optimise the whole manufacturing process to run more efficiently.”
Let’s talk about tech
The list of the technology that is enabling this change is an extensive one, and there is no one silver bullet. AI, automation, robotics, PLM tool sets, data science, etc., will all have a role to play. However, the view of 24/7 lights out, automated factories are still some way off for most businesses.
“When we look at the technologies that people use, our starting point is where they are in their journey, and then we move forward from there,” said Maddie. “We’re very focused on the benefits that technology is delivering to the customer. For example, a large number of conversations we currently have with customers is around digital twins, and how you use data analytics and data science to really make a difference and add value to the bottom line.”
Maddie added: “In many manufacturing plants we’re using data and new technologies to really deliver value, and we’re having lots of similar conversations across the consumer goods market. The use of technology is quite different in other environments such as aerospace or more heavy industrial environments where there is more of a focus on quality and having the predictability and assurance associated with that. So, the asks are quite different depending on the different industry sectors that we’re working with.”
The shift to net zero
As mentioned, a key driver for manufacturers, particularly since COP26, is the drive for increased sustainability, and again, technology has a key role to play. Responsible value chains can have a massive impact on scope one, two, and three emissions. They can achieve this by designing and manufacturing products with fewer materials closer to where these materials are sourced. Responsible supply chains can drive further benefits by generating less waste and managing reuse more effectively by giving manufacturers greater control.
“What’s really important is the resiliency and the transparency in the whole supply chain,” added Walker. “It’s all very well focusing on your part of that supply chain as being sustainable. But if you’re sourcing goods from areas that are not sustainable, and you’re transporting them around the world, then your sustainability is challenged. Rising energy prices will mean there’ll be a real imperative to make change happen, even if companies haven’t already factored in the need to be more sustainable as part of the COP26 commitments.”
Applying transformation at manufacturers
Many of Accenture’s clients operating outside of the engineering and manufacturing sphere tend to be further ahead on the digital journey and, as such, the company is seeing a huge wave of companies looking to leap frog and transform their businesses, which it is serving through its Industry X practice.
“The focus of Industry X is on how companies reimagine what they make and how they make it,” continued Walker. “It’s about how we help our manufacturing clients to set up a business strategy, optimise and digitise their processes at the same time, and help them track and deliver value and benefits at the end of it. We can provide an end-to-end value chain; we can do everything from the upfront business strategy right through to the design and implementation, and that’s unique for our clients.”
To deliver this, Industry X is growing its skills and capabilities both in terms of hiring the most talented people from industry, but also through pointed acquisitions that build out the capability and skill set in this area.
Walker added: “We acquired a company called Myrtle which is focussed around delivering transformation on the shop floor. Industry X acts as an umbrella for these deep skills and capabilities in the digital engineering and manufacturing space, and we’re making a real difference with the clients that we’re working with.”
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