Sustainability and digital transformation shape the future of manufacturing
The manufacturing industry is facing transformative times. Increased turbulence and complexity have arisen with new risks: excessive energy and primary resource costs, supply chain problems, inflation, and increased financial costs. At the same time, the two megatrends, digitalization and sustainability, continue to change the business landscape for manufacturers steadily. This development will call for new business models and production terms for many small and medium-sized manufacturing companies.
Sustainability as a business driver
Many people still think of sustainability primarily in terms of environmental sustainability, yet it has come to incorporate many more aspects. Businesses today must be environmentally, socially, and economically sustainable. It means being a business that can be profitable in a changing world and survive in the long term. Sustainability is also no longer just about regulatory compliance. According to a study by Capgemini[1], 79% of consumers are changing purchase preferences based on the social responsibility, inclusiveness, or environmental impact of their purchases, but only 36% of organizations believe that consumers are willing to make this change. As customers change their behavior based on the impact of their purchases, companies need to see sustainability as a business driver. This will be the case for all businesses, not just for B2C companies.
What business models will the world of the future demand?
“There is nothing permanent except change”, said Heraclitus. Nevertheless, businesses like predictability and familiarity. These are qualities that enable effective planning, budgeting, and implementation. Unfortunately, predictability is not always a quality of the real world. The real world is often characterized by volatility, unpredictability, complexity and ambiguity (what we call VUCA). This has never been more so than today, where the forces of digitalization and mass connectivity have accelerated the pace of change, ushering in new ways of working, communicating, and collaborating.
This technological transformation is precipitating an upheaval in business infrastructure and behavior no less radical than the industrial revolution. And on top of these fundamental structural changes, there have been more unexpected geopolitical shocks. These can have profound consequences for business-as-usual.
So what can businesses do amid such seismic shifts? How can business model innovation be effectively pursued? Well, innovation, from sustainable innovation to commercial innovation, increasingly means making the most out of your data.
This starts with collecting, standardizing, and analyzing it in a way that means it can be effectively utilized. From supply chain to sales, design to distribution, manufacturers produce huge amounts of data. Having all this information in the right state enables businesses to make decisions far beyond next quarter’s budget.
The most logical next step in using data to manage this scale of transformation is the virtual twin. Take your products, for example. If you have a virtual twin of your product, you can optimize it at the design stage, boosting its quality and durability – and help reduce its environmental footprint. But you can also model the whole post-sales life of that product, looking at how it might need to be maintained, how its components could best be recycledwhen it has reached its end of life, and what its second or third lives could be.
The value of virtual twins also extends into companies’ operations. If something goes wrong in the supply chain, for instance – one of the suppliers comes and says, ‘we’re out of semiconductors’ – a company can turn to the virtual twin and experiment with new models, risk-free, and use that information to find new suppliers or logistics arrangements and get its operation back up and running.
Building business resilience
According to BCG study, in the four downturns since 1985, one in seven companies grew its sales and profits. How did they succeed while others faltered? Because, as BCG observes, “companies that have purposefully developed capabilities to tackle ambiguity and unpredictability – in a word, resilience – are most likely to thrive.” Analysts agree that today, business resilience is enabled by digital transformation.
Digital transformation has long been touted as the magic formula for manufacturers that want to optimize operations, increase cost-effectiveness, boost efficiency and productivity, accelerate speed to market and build a sustainable, risk-resilient business. However, while most manufacturers have experimented with new technologies over the past decade, few have implemented the core data management platforms, smart equipment, internet of things architecture and connected systems at the scale required to achieve measurable success.
The current concerns revolve around unstable geopolitical situation, inflation, cybersecurity, food crises, and the existential threat of climate change. Our dependency on critical infrastructure and each other has been exposed. In these uncertain times, people and companies are looking for ways to minimize risk and find long-term stability. For manufacturing, this means building sustainable businesses that can withstand rapid changes and ensure that data and digital infrastructure is secure. Digitalization and increased visibility throughout the supply chain enable rapid response when potentially disruptive issues occur.
Factories 4.0
Digitalization affects all industries and businesses, and manufacturing is no exception. New technologies and digital tools continuously unveil new opportunities and make the production processes more efficient. IoT and sensors help generate new data that allow measuring almost anything in real time. For manufacturing, digitalization has the potential to transform business
models and unlock new opportunities to understand and serve customers in a better way, optimize existing processes and save costs, and to manage risks intelligently.
However, before factories in Poland can fully benefit from the effects of quality improvement and other potential benefits of new technologies such as Artificial Intelligence, Machine Learning, IIoT and others, they face a number of significant challenges. One of the main challenges remains providing the processes with the right fuel in the form of relevant data. This typically requires the dismantling of silos operating within the enterprise, including silos of data, analytics and analytics tools.
With the right discipline and technology, these challenges can be overcome. Digital business platforms, such as the 3DEXPERIENCE platform from Dassault Systèmes, open up opportunities for collaboration across the organizations and maximize the benefits of new technologies. They enable to assess internal competencies and external needs in each area and create the business environment that will engage customers and subcontractors as full partners in the value creation process.
Ireneusz Borowski, Country Manager Poland, Dassault Systèmes
[1] https://www.capgemini.com/news/sustainability-in-cpr/
Last Updated on June 13, 2024 by Anastazja Lach