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For many industrial manufacturers, the COVID-19 pandemic posed sudden and drastic challenges as demand for products fell and geopolitical trade conditions severely disrupted access to markets, distribution channels, and suppliers. The shock to the Aerospace & Defense industry, for example, has been swift and painful due to reduced travel. Bailouts and financing packages are being offered by many governments around the world. Another key sector, Automotive, has also seen greatly reduced demand for new vehicles as consumers have reduced spending and trade tensions have increased tariffs. An area of opportunity for industrial manufacturing companies has been M&A of distressed companies. The speed of recovery for industrial manufacturing is highly dependent on recovery from the pandemic and what becomes the new reality for commuting and travel. Companies in this sector will need to utilize key market data to inform long-term strategic decisions based on shifts in demand and their downstream impacts. Investing in their digital transformation will be paramount. For IT leaders in the sector, especially in discrete manufacturing, instilling organizational agility and adaptability to prevent shocks to the system must be a priority along with implementing fully integrated processes, systems and data that connect all parts of the enterprise — from the manufacturing shop floor to the extended supplier and customer ecosystem, and administrative and support functions. The ability to use insights from data to predict supply chain risks, dynamically manage inventory to unlock value and ensure just in time operations will be key as companies in this sector enter the new reality.

Analytics & insight

To recognize the efficiency and productivity gains mandated by the Board, CIOs in this sector recognize that advancing the business’ data fluency and technical acumen will become a new core competency. The challenges are real with data being spread across a wide variety of disparate systems and legacy platforms, often unstructured and in different formats. This is particularly important through the supply chain, with real-time decision making needed on a continual basis. Only through the ability to access and read external data signals can manufacturers stay ahead and keep their agility. With increasing the organization’s data literacy a priority for a high proportion of IT leaders in the sector (59 percent), there is clearly further to go.

What now?

COVID-19 has changed the landscape. With technology more important than ever to organizations’ ability to survive and thrive, the opportunity has never been greater for CIOs to work as strategic partners with the business. Seven in ten IT leaders report increased collaboration between the business and technology teams — this relationship is something that CIOs must build on to ensure their organization’s digital transformation success. For CIOs in industrial manufacturing, now is the time to act as strategic partners to the business given the scale of the challenge that some organizations face. Leanness, agility, operational efficiency must be the watchwords — along with highly targeted investments in cutting edge technology to make crucial marginal gains in the manufacturing process.

Manufacturers are being tested as never before. The enterprises that do best in these severely adverse conditions will likely be the ones that are most agile across a wide range of endeavors. In particular, the current acceleration of the digital transformation is critical to improve operational efficiency and increase competitiveness accordingly.

Stéphane Souchet
Global Head of Industrial Manufacturing
KPMG International