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.
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. The Steel industry meanwhile is heavily reliant on a small number of destination industries for its products, such as Automotive. 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.
Priority areas for long-term change are common across industrial manufacturing, including increasing automation and manufacturing equipment monitoring technology, along with the gradual shift from global manufacturing footprints to a regional hub (multi-local organization) model for greater resilience and agility. Right-sizing operations with the right plants in the right locations and reducing overhead have also become mission critical to maintain the right level of fixed costs. With the sector’s largest costs in input materials and parts, smarter use of technology can help achieve optimization of these variable costs.
Operational efficiency (65 percent) is the number one attribute that executives are looking to IT to deliver —but it is noticeable that stable and consistent IT performance (34 percent) is also a top three item for this sector, while it doesn’t feature on a cross-sector basis. This underlines the critical importance of an always-on operating technology (OT) architecture of a modern manufacturing environment. Customer centricity and the growing consumer expectation of a seamless digital experience have also accelerated due to the pandemic with 36 percent placing improving customer engagement in the top three business issues for IT to address.
While KPMG firms are some of the largest providers of services to industrial manufacturing organizations globally, we take a boutique approach to client issues with a focus on flexibility, adaptability, and innovation. We recognize that there are many on-ramps to supporting IT transformation and we’ve tailored our services accordingly: