Without a doubt, the events of 2020 have been very disruptive. The COVID-19 pandemic has amplified the underlying weaknesses and fault lines across society. Individuals have had to adapt their behaviour to slow the transmission of a poorly understood virus. In manufacturing, it is likely that billions of dollars have been lost so far in 2020, while a high percentage of manufacturing jobs have been negatively and permanently impacted.
In April the International Labour Organization estimated that nearly half of the global workforce is at risk of losing their livelihoods. More recent data shows that in US manufacturing the hoped-for recovery in jobs is not yet happening, even as lockdown restrictions are lifted. Salary sacrifices across the industry are commonplace. Part-time, remote work is becoming normal. Demand for manufactured products has in most cases dropped at an unprecedented rate. For example, most of us remember how crude oil futures dropped so dramatically that at one point in time the price of oil dropped below zero.
In a heroic effort to adapt and survive, many manufacturers repurposed their plant towards making products that help fight the virus. Clothing factories produced personal protective equipment and alcohol companies converted to producing sanitisers. At no other time in recent history, other than during a major world conflict such as World War 2, has the economy been so severely impacted and manufacturing companies required to take such dramatic steps to survive.
Where to next?
In the context of a sustained global recession, valid questions are now being asked: where to next? Will there ever be a return to normal? What does the ‘new normal’ look like? Can we as manufacturing control and automation professionals find new ways to prosper in this new volatile and uncertain environment? How can we pick up the hyped-up technologies loosely referred to as ‘Industry 4.0’ and take them forward? Is it even ethical to push for manufacturing automation at a time when so many people are without a job?
The bad news is that the COVID-19 pandemic is very likely not the end of wide-scale global disruption. Disruption, as we move into the world of Industry 4.0 dominated by ‘smart plants’, was steadily evolving long before the pandemic. Adaptable manufacturing was one of the objectives of companies looking to invest in the smart manufacturing IT platforms of the future. The current pandemic has merely sharpened our awareness and improved our understanding of what future global disruption might look like. For all we know, COVID-19 might just be a mild introduction to an even more chaotic future. We simply don’t know.
To get through the immediate crisis, manufacturers have been forced to implement short-term strategies for survival, i.e., the urgent protection of their cash reserves. This is achieved by implementing radical cost-cutting measures, avoiding increases in working capital and shutting down marginal or loss-making production facilities. Many of these are temporary measures, with the expectation of returning to some sort of new normal. But as the recession bottoms out, manufacturers that survive the cash crunch will turn to looking for ways to make their business much more resilient. This might involve focusing back on the core businesses, disposing of non-core or non-performing assets, and redesigning their business models around customer focus, responsiveness, agility and adaptability.
Slowly, as demand picks up, manufacturers will once again start investing in targeted new ventures (which is good news for project engineers). The next wave of control and automation investment will have to position the organisation for the new normal, including so-called smart manufacturing. Technologies will include the familiar Industry 4.0 enablers, inter alia the IIoT, AI, virtual reality, digital twins and cloud computing. Innovations will accelerate. The language of MES will be replaced with the language of smart factories. The fourth industrial revolution will be accelerated; factories that do not adapt quickly could slowly regress into obscurity.
IT investments must add value
Manufacturing companies that were busy preparing for the world of Industry 4.0 and had already started researching or making strategic investments in next-generation platforms such as the IIoT, cloud/edge computing, AI and mobile applications, will no doubt be better positioned for this uncertain future than the others.
Over the years I have always insisted that all IT investments must add value. As engineers, many of us think that value is all about lowering cost. This is perhaps a weakness in our technical training, as opposed to the business skills learned by marketers or entrepreneurs. Engineers enjoy finding the minimum cost of production and we instinctively spend most of our creative time grappling with optimising processes to reduce waste. We become fixated on minimising expenditure, whether it be on capital items or operating costs (e.g. maintenance), or on reducing the cost of production (e.g. conversion efficiencies). Our mindset in this regard has, rightly or wrongly, in the past been shaped by the dominance of the chief financial officer, who ruthlessly measured the success of any business venture in terms of revenues and costs, i.e., profit, retained earnings and the balance sheet.
So what is the real measure of value?
Hopefully, many engineers are more than just subconsciously aware that value is actually much more than financial performance. History has shown that organisations that focus only on financially defined ‘profit’ tend to be unsustainable over the long term.
PMBOK (Project Management Body of Knowledge) defines business value as the total sum of all tangible and intangible elements. Tangible assets include physical plant and equipment, cash and working capital (stock levels of raw materials, intermediates and finished goods). Intangible assets include intellectual property, brand, goodwill, reputation, credibility, and so on. Business performance is therefore not just measured by the financial statements, but must take into account a scorecard of key performance measures across multiple dimensions. Key performance measures could therefore include customer loyalty, customer satisfaction, market share, etc. (I would suggest that agility and adaptability also be considered as one of the more important new metrics). Because all of these measures reflect on business performance, they are all measuring ‘value’ in some form. Once we understand that value is much more than controlling cost, we are in a better position to start to see many opportunities for smart IT investments going forward.
As engineers designing the next generation of smart plants, we have an enormous range of technology tools at our disposal, more than ever before. A familiar example: we can now install smart sensors that connect to the Web and that can be interrogated and controlled from anywhere on the Internet. The implications of this are, however, often underestimated in terms of unlocking new business opportunities. Smart sensors connected to physical products can provide usage data allowing proactive services like predictive maintenance and remote troubleshooting, for example. These new digital channels might hold the key to important new business models.
We also now have vast amounts of data at our disposal, most of it stored in the cloud, along with easily accessible and cheap tools for analysing and processing information using artificial intelligence (AI). Even more, this AI can start to predict things better than we can, and therefore guide business decisions in a volatile environment.
The rich toolkits available to us as control and automation engineers will not end here; these IT technologies will continue to evolve into the foreseeable uncertain future, creating many new opportunities to add value. There is no way we can fully predict the nature of new toolsets at our disposal in future, nor can we accurately predict the next disruption. What we can do is change our way of thinking. As engineers we can start to embrace disruptive change as being the new normal, and remain focused on adding value in its fullest sense. As the saying goes, we have to adapt or die.
Gavin Halse
Gavin Halse is a chemical process engineer who has been involved in the manufacturing sector since mid-1980. He founded a software business in 1999 which grew to develop specialised applications for mining, energy and process manufacturing in several countries. Gavin is most interested in the effective use of IT in industrial environments and now consults part time to manufacturing and software companies around the effective use of IT to achieve business results.
For more information contact Gavin Halse, Absolute Perspectives,
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