- By Paige Marie Morse
- December 08, 2020
Companies faced with challenges of recovering from pandemic and economic disruption benefit from digital technologies and metrics that show progress toward short- and long-term goals.
Resilience is a concept that is top of mind these days, both in our professional and personal lives. The global pandemic has forced all of us to think about how we respond to unexpected situations, and how we manage the risk that goes with it. We also must consider how we think about the future knowing that such events can happen.
As all companies have been challenged by the current economic and health crisis, the successful recovery requires a new view toward future development and growth with metrics that can show progress toward immediate and long-term goals. Digital technologies can address these challenges.
It is also important to note that risk and resilience are important topics for investors with several portfolio managers rethinking their criteria for future investment–criteria that include commitments to environmental, social and governance (so called ESG) improvement.
During this period of market and economic recovery, a renewed focus on these goals will enable longer-term resilience for successful companies.
Addressing market volatility
Due to the disruption around the ongoing pandemic, external markets are particularly volatile, and outlooks are increasingly uncertain. Businesses must be adaptable and flexible to respond to unexpected market environments and supply disruptions. Many companies have learned that digitalization is a key enabler to build this flexibility and agility needed for profitability, both now and in the future.
Companies also need insight to make better decisions today and about where their business is headed–I will talk about new technologies to get you there.
The World Economic Forum talks about current times as “The Great Reset in Manufacturing” and in a report this summer lists a few key changes that many of us experienced as business professionals and consumers. The report highlights that online sales are growing worldwide–the US saw 146% growth in April, at the height of regional lockdowns, and this behavior is continuing as more and more consumers use mobile devices to make purchases.
Also, many educational institutions have shifted to online formats–a drastic change that will have a long-term impact on higher education worldwide, including investment into that sector.
Many employees are working from home from the first time, and this will continue as companies rethink work routines and engagement.
This digital adoption extends across business operations and now 77% of CEOs say this disruption is forcing them to speed up their digital transformation. And in the context of the rapid technology shifts from the pandemic, digital technologies, including artificial intelligence are critical for the competitiveness of companies.
The World Economic Forum recently completed an update to its study on companies that have learned to lead by employing artificial intelligence capabilities across their businesses. Their first study, completed in January 2019 and reported jointly with McKinsey, identified so-called “Lighthouse” companies that were leaders in implementing AI.
Their results show that companies that adopt AI technology within the first 5 to 7 years significantly out-perform those that follow or lag behind. Those companies that delay will miss opportunities to grow. And those that do not invest in AI will eventually lose market share.
The McKinsey and the World Economic Forum research continues in the current environment, and together they have identified the key shifts that are stemming from current market challenges[i]. The disruptions from the pandemic have led to so-called “durable shifts”–meaning they will be lasting, and differentiators for future success. The four key shifts are:
Agility and customer centricity: as a response to the demand uncertainty and disruptions that are challenging planning systems;
Supply Chain Resilience: as a means to manage the logistics disruptions and trade barriers that persist; especially important with the complex global supply chains that most companies are industries depend on;
Speed and Productivity: collaboration required as a quick response to remote working and physical distancing required, variable operating environments, and now pockets of economic recession that require operational and capital cost reduction;
Eco-efficiency: with the increased global concern about the environmental impact of human activities.
Digital technologies help companies make progress on every one of these challenges–a point clearly highlighted by the authors.
Agility and customer centricity: this means faster recognition of customer preferences and corresponding adjustments of manufacturing flows at next-generation small-scale modular plants. Even before the pandemic, markets had significant uncertainty. Weather events, global politics and cybersecurity issues have been part of risk planning recently and now we have a new risk.
Companies need the capability to run multiple scenarios to carefully consider many changing variables, respond to market disruption and rebalance to meet customer demands. In many cases, previous operational choices can impact future resilience–such as just-in-time production or single-supplier sourcing. These practices may need to be adjusted in the new environment.
And we then benefit from the accuracy of digital technology to represent actual operations, supply chain, and more. Many companies are working to improve business planning, especially forecasting accuracy in today’s markets. Planning has become a much more challenging task yet crucial tool for the agility needed in current markets.
Supply chain technologies work to combine historical data with market intelligence to generate and integrate accurate demand forecasts. This insight helps to manage inventories to optimum levels and takes the guess work out of forecasting so production assets are better utilized, and colleagues are better aligned in their activities.
Supply Chain Resilience: as a competitive advantage, requiring connected reconfigurable supply systems, regionalization and overall higher level of customization. A digital twin of the supply chain, that simulates current operations and enables exploration of alternatives to address vulnerabilities. Make sure your planner is focused on important activities and not distracted; holistically optimize regional and global supply chains.
One interesting and surprising application: Some companies quickly added social distancing constraints to their manufacturing scheduling digital twins to keep production operations personnel safe. The pandemic has exposed vulnerabilities in production asset networks and value chains–many companies working to revise production networks to achieve cost optimization and resilience.
Speed and Productivity: attained through increased levels of automation and workforce augmentation, increasing safety and competitiveness in a society when continuous reskilling and mobility are becoming the norm. It is important to synchronize operations to meet unexpected demand.
Also, particularly during these unprecedented times, companies want to ensure productivity and efficiency even when operating outside of normal ranges. Advanced process control (APC) helps to stabilize and optimize operations. And importantly provide in-context guidance to operators to keep processes on track.
Using Machine Learning and AI algorithms to build and deploy APC enables faster deployment, provide easier use with guided workflow, and reduces the time to build models from weeks to a few hours. Easier and lower-cost implementation means that users can gain value of APC for more processes, including batch operations for specialty chemicals, food and beverage, and other demanding processes.
Eco-efficiency: many companies would refer to these activities as sustainability targets and triple bottom line–seeking to balance People Planet and Profits. The World Economic Forum likens these efforts to "Purpose" and combines these concepts to note the importance:
“Updating their business for a digital-first world, led by purpose, is now an imperative for almost every company.” (ii)
Digital technologies help customers achieve sustainability targets to increase safety, reduce environmental impact and enable more efficient and sustainable processes and products. Companies are looking at ways to optimize their energy networks and lower the overall carbon footprint of their operations, and are using digital tools that help them identify opportunities for energy recovery and integrate lower carbon energy options, and consider heat and power sharing across their enterprise and with local communities.
And as companies develop more innovative products and processes supporting the circular economy, digital technologies enable faster evaluation of multiple options, reflecting emissions impact and economics for each, so companies can choose the best option and get new products to market more quickly.
And these adaptations help ensure the kind of resilience that will be key to sustaining successful operations in the face of future challenges.
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