The COVID-19 pandemic has swept the globe, highlighting strengths and laying bare weaknesses across our society and economy. Today’s intricate ecosystems rely on stable supply chains – and panic quickly sets in if they’re perceived to be under threat. We saw this in many countries as consumer uncertainty triggered spikes in demand for consumer-packaged goods (CPG). Manufacturers scrambled to respond, while at the same time grappling with the challenges of employee absence, new social distancing rules and unpredictability.
The crisis exposes the limited resilience of many manufacturers and highlights a worrying lack of agility that makes supply chains vulnerable to disruption in any form. Many CPG companies are being forced to rethink the way they do things at a time when cost is also a major concern. Forward-thinking companies realize that investment in their supply chains now is not just a cost item; it’s an important enabler as they navigate the crisis and prepare for to a stronger, more resilient future.
Industry 4.0 promises greater agility, faster adaptability and better reliability. New technological capabilities drive operational efficiency, propositional value and market relevance. With supply chains stretched to their limits, the COVID-19 crisis is proving a litmus test for these claims. So are factories of the future living up to their reputation? The truth is that they most likely could if companies were adopting the available technologies, systems and controls properly. But many are not. In collaboration with EY, SmarterChains – a software-as-a-service leader in the assessment and design of Industry 4.0 strategies in manufacturing companies – conducted the first global benchmarking study across a significant sample of multinational consumer product companies. The results show that the level of advancement is far lower than we might expect based on publicity around Industry 4.0. Of 50 plants and 327 production lines assessed, only 10 percent are classified as advanced in using and leveraging digital capabilities.
Roadmap to a smart factory
How can CPG companies do better at leveraging the opportunities of Industry 4.0? We explore five insights from the study, and what they mean for CPG companies now and going forward.
1. Digitalization goals and strategy are vital
Advanced plants already have sophisticated digitalization goals and strategies, which they continue to update and refine as technology advances at pace. Strategy and roadmap of technologies must fit the realities of a company’s operations. Especially now, business leaders need to assess and develop the plan for the future. It means investing time in a clear end vision, rather than simply embracing Industry 4.0 in principle. This approach will help companies avoid expensive purchases of fancy IoT tools which could turn out to be difficult to scale and have limited applicability in practice.
2. Operational excellence drives adaptation of advanced technology
Successful CPG companies seize the significant opportunities of end-to-end integration by working across the value chain and setting loss elimination targets in operational excellence programs accordingly. To support and maintain steadfastness of purpose in driving and accelerating operational excellence programs, companies need to get everyone on board. For example, they should offer tech-enabled workforce skill augmentation programs to scale capability and build skills faster.
3. A tech-augmented workforce is stronger
The workforce of today and tomorrow expects to work with smart factory tools and technologies that assist employees. These help build skillsets and optimize workflows, offering not just productivity gains but a modern workplace. The goal is to build a tech-augmented workforce that truly empowers the business. Many plants are already using handheld devices such as smartphones or tablets on the shop floor. These provide new and immediate insights by focusing on data visualization, reporting, and auditing. Going forward, augmented and virtual reality will take the workforce to the next level of efficiency.
4. Investment is a continuous process
For companies still at the strategy definition stage, identifying investment size will help create a clear roadmap for the transformation process. Although it’s tempting to save costs in the current environment, it’s important to invest continuously (and wisely) in infrastructure such as connectivity and cybersecurity as the foundation of successful transformations. Embracing Industry 4.0 is not a one-off exercise but a future way of operating that reduces risk and increases resilience.
5. Mindset matters
At the leadership level, it’s important to nurture behaviors for transformation through comprehensive education and training. Companies should seek ways to incentivize experimentation with new loss eliminating technologies and integrate this into the leadership agenda. More broadly, instilling a culture of continuous discovery will keep everyone at the organization ready for the challenges ahead and increase willingness and ability to adopt new tools and technologies.
Now and next
As companies navigate disruption now and in the months and years ahead, a truly transformative approach means turning the idea of digital operations into the tangible and sustained reality of a smart factory. Wherever they stand on their journey, now is a good time for CPG companies to take stock and explore priorities and strategies for the future. A status quo assessment is the first step in developing a roadmap towards a more agile and integrated manufacturing ecosystem. Depending on the size and digital maturity of the organization, this will include internal and external benchmarking.
Today’s uncertain and volatile environment will accelerate the demise of companies that cannot adapt fast enough to the changing landscapes. In contrast, those who embrace new technological possibilities will be better placed to adapt and respond to future disruption, whatever form it may take.