Reflecting back, it was pretty clear that 2019 was a transitionary year for manufacturing. Output was down, and tariffs and trade policies were a large part of the reason. Call it “political instability” that caused some manufacturers to hesitate or postpone capital investments in machinery or tech (including ERP) that could make them more efficient or drive business. In direct correlation the declining demand for oil and gas has been going on since the fourth quarter of 2018.
With renewed trade policies everyone thought a turnaround was set for 2020 (although election year politics and ramifications are never predictable). Enter the seriousness of the Coronavirus and forecasts for manufacturing increases or stability have never been more in jeopardy. China, who produces around 45% of global manufacturing is grappling with quarantines that have shuttered factories.
The stock market is in freefall. The balance between public health concerns and economic hurt is only getting more complicated. Serious supply chain disruptions worldwide are becoming reality. Apple has been forthcoming about product delays while thousands of Amazon resellers are out or low on stock. We have now entered uncharted territory.
With all of that said, we continue to get solid business from manufacturers looking to get ahead of the curve by updating their technology and processes. Leading-edge manufacturers are trying to control their own destinies to become effective digital manufacturers and not get caught up in the paralysis of the times. Hard to do with the likely broad impact on earnings growth.
I recently talked with Bryan DeBois from RoviSys whose company focuses on innovative process automation solutions for manufacturing. Here’s some perspective on what manufacturing companies are thinking and doing:
For too long, the insights that can be gained from Operational Technology (OT) have been locked away from IT and company leadership. Lack of visibility, lack of trust in the data, and poor integration have been the standard way of operating. Digital transformation gives companies an opportunity to start to break down those walls.
And for the plant floor, IT brings much-needed standardization, security and governance best practices, and data-wrangling tools that could greatly modernize the world of OT. And that certainly includes AI and Machine Learning. These tools and techniques that IT takes for granted would be game-changing for the plant floor.
Certainly, there are aspects to modern factories that look futuristic compared to 20 or 30 years ago. In the areas of safety, environmental awareness, and productivity, we are far ahead of where we were. But there’s still so much room for improvement. Consider that Artificial Intelligence (AI) is anticipated to have the highest returns with the lowest investment of any sector. Clearly, bringing the factory of the future into fruition should be everyone’s priority especially in challenging times.
We helped one of our customers create an Integrated Collaboration Center that serves as a NASA-style command center to monitor and coordinate all upstream and downstream operations of their production factories. Previously a problem in an upstream plant could cause cascading issues with downstream plants as the supply chain was regularly upended.
Now, representatives from all plants sit in the command center, and problems are handled in a coordinated and informed manner. This is especially valuable in turbulent times like the one we are currently going through. This customer has publicly stated that their Digital Transformation investment (while substantial) was paid off in just one year by handling issues in a coordinated and timely manner. Their initiative was well underway before the Covid-19 outbreak, which no one really saw coming.
Figure 1 Displays show all plant operations across the enterprise (This photo was presented at a public trade show and is believed to be free of NDA constraints.)
Yes, companies are investing in process optimization. In fact, RoviSys estimates that while these types of process optimization projects made up only about 20% of our workload 20 years ago, they now make up 45%, and we anticipate will be over 50% of what we do in the next five years. These projects are only successful if IT and OT own these continuous improvement efforts together. RoviSys engineers often finds us in meetings with both IT and OT at the table, and it’s sometimes up to us to get everyone working together and moving in the same direction.
I think it’s our people. If you grabbed any random RoviSys engineer, you’d find someone who is smart, driven, and easy to work with. Someone who is a professional, but also doesn’t take themselves too seriously. And most importantly, they love solving problems—both for our customers and for their peers. When you pack your company full of 800 engineers like that, you can accomplish some pretty amazing things.
The world is fraught with uncertainties and we are encountering unprecedented challenges that we will learn from. The current disruption to manufacturing (as not to minimize it) is not quite like anything we’ve seen – impacting demand as well as supply chains at the same time. Large and small businesses are being affected. It will prompt companies to develop better strategies, more efficient processes and less dependencies.
As previously mentioned in this this blog, we have not encountered companies slowing their digital transformations or process improvement efforts. Quite the contrary – unplanned downtime is being used to analyze outcomes while strategizing how to minimize future disruptions. We are also seeing companies amend their “future state” visions to be more comprehensive and inclusive of the possibility major events like Covid-19.
With our help and faced with a plethora of unknowns, our clients are navigating this challenge by developing new or improved rigorous business approaches (including managing risk) and focusing on cash flow vs. profits. They are also using this downtime as an opportunity to evaluate from among the top ERP systems in the market.
We hope for the best, given the emotionality and uncertainties that come at us about the virus via daily newsfeeds. Likewise, we believe that manufacturing companies will become stronger and better prepared, albeit not without feeling the pain or severity of the current situation.