“The digital process of the manufacturing industry chain will create a large amount of high-quality and transparent data, which covers everything from energy usage and inventory counting to new technology applications. Connected devices, data analytics, automation, sensors and other smart technologies, while creating their own databases, can also help manufacturers optimize processes, reduce waste and better predict consumer needs through sustainability metrics.

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By Subba Rao, Director of Product Evangelism, Mendix

I thought that 2021 was already the most challenging year, but from 2022 onwards, the outlook for the manufacturing industry will face constant changes in the market. The current manufacturing market suffers from labor shortages, isolated operating models, and difficulties in sustainable development. Long-term challenges such as supply chain volatility and inflation in some countries have undoubtedly exacerbated these phenomena. Therefore, all walks of life, especially discrete manufacturing enterprises, have urgent needs for the agility and elasticity of production.

After two years of COVID-19 shock, companies have embraced current trends and started to improve their adaptability and resilience. 67% of manufacturers say the pandemic has accelerated their adoption of digital technologies; 88% are more concerned about the resiliency of their operations as a result of the pandemic.

Manufacturers can adopt technologies that simplify digitization to increase business agility and resilience. The following sections highlight three priorities for manufacturing in 2022 and how digital transformation can positively impact the future of the industry.

Siloed operating model

Due to volatile supply and demand and changing consumer demands, it is imperative for companies to accelerate the innovation cycle. To do this, companies start by ensuring that business domains align with stakeholder goals to increase transparency in data-driven decision-making, while automating business processes.

However, in many manufacturing enterprises, there is no clear communication mechanism for cooperation between teams, resulting in enterprise departments often operating in isolation in the fields of engineering, production, business operations and supply chain, and with third-party manufacturers and Suppliers are also not closely connected.

These isolated sectors rely on a variety of systems and technologies that are not always consistent. For example, business operations may be using off-the-shelf commercial systems (COTS) and manual processes, while production may still be using old legacy systems. Many manufacturers have to take a step-by-step approach with siloed departments using disparate systems, resulting in higher IT costs and difficulty adjusting to changes in real-time, and teams struggling to align their priorities attitude, but the recent supply chain turmoil has shattered that status quo. Manufacturers are under enormous pressure to respond quickly to changing consumer demands. When the automation of various business processes is scattered in different systems, if the data is still inaccessible, unreliable or unavailable, the business side is struggling.

In response to the challenges of the pandemic, companies across the manufacturing industry are turning to digital tools to break down this silo and increase business efficiency. Moving from on-premises to cloud solutions can reduce the infrastructure burden on IT departments, but it still cannot avoid the difficulty of integrating systems and processes. Affecting the digital workflow of the enterprise itself, service providers, suppliers and customers, it can improve the transparency of data, reduce the risk of human error in manual processes and maintain agility, and help manufacturers create new products and products that adapt to the continuous changes in the global supply chain landscape. business model.

Challenges posed by inflation

In the early days of the pandemic, many manufacturers went all out to reduce production and preserve cash flow by “just-in-time” manufacturing processes and cutting short-term costs. But these decisions at the onset of the pandemic also present new technical challenges as manufacturers continue to adapt to the new normal.

The International Monetary Fund (IMF) believes that a rebound in demand, consumer preference shifting from goods to services, wage pressures, etc. are driving the rise in core inflation. According to a Gartner report, 74% of CFOs are concerned that profit pressures and inflation will lead to lower profitability. The types of inflation they are facing include:

• Wage inflation (60%)
• Raw material or commodity price inflation (59%)
• Freight inflation (51%)
• Salary inflation (50%)
• IT hardware/software/service cost inflation (34%)
• Electronics or semiconductor price inflation (20%)

61% of CFOs respond to rising costs by raising prices, but this practice is not a sustainable means. Randeep Rathindran, research vice president, financial industry at Gartner, explained: “Many CFOs responded to early input price increases by passing costs on to customers, rather than making long-term structural changes, such as investing in suppliers to increase capacity and reduce Costs. So as prices for materials and services rise and demand surges, businesses are facing lower margins.”

Under the severe impact of the epidemic, manufacturers immediately realized that their existing systems and processes were not flexible and fast enough to deal with the new environment. So in the first year of the pandemic, according to McKinsey’s survey, 85% of companies surveyed expressed greater focus on accelerating the pace of digital transformation, especially in areas that improve data visibility and accessibility. Some leading manufacturers are taking forward-looking actions, such as creating data-driven processes by investing in digital tools. Only by making data come alive will companies be able to more clearly assess and predict supply chain costs and limits.

Related reading: Seven trends for customer experience in 2022

Contribute to sustainable development

Environmental, social and governance (ESG) is now a key area of ​​focus for clients, incumbents, investors and policymakers. According to Deloitte research, 95% of manufacturing executives plan to increase their ESG investment in 2022.

With manufacturing accounting for one-third of global energy use, manufacturers need a data-driven approach to the entire manufacturing process to achieve sustainability, from product design, production to delivery, after-sales and across the supply spectrum, But only if businesses have transparent, logical and accessible data.

The digital process of the manufacturing industry chain will create a large amount of high-quality and transparent data, which covers everything from energy usage and inventory counting to new technology applications. Connected devices, data analytics, automation, sensors and other smart technologies, while creating their own databases, can also help manufacturers optimize processes, reduce waste and better predict consumer needs through sustainability metrics.

By digitizing processes, manufacturers can access data from these technologies in real-time and make forward-looking data-driven decisions to support short- and long-term sustainability goals. The CPG field, for example, is using machine learning to manage energy consumption and increase yield, while automakers are shortening production cycles and increasing efficiency through proactive, data-driven decisions.

Related Reading: Seven Manufacturing Trends at a Glance in 2022

How to get started with digital transformation

While each company may have a different view of the outlook for manufacturing in 2022, there is an urgent need for all sectors to build their own resilience. From R&D and engineering to manufacturing and supply chain to finance and human resources, digital transformation can reliably connect all areas of manufacturing, minimize the impact of inflation, and create more sustainable processes.

By using Siemens Low-Code Manufacturing Industries, the speed of digital transformation can be accelerated by reducing disruption to core systems and increasing cross-domain interactions. For more information, visit More Manufacturing Solutions in the Marketplace, or click to start your free Siemens low-code development journey.