We recently had our Advisory Board meeting, comprised of senior executives from European manufacturing organisations, with an objective to understand the latest topics or challenges they are dealing with. The two main challenges that were on their lists were energy prices and cybersecurity, how these two converge, and the role that technology can play to overcome the obstacles created by these threats.
Exploding Energy Prices
Unsurprisingly, the first challenge is exploding energy prices and how most manufacturers are struggling to cope with the ongoing situation here in Europe. They are in firefighting mode and find it extremely challenging to make profits from their operations.
Many companies have had to completely stop production for a few weeks, and this will continue even more in the coming months as prices rise exponentially. Some European manufacturers that have recently announced shutdowns are Arcelor Mittal (Germany), Aperam (Belgium), and CF Industries (United Kingdom).
Manufacturers tend to get energy price visibility only a week ahead and are therefore unable to plan for longer. Unless these costs can be passed on to customers, they have an impact on everything else and are pushing manufacturers beyond limits.
The cost uncertainty significantly complicates the S&OP process. For instance, frozen food requires storage in cold conditions and soaring energy prices lead to planning constraints. The bigger challenge is that this doesn’t seem to be going to stabilise anytime soon.
Are such high prices now the new normal? It is getting complex, since absorbing the costs or keeping high safety stock is making it difficult for manufacturers to even stay afloat.
Cybersecurity
There has been a shift from traditional closed systems to interconnected and open ones as part of digital transformation in manufacturing. This has made the industrial internet environment extremely complex, leaving the internet with many weaknesses and attracting more and more criminal attacks.
These cyberattacks have risen massively in the past six months. The manufacturing industry is only now waking up to the need for and importance of cyber security.
Most manufacturing organisations are increasing their investments in cybersecurity, but this is also leading to limitations in their operational technology (OT). They have mentioned how some of these cybersecurity measures had to be disabled because they impacted the performance of their equipment.
The desired output wasn’t being achieved, which required decision-making between a secure environment and the performance of the equipment.
When cyberattacks are successfully made on the systems or equipment that produce gas, it leads to a production shutdown causing an energy war. Unfortunately, this is the current reality that manufacturers are dealing with.
Producers acknowledge supply chain struggles caused by the pandemic, but these attacks on energy-producing equipment are hitting them at their core. The situation is making them rethink their IT capabilities — what to continue to do in-house vs. what to outsource/partner with and with whom.
The most important thing in such times is to be resilient, but the question is how? How to have safe energy, smarter supply chains, optimised and secure systems, visibility into what is happening and what needs to be done?
This is where technology can play a key role and manufacturers are looking for technology partners, not just to help them solve these challenges but also to build long-term resilience, especially around energy and materials. These challenges also provide an opportunity to think differently, innovate, and explore different business models, and only those manufacturers that can sail through this challenging phase will stay relevant in the market.
IDC the European Manufacturing Summit
Join us on November 15 at IDC’s European Manufacturing Digital Summit as it will be a perfect opportunity for manufacturing executives to discuss further on these challenges, share lessons learned, and network with the peer group.
Our advisory board members are keen to hear from technology providers during our summit about how they are helping solve these challenges. A summary of previous discussions with our Advisory Board can be found here. The summit also provides an opportunity for manufacturing organisations and technology providers to discuss how they can thrive in an increasingly digital and sustainable but also uncertain, volatile, and complex economy.
IT executives and senior decision makers can register here for the summit.
For more information about the summit, please contact Stefanie Naujoks or Gunjan Bassi, or head over to https://www.idc.com/eu