Gunjan Bassi
Gunjan Bassi (Research Manager)

Manufacturing leaders must steer their organisations amid the geopolitical, economic, and social volatility being experienced worldwide towards long-term business growth and profitability. At the same time, they must rethink how their organisations work, their broader purpose, and how can they create a meaningful impact on society.

In today’s post-COVID world, there have been hundreds, perhaps thousands of disruptions worldwide — some at the same time, others consecutively. Dealing with disruptions and challenges isn’t new for manufacturers, but they are now of a completely different magnitude — there is an acute shortage of raw material, components, and labor, component and energy prices are sky-high, containers are not available, ports are congested, and inflation is biting. One of IDC’s Manufacturing Insights advisory board members describes the current market situation as a horror show and that organisations need to deal with continuous tsunamis coming toward them.

IDC research shows that, on average, less than 20% of European manufacturers think they are leading in executing their strategic business priorities, and hence the remaining 80% are continually looking to improve their market positioning.

Introducing IDC Insights’ PRIME Framework

At IDC Insights, we have designed the PRIME framework to guide the entire C-suite of manufacturing organisations on navigating these disruptions and thriving in the future by focusing on five key elements: Purpose, Resilience, Imagination, Mastery, and Ecosystems.

We believe that by addressing these pillars, manufacturers can prepare themselves better to face the unknown in the future. In this blog, we are going to take a deeper look at each of these pillars.

Purpose

Manufacturers must define and apply their purpose to people, products, and processes to drive enterprise growth. Sustainability is becoming more important than ever and is a core component of the purpose wave.

Tobacco multinational Philip Morris International (PMI), for instance, issued its Statement of Purpose in 2020, committing to deliver a smoke-free future. It is developing innovative alternative products, which when cigarettes are completely phased out, are meant to have benefits to the public health. The company seems not only to be adapting its business model for growth, but also working towards making a positive contribution to society. Another example is Unilever, which has concluded its Unilever Sustainable Living Plan (USLP) and in 2021 launched Unilever Compass, an integrated corporate strategy, with a central purpose to make sustainable living commonplace.

A sustainable business must also run with sustainability principles in mind. In my previous blog, I talked about the fact that “lean is green”. Improving operational efficiency (such as reduced energy consumption or reduced material waste reworks) and fixing sub-optimal supply chain networks not only leads to better business performance but also contributes to greener operations. Sustainable manufacturing organisations can also make their market position stronger by catering to more demanding end-user markets and eventually becoming part of sustainability-strong value chains.

Resilience

Building a resilient organisation has never been more important. Resilience is not about managing ‘a’ crisis or ‘a’ challenge; it’s about being prepared for anything — not just being able to adapt to any disruption but also being able to capitalise on the changed conditions.

The past couple of years has revealed persistent cracks and vulnerabilities in the supply chain, whether it was the Suez Canal blockage or containers piling up at ports leading to the unavailability of products. Peter Hasenkamp, an ex-supply chain leader at Tesla, once famously said that “it takes 2,500 parts to build a car, but only one not to”.

All these disruptions have a direct impact on a manufacturer’s ability to sell its products and generate revenues. At the same time, they have also presented them with a unique opportunity to transform their supply chains and become truly resilient.

Walkers Crisps by PepsiCo, for instance, has temporarily shifted from using sunflower oil, which is in short supply due to the ongoing Russia-Ukraine war, to rapeseed oil, trying to maintain the same taste as before. With such complex situations being thrown at manufacturers every now and then, they are expected to continue to invest to improve the resilience of their supply chains — whether it is to increase visibility into suppliers, customers, and other partners, or to implement near-real-time supply chain planning and intelligence solutions.

Imagination

After more than a decade since industry 4.0 concepts were first outlined, accelerated disruption is pushing manufacturers towards reimagining their businesses that go beyond the traditional product or service innovation. The business needs to be looked at with a “Business as Un-usual” mindset to be able to create new business models, new products, and services, or even reinvent operations and be able to move from pilot projects to scalable solutions.

Although the opportunities emerging from what IDC calls the “industrial metaverse” are nascent, they are steadily emerging. Sabine Scheunert, Vice President of Digital and IT Sales/Marketing, Mercedes-Benz Cars, said, “I predict that metaverse technologies will influence how we think about data, how we design digital marketplaces, and how we approach ecommerce in the future.”

We can already see several examples across automotive (such as the Hyundai Motor Co. Meta-Factory and BMW Group Omniverse Digital Factory) and CPG companies (such as P&G’s BeautySPHERE and The Coca Cola Co. NFT collectibles), leveraging the industrial metaverse and blending the physical and digital spaces. Metaverse can also be leveraged to attract a tech-savvy new generation of workers to the manufacturing sector.

Mastery

Manufacturing companies have long aimed for operational and product excellence to deliver a great customer experience. Many manufacturers are also successful in delivering great products with fine-tuned processes. The issue is that adding value to the traditional source-make-deliver model is very challenging in some sectors. However, it can be addressed by creating value somewhere else, leveraging manufacturing roots to create new sources of value, for instance in the digital world. We see manufacturing companies moving to data sharing and trading, operational and IT IP resell, new digital product creations, outcome-based business models, and even the metaverse.

An example is Britvic, a UK-based soft drinks company that sells Fruit Shoot, Robinsons, Tango, Pepsi Max, and several other well-known brands to retail, food service, and leisure outlets. It has launched sustainable digital flavour taps, called Aqua Libra Flavour Tap, for office and retail environments. These taps release micro-doses of sugar- and additive-free flavouring into the water providing healthy hydration options to office staff and retail shoppers. Using the Amazon Web Services (AWS) platform, Britvic is also able to capture real-time data on product usage and on maintenance requirements. This offering also provides an opportunity to eliminate single-use plastic bottles, making a positive impact on the environment as well as personal health.

Ecosystems

At IDC, we believe that in the digital-first world, people will live differently and therefore consume things differently too. This will also impact how manufacturers produce and sell things to their customers. The value that a product and service bring to the customer is what will matter most. To create and deliver this customer value, manufacturers will increasingly have to collaborate with their ecosystems. The focus will be on the exchange of data among all relevant ecosystem stakeholders to run their businesses, innovate, and be able to move ahead of any disruption that may come. An example here is SKF, a bearing solution OEM, and AWS, which teamed up to create a brand-new product — a scalable next-generation condition monitoring system.

Now, when discussing ecosystems and cross-company data exchange with our manufacturing clients, establishing trust and ensuring data sovereignty are two of the key aspects that are always a part of the discussion. A prominent European example here is Catena-X, which is based on Gaia-X. The goal of this initiative is to support data sharing in a trusted and secure environment while ensuring data sovereignty in the automotive sector. Another example is Siemens, which has launched Estainium Network, an ecosystem-based approach for the exchange of emissions data to track a product’s carbon footprint across the supply chain.

Key Questions Manufacturers Should Answer

To succeed in this “Never Normal” scenario, manufacturing organisations must embrace technology innovation to deliver on economic and societal purpose; develop resilience against short-term shocks and long-term stresses; reimagine their business; master intelligence, operations, and experiences; and be open to dynamic ecosystems.

At IDC, we believe that applying this framework will empower manufacturers to holistically transform their organisations and gain a competitive edge by being able to navigate through the ongoing disruptive business environment and at the same time be prepared to deliver success in the long term.

Here are the key questions manufacturers must address when looking at the five pillars of IDC Insights’ PRIME framework:

  • Purpose: How to become a sustainable organisation
  • Resilience: How to ensure resilient supply chains and factory operations
  • Imagination: How to develop new revenue streams and attract new customer groups
  • Mastery: How to optimise and automate better decision-making based on data and insights
  • Ecosystems: How to create new value with ecosystems and scale innovations

 

PRIME is also our theme at IDC’s European Manufacturing Summit 2022. Join IDC experts, manufacturing leaders, and technology providers to learn more about how manufacturing organisations are embracing PRIME to thrive in this complex and volatile business environment. See you there!

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