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How Crisis is facilitating innovation in manufacturing firms

After the Second World War, the COVID-19 pandemic led to humanity’s most serious crisis. The closing of borders and national lockdowns have hit society, and particularly the manufacturing industries, hard. This has culminated in the destruction of supply chains and the closure of factories in return. Many companies were not prepared for this and had to learn to quickly reinvent their current supply chains and develop new ones from scratch.

Increased digital transformation investments as a result of the pandemic

Research1 reveals that among businesses that have not invested in money-saving, more than half of the survey firms have raised their digital transformation budgets. They also accelerated the digitization by 3 to 4 years of consumer and supply chain transactions connected with their internal operations. This included investments in remote communication technology to allow non-critical employees to work from home and in robotics, wearables that enable certain distancing on the shop floor, or digital control towers for logistics. To obtain the lack of clarity regarding their supply chains and compensate for the scarcity of labor during the pandemic, the pandemic has pushed producing companies to introduce digital solutions.

Robots facilitate the reshoring method, i.e., shifting output from offshore locations that provide cheap labor back to the developed countries where robots substitute work. Low-interest rates for investments assist this mechanism.

Reshoring is one method for eliminating confusion resulting from the pandemic in managing global supply chains. This process will continue because, considering climate change and the rising number of natural disasters worldwide, uncertainty will precede.

Business leaders also see the digital transition as an opportunity to develop and gain a competitive advantage in the crisis or lay the foundation for doing so after the problem. This emphasis eliminates the re-pandemic mindset of most businesses to perceive digital transformation solely as a means of reducing operating costs. As consumers seek more digital cooperation and crisis-induced engagement, the digital approach will become an integral part of the overall corporate strategy. The crisis is an accelerator of the digitization of relationships and processes. To retain ownership of their manufacturing environment, manufacturing companies need to become data-driven.

The crisis will improve new sourcing models.

Disrupted supply chains caused by COVID-19 have contributed to shortages of materials and components. By insourcing component production, emerging developments such as additive manufacturing have helped close the supply gap. The foundation for modern procurement platforms like Manufacturing as a Service is data analytics and machine learning (MaaS). The concept behind this is not to order directly from a (longstanding) supplier but to upload material specifications and a CAD file of the component to the platform using a platform such as 3D Hubs (Netherlands) or Xometry (US) that will automatically match them with suppliers developed on the forum. The platform operators ensure that all suppliers wishing to be included on the platform conduct trial orders before they are accepted to provide a high degree of quality. Also, operators periodically audit the manufacturing sites of the manufacturers as well as their quality control systems. The goal is to have a significant number of suppliers on board and provide OEMs with suppliers’ full option.

Significant manufacturing firms have also used these services like ABB, Audi, and BMW. These networks have helped close supply chain gaps in times of COVID-19, as local and mid-sized suppliers are now included in the collection of suppliers. Extended quest operations are becoming redundant for vendors. Based on the data collected over the years, the platforms may also have guidance on alternative production methodologies.

After the crisis, the growth of digital collaboration, process management, and the evolution of new business models will prevail. There will be no way back, even though 90% of people behave as they did before the crisis. Technology alone is not going to guarantee success for the business.

Digitization and improved virtual communication will set new standards for handling individuals and teams, such as creating closeness between individuals while there is no physical presence. We need to make sure we take people on this ride with us. Learning will be more critical than ever: continually learning, unlearning or forgetting stuff, and learning new things.

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