Deloitte’s Paul Wellener discusses the drive among manufacturers to become more resilient through digital transformation and their concerns around cybersecurity.
The manufacturing industry and global supply chains have been forced to adapt to dramatic disruptions in recent years.
While recovering from the impact of the Covid-19 pandemic, supply chains are now being hit by rising inflation, material shortages and rising energy costs. These challenges have been exacerbated by Russia’s invasion of Ukraine.
Supply chain disruptions could lead to a loss of up to €920bn across the Eurozone next year, according to an Accenture report in May, which would be nearly 8pc of the Eurozone’s projected GDP for 2023.
As a result, more manufacturing players are looking to technology to reduce their operating costs and help them respond better to supply chain challenges. More than half of Irish firms recently surveyed by Accenture said they plan to invest in technology over the coming year to try reduce their operating expenses.
Paul Wellener is a vice-chair of Deloitte and the leader of Deloitte Consulting’s US industrial products and construction practice. He told SiliconRepublic.com that digital tools are helping manufacturers become more resilient to supply chain challenges.
“Those companies that can see further into the supply chain and understand where those disruptions are, they can see through multi levels of their supply base,” Wellener said. “They can look across their factories and allocate components that might be scarce to different kinds of products.”
He noted that certain companies were quicker to bring digital transformation into their business during the Covid-19 pandemic. Wellener said these “digital frontrunners” were typically companies that have embraced new technologies earlier.
“We’re definitely seeing those companies that have that ability to have visibility being able to become more resilient,” Wellener added. “They would have had to have invested in the tools early.”
Securing the supply chain
Wellener said that the Covid-19 pandemic, combined with recent supply chain issues, has boosted the drive for companies to adopt more digital tools.
In September, Deloitte released a study after speaking to more than 200 manufacturing executives. The vast majority (80pc) of respondents said they experienced a heavy supply chain disruption in the previous 12 to 18 months.
Nearly 80pc said digital tools and monitoring technology would enhance visibility and transparency through the supply network, with 76pc planning to adopt these tools.
Wellener noted certain industries that have managed to embrace digital transformation early, such as the automotive sector. But overall, he can’t predict if certain industries or sectors will adopt digital tools faster than others.
“I think there are key players in certain industries that have demonstrated their ability to be more nimble, more resilient, to be more proactive in their investments,” Wellener said. “You’ll see some of those companies in aerospace, you’ll see some in automotive, you’ll see some in other discrete industries.”
Accenture Ireland strategy and consulting lead Antony Keane said a fundamental rethinking of supply chains will be critical to Irish competitiveness and growth.
“We see particular exposure to supply chain shocks in manufacturing sectors, and even more in industries like high tech, automotive and aerospace,” Keane told SiliconRepublic.com.
“To contend with an uncertain future and build long-term value, Irish businesses need to redesign their supply chains around resilience, relevance, and sustainability. Success may ultimately depend on how well leaders adapt to the demands of this new, testing environment.”
Efficiency through digital transformation
While Deloitte’s study focused on supply chain challenges, new technology can also be used to improve efficiency within a business. Examples of this are already being seen in Ireland and beyond.
Last month, equestrian retailer Old Mill Saddlery said it invested £1.6m to build a new warehouse with robotic sorting technology and an onsite wind turbine.
The Antrim-based retailer said these autonomous mobile robots, designed by Chinese firm Geek+, can handle picking, sorting and handling industrial material to boost warehouse automation.
Old Mill Saddlery said this smart warehouse system is used by companies such as Nike, Asda and Next, but claimed it is the first of its kind on the island of Ireland.
“The automated warehouse system has led our business to be more efficient than ever, ensuring we can keep up with the demand, get our products out on time and supply our goods even further afield,” said Old Mill Saddlery MD Robert Patton.
“We mainly supply to the UK, Ireland and Europe, but we are hopeful the new system will give us the capacity to expand our business worldwide.”
Concerns around digitalisation
While manufacturing players are embracing digital tools, many have expressed concerns around digitalising the supply chain ecosystem. Nearly 90pc of respondents in the Deloitte study said they had concerns in areas such as legal, financial, IP theft or cybersecurity.
In Wellener’s experience, one of the biggest concerns shared among manufacturing executives is the threat of cyberattacks.
“I do believe manufacturers at all levels in the supply chain are concerned about cyber,” he said. “You’re not going to prevent all cyberattacks, but you could be more resilient in how you recover from a cyberattack.”
Wellener said manufacturers need to ensure they invest in the right tools and ensure they have the right processes in place to help mitigate and recover from cyberattacks faster.
“Cybercriminals are just getting better and more sophisticated every day,” he added. “So it’s not a matter of if, it’s a matter of when an attack happens in your business.”
The Deloitte study noted that as companies diversify their supply base, their optimisation process can become increasingly complex. To deal with this issue, the company said emerging technologies can be adopted to help assess the growing list of variables.
One such technology is digital twins, which are virtual representations of a physical product or process, used to understand and predict the physical counterpart’s performance characteristics.
This technology is being embraced more widely. Last year, Dublin City University announced that there would be a digital representation of the university’s campuses, incorporating real-time data on energy, water usage and other important data points to inform the planning and development of infrastructure.
Earlier this year, the European Commission launched an initiative to develop a highly accurate digital model of Earth to help monitor, model and predict natural and human activity, and develop and test scenarios for more sustainable development.
Deloitte said digital twins can be used to identify inefficiencies and bottlenecks in supply chains, and can help companies make an informed decision on selecting the right supplier, facilities and transportation capabilities.
Wellener noted the potential of digital twins, but said one key challenge with this technology is keeping the virtual model up to date, which can be expensive.
“The model is only correct the day that you build it,” Wellener said. “When you start doing engineering changes to a product, if you don’t keep the digital twin current, you’ve got challenges.
“A digital twin for a building, if you don’t keep that up to date with all the change orders, even during a new construction build, well then your digital twin isn’t really going to help you completely down the road when you’re trying to predict issues as it relates to your building. Same with supply chains.”
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