One year into the pandemic, the manufacturing industry has undergone significant disruption and transformation. For a sector that works primarily on-site in physical spaces, the workflow and production changes were abrupt and highly impactful. Leaning on technology, adapting quickly to new demands and supply chain restrictions, and adopting contactless safety processes—all while maintaining productivity and manufacturing essential items to fight COVID-19—were enormous challenges to overcome.
But after one full year of responding and adapting to this crisis, manufacturers have learned a lot about their capabilities. Widespread remote work had never been a serious consideration, but with this shift came some surprising, welcomed insights. Steps to reduce contact and prevent the risks of COVID-19 also improved overall efficiency and workforce safety. The need to pivot to manufacture new products, including PPE, opened the door for new partnerships. Border closures sparked new exploration in global supply-chain innovations. These discoveries have led many to re-evaluate how new processes, ways of working, and adaptability could determine the direction the industry is headed.
As we look toward the future of manufacturing, here are the four lessons learned over the past year that will continue to make the greatest impact on the evolving industry:
1. Adaptability ensures business resilience Few industries were fully prepared for what they were about to face last March. But when the pandemic struck, manufacturers proved that they could rapidly adapt to stay resilient in the face of a crisis. In the previous century, manufacturers answered the call during World War II—prioritizing production of essential items to support the wartime efforts. In 2020, the enemy was COVID-19, and the essential items were personal protective equipment (PPE). The manufacturing industry was vital to the cause.
Shifting from a specific component or part to produce PPE is a significant change, and one that should not go unrecognized. The engineering capabilities needed to lay out a production line and manufacture something new showed the resilience that can be achieved by modifying existing equipment and material flows. Through these pivots to create new products sprang new partnerships that would never have existed otherwise. For example, one of our Aerospace & Defense clients pivoted to create respirators but did not have the right distribution system to get them to hospitals and medical facilities. By partnering with a healthcare distribution and logistics company, they were able to quickly provide those much-needed supplies to surrounding hospitals.
2. Reducing supply chain risk is a top priority
An area of significant change for some manufacturers is the risk in their supply chains. The pandemic shut down manufacturing operations around the world, and the ability to ship products and equipment across borders was restricted. These disruptions in supply and distribution were seen in almost every manufacturing capacity, and now have organizations looking closely across their supply chains for vulnerabilities. To future-proof against the next crisis, many in the industry are rethinking their sourcing and manufacturing strategies, with a more holistic view of the supply chain. Manufacturers looking to make sweeping changes in this area are relying heavily on data and analytics, to draw the right insights to shape future decision-making when global events occur.
3. Remote work was validated for certain roles While it’s not realistic for the entire staff, manufacturers now acknowledge that some roles can (and will continue to) function in a remote capacity. The pandemic forced temporary adoption of work-from-home operations, and while many anticipated some difficulties and were anxious for a return to normal, most were pleasantly surprised by the result. In an industry that was not an early or large adopter of working from home, productivity and collaboration did not suffer, and in many cases proved more beneficial. With its proven ability to increase flexibility, reduce cost, and improve efficiency, the industry will continue to evaluate which roles can remain in a permanent remote capacity post-pandemic.
4. Safety took on a new meaning
We’ve all heard the saying that innovation is often born out of disruption. In response to COVID-19, manufacturers adopted contactless processes of handling equipment and producing products to reduce person-to-person exposure. Many of these new processes were digitized and technology-driven, and not only reduced the safety risks of in-person contact, but also reduced the physical risks that are inherent to manufacturing operations. In addition, many companies requiring on-site workers implemented daily temperature checks and daily COVID-19 testing, with at least one test per week for every worker and an established contact tracing system. The willingness to embrace a different way of thinking, and to challenge the norms of age-old methods, made these adjustments successful. Now, many of the contactless safety protocols that have become staples during the pandemic are likely to remain.
One year later, many things remain the same. We are still fighting through a pandemic that has resulted in more than half a million lives lost just in the U.S. alone. Businesses are still struggling to recover from closures and economic troubles. The workforce is still navigating unfamiliar routines that have greatly impacted their roles. But the manufacturing industry is much different. It’s faster, more efficient, more resilient, and most importantly: safer. The pandemic initially created concern for the industry’s future, and with good reason – there hadn’t been this much disruption or economic uncertainty in over 100 years. But manufacturing’s quick pivots and the new process changes have made the industry stronger.
Eileen Sweeney is executive vice president of Manufacturing, Automotive & Life Sciences at Capgemini North America.
Over the past five years, the subscription economy has transformed many business sectors. Media, music, entertainment, and news are just a few examples of sectors that have flourished with new subscription business models and have grown through the recent COVID crisis.
But subscription models are not just for “those industries.” The B2B and industrial worlds are now starting to focus more and more on how they can leverage recurring business models and subscriptions in general—some notable examples include Caterpillar, John Deere, Hilti, Honeywell, GM, and 3M.
Research for my upcoming “Industrial Subscription Economy” book reveals that many firms across manufacturing verticals and geographical regions have started with subscription models. Given that one-time transactions are fading, manufacturers are recognizing the need to transform and capture the growing profit potential of recurring business models.
However, making this shift is no easy feat. Industrial companies experience two main challenges: They do not know how to get started, and they struggle to fully monetize their investments.
What do you do first? What is the first move internally and externally? If you have not started yet, there is still time to play in the digital space. If you have barely started or only scratched the surface for the past two or three years, now is the right time to accelerate.
Consider the following statistics:
Half the battle is to get started. It is not too late to do so. It is in fact the right time for a business model reset. 2020 was the wakeup call for many large industrial groups. We moved from an era of “digital fad” to one of “digital impact”. The COVID-19 crisis has changed the game. The need for short-term impact and for sales growth in the context of depressed demand levels is now greater than ever. If you are behind in your digital journey, the bad news is that you will not be first to market. The good news is that you can learn from others and benefit from the numerous insights publicly available.
There are four key considerations to keep in mind when considering subscription business models and how to get started on the road to usership.
1. Get started and gain maturity using a roadmap approach and the right sequence of subscription-based innovations.
2. Remember, there is a fair amount of internal preparation and “socialization” internally before going outside and bringing customers and distributors on board. Crawl before you run!
3. There are six types of digital offerings and ways to monetize to drive recurring revenue growth. You need to list these opportunities for your firms and prioritize them based on financial impact and ease of implementation. Do not start with the most difficult subscription innovation. Leverage quick wins to start learning how to design and manage subscriptions.
4. Benchmark industrial use cases from companies like Caterpillar, Honeywell and Toyota that have successfully made the shift from products to services. They can offer a lot of quick tips and recipes for success.
Join us for more insights and best practices on an IndustryWeek webinar on April 22, 2021. I will be joined by Rich Becker, an expert in industrial subscriptions from Zuora, to discuss these four considerations in greater detail and to share real-life examples.
Stephan Liozu is founder of Value Innoruption Advisors, a consulting boutique specializing in industrial pricing, digital business and pricing models, and value-based pricing. Stephan has 30 years of experience in the industrial and manufacturing sectors with companies including Owens Corning, Saint-Gobain, Freudenberg, and Thales. He holds a Ph.D. in management from Case Western Reserve University. He has written several books, including “Monetizing Data” published in 2018. His next book, the “Industrial Subscription Economy” is due out in fall 2021.
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