The Sustainability Shift – Embracing Agility and Resilience
Published on : Wednesday 04-01-2023
Enabling the right digital capabilities can help manufacturing plants – and their workers – to respond to changing market conditions more rapidly, says Sree Hameed.
The focus for manufacturing operations in the consumer-packaged goods (CPG) sector is changing. An increasingly stressed supply chain is driving CPG manufacturers to become more agile and sustainable. Where as earlier plant efficiency was the top priority, this has now expanded to include agility and sustainability – both of the plant and the wider supply chain.
In the past, the goal of digital investments was to improve cost efficiencies; with overall equipment effectiveness (OEE) considered the main key performance indicator (KPI). However, the pandemic fundamentally challenged this way of working.
Last year, a World Economic Forum (WEF) report identified permanent shifts of focus that have come from businesses dealing with demand uncertainty and disruptions. At the top of that list is agility and customer centricity, closely followed by supply chain resilience and eco efficiency, given the increased global concern for the environmental impact of human activities.These are now core topics in the post-pandemic recovery discussion, and manufacturing plants play a critical role in responding to today’s rapidly changing market conditions.
Enabling agility through digital “sense-and-response”
Built with real-time operational data, digital twins can help understand what the plant is ‘capable-to-promise’, by providing real-time situational awareness via edge-to-enterprise visibility. Furthermore, the digital twin provides the foundation for AI and predictive analytics to provide powerful insights that empower workers to optimise processes and throughput.
Enabling agility through empowered workers
A connected business, with access to information anywhere and at any time, increases agility and enables manufacturers to respond to the challenge of today’s dynamic markets.
Coupled with knowledgeable and empowered workers – who are the ultimate drivers of continuous improvement and resilience – businesses can really push the boundaries of their agility. Indeed, a key factor for future manufacturing operations improvements is collaboration of people and systems.
Businesses cannot control incidents that occur across the wider supply chain, but having agility and resilience allows them to adapt quickly. By taking steps to improve the supply chain, companies are better positioned to make the right decisions when issues occur, as well as gather data around long-term trends and patterns to become more agile and resilient in the future.
Death of the old supply chain model
For decades, the predictable consumption patterns and stable networks allowed businesses to tightly adhere to an optimised plan of product quality, quantities, and timing – keeping the cost of production as low as possible.To manage supply chain variance, companies would implement a standard inventory buffer which responded to replenishment signals, maximised factory utilisation by ‘sweating the assets’, and implemented just-in-time vendor/product replenishment strategies.
But in the pandemic world, this decades-old model has cultivated brittle supply chains. Amid a new and morphing era of sharp shocks – such as port delays, supplier disruptions and changing consumer buying habits – companies have learned that efficiency (e.g., just-in-time inventory, full utilisation) can come at a cost if the system is unable to absorb these shocks. Today’s unpredictable business world demands greater agility and resilience.
Towards agility and resilience
So how should we think about agility and resilience? A useful metaphor can be seen in world-class athletes. When it’s time to compete, top competitors unleash their maximum performance and operate at the outer, exceptional fringes of human capability. But this level of output cannot be sustained 24/7 without damaging the body. So, as well as agility – which is evidenced in the ability to perform – athletes, like businesses, must cultivate resilience.
Agility allows companies to perform at the highest level, while resilience enables businesses to protect themselves.
The training program
Today there are eight company ‘levers’ that enable both agility and resilience, providing the ability to thrive in an increasingly dynamic business operating environment.
Foundational: Information, relationships and cash.
Operations: Time, inventory, and capacity.
Customers and suppliers: Segmentation and price.
In a recent AVEVA survey, we asked several CPG companies two questions: What happened in your business in the pandemic? How could you have prepared if you knew ahead of time? The answers are revealing and uncover the essence of what it means to be an agile and resilient business.
The majority of respondents said they aimed to match demand and supply in a more predictive, prognostic and profitable way through digitisation. CPG leaders also said they would be more mindful of operating under vastly different and changing conditions using different strategic levers.
Unpacking the pain points of the pandemic
The pandemic unleashed a legion of market forces and supply chain challenges. According to our survey, the changing business landscape highlighted the following pain points (listed on the right.) For example, we summarised the experience of a large consumer goods manufacturer (see illustration).
Workforce challenges: During the initial lockdown (March to May 2020), up to 30 percent of the workforce chose to stay at home without pay leading to significant scheduling challenges. On their return to work, employees resented management teams due to Covid transmission risk fears. Meanwhile, on-demand temp workers were less skilled and more prone to making mistakes. What’s more, maintenance contract workers were sometimes unable to enter the plants to fix the errors.
Supply demand mismatch: In some areas, product demand shot up by 50 percent during the pandemic, leaving suppliers with shortages of up to 30 percent. This surge led to a scramble for new suppliers and materials, leading to onboarding, compliance, ERP and capacity issues.
Revised priorities and needs: The primary business priority evolved to become the health and safety of workers. Engineering resources were diverted to testing, HVAC and sanitisation. Companies realised the importance of building real time visibility into asset status. Businesses also built in additional reporting around staff absences, Covid-related issues and vendor status.
Corrective action plans
So what actions did companies take during this tumultuous time to ensure the survival of their businesses? First of all, organisations realised the criticality of timely information and a fluid and responsive supply chain. More companies turned to full digital transformation to enable a supply chain without fatal delays or disconnects.
CPG leaders also realised the importance of enabling a flexible workforce, through skills rotation, temp training and automation assistance.
Another critical – and possibly fatal – pain point to be addressed was the ‘bullwhip effect’ –where one delay reverberates and lengthens as it travels along the value chain. To counter these delays, leaders tore down walls across the network to better collaborate with their contract manufacturing partners.
To counter the pain point of segmentation, companies are also working harder to symbiotically align markets and categories with demand.
And crucially, companies chose to spend and invest in digital initiatives for future resilience. CPG leaders no longer view saving cash as the key objective – avoiding future cash haemorrhages through resilience planning and investment is now paramount.
The holistic shift
Following the pandemic, companies are being pushed to redesign their supply chain design principles in a holistic manner – allowing for factories, suppliers, vendors and distribution centres to work together in an integrated, flexible fashion. There is a marked move away from linear, silo-based thinking to network-based processes.
Businesses endeavored to carry out more frequent and systematic reviews of overall operations. They also committed to co-manufacturing and tighter integration and strategic alliances with partners. Above all, CPG leaders are now realising that information and relationships is the lifeblood of their supply chains. The investment mindset is also shifting from cost reduction to cost avoidance and sustainability. Whereas the goal previously was to make products at the lowest cost, now consumers are also looking for traceability and low emissions. What’s more, ever-inflating energy costs are driving sustainable manufacturing decisions.
A case in point is Schneider Electric’s 62-year old factory in Lexington, Kentucky, which has been recognised by the World Economic Forum as an Advanced Global Lighthouse for sustainable digital manufacturing. The brownfield site is now one of the group’s leading Smart Factory showcases, with plans already underway to replicate the model at multiple sites around the world. Using Schneider Electric and AVEVA’s integrated solutions, the plant’s digital strategy leverages IIoT connectivity an analytics to drive new levels of sustainable process efficiency, reducing downtime, while modernising the control, monitoring, and management processes of the plant.
Enhanced digitisation and site-wide monitoring has helped Lexington reduce manual paperwork by 90%. What’s more, by leveraging software the site has driven improvements in labor productivity, with cloud-based insights further reducing unplanned downtime by nearly 6%.
In crisis, there is opportunity
Global business has a long and rich history of adaptation. While the latest iteration of business challenges came in the form of lockdowns, social distancing and uncertainty, companies have historically faced curveballs such as product lifecycle, security, information velocity, sustainability and last mile logistics.
Nevertheless, each wave of change in the last century has pushed businesses to elevate performance and ability – whether that’s selling more, cutting costs, cut emissions or reducing defects and downtime.
CPG leaders that embrace today’s new era of agility and resilience are well positioned to raise the bar on business performance – for employees, customers, suppliers and the bottom line alike. By shifting to digital-first, holistic thinking, companies can dually springboard performance and future proof their businesses.
Sree Hameed is Consumer Products Industry Strategist, at AVEVA. In his 25-year career, he has helped companies adopt a variety of transformational technologies in the areas of production automation, manufacturing operations, supply chain management, product lifecycle management, and operational risk management. Sree also serves as an advisor to the Center for Intelligent Supply Networks at the University of Texas at Dallas.