Primarily as an outcome of the upheavals over the past few years, many businesses are feeling obligated to remediate the vulnerabilities in their highly globalized supply and production. They are perceptibly recognizing the fact that their business may be negatively impacted by a lack of resilience in engineering, supply, production, and operations.
The companies are being driven by the currently adverse business environment to reconsider localizing and diversification of their sourcing and production landscapes. According to a recent Accenture research, the most resilient business organizations have notably outperformed their less resilient peers in the face of disruptions.
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In the past few years, disruptions have severely impacted business organizations. For instance, the demand for digital products and online activities increased dramatically during the pandemic, high scarcity of semiconductors, cyber-attacks on production lines, the geopolitical crisis (including the Ukraine war) raising the cost of materials labour & energy, climate emergencies, and technology innovations. All of such disruptions have demonstrated exceedingly inadequate levels of resilience in business operations, supply, engineering, and manufacturing. Only a small number of companies could maintain their long-term growth and resilience in the face of disruption during 2021 and 2022.
Due to disruptions in engineering, supply, production, and operations, business enterprises across the world lost an estimated US$1.6 trillion in additional annual revenue through 2021 and 2022, as revealed by the Accenture report. The report “Resiliency in the Making” further stated that the 25% most resilient global companies achieved 3.6% higher annual revenues than the 25% most decrepit companies.
Enhancing resilience to gain a competitive edge
Resiliency in the context of engineering, supply, production and operations is defined by Accenture as; “an organization’s ability to proactively sense, absorb, adapt to, and recover from disruption so it can produce goods, deliver services, meet and increase customer demand, and respond to changes faster than its competitors.”
To enhance their resilience, the Accenture research suggests that businesses need to concentrate on three key areas:
Visibility: The report suggests that companies should make supply chains and production processes more predictable and autonomous. This will facilitate ‘real-time’ insights and data sharing across suppliers, factories, plants, distribution centres, logistics carriers and customers.
The research by Accenture reveals that an average of three months, and sometimes even up to five months is what it takes to stage a full recovery after being notified of a disruption. Businesses seeking to reduce these recovery periods should adopt demand foresight, smart end-to-end control towers, reconfigurable supply networks and autonomous production to acquire real-time visibility and control across the whole value chain, from suppliers to customers.
Thereupon, companies will be able to proactively streamline operations, improve resource allocation, and customize productivity levels to address disruptions in real-time or near real-time through increased visibility, reconfigurability, and the capability to accelerate automated assembly processes in response to a sudden shift in consumer preferences.
Resiliency in design: A “shift left” strategy, as suggested in the report, may help businesses to achieve resiliency while simultaneously reducing costs, improving cycle times and elevating product quality. It allows businesses to get products, processes, and ways of working right the first time and helps them resolve any potential problems before the commencement of production. It facilitates resiliency in engineering by moving activities earlier in the process of development.
Businesses may effectively implement a “shift left” strategy with the aid of Resiliency 2.0 capabilities, which revolve around dynamic and sustainable product development. During the product design process, these capabilities enable businesses to anticipate potential disruptions and their impacts on the product. Furthermore, they contribute towards minimizing lead times and enhancing customer and revenue retention.
Digital twin solutions contribute to the development of resilience by improving transparency and providing real-time visualization of production activities. The digital replicas of physical manufacturing facilities, down to individual assembly lines and machines, enable product designers and engineers to proactively identify and fix potential prototype faults or defects and modify the design before commencing production.
Businesses’ continuity and growth can be brought within the realm of control by investing in Resiliency 2.0 skills, which enable firms to foresee issues and respond to disturbances effectively and on time. Resiliency 2.0 capabilities, as per the report, include:
- Structured analytics tools to predict demand fluctuations.
- Proactive customer segmentation to arbitrate demand.
- Digital twins leveraged with a collaborative approach.
- Continuous upgrades of offerings to adapt to customer needs.
- Eco-design approaches to embed sustainability by design.
- Hyper-flexible and automated production lines.
- Dynamic and data-driven planning with “what-if” scenario capabilities.
- Predictive early detection of operations issues.
- Decentralized, transparent decision-making close to execution.
- Remote expertise capabilities leveraging AR, VR, and more.
- Possessing a versatile/multi-skilled workforce across the supply chain, production and operations to enable resource reallocation.
New methods of working: Companies ought to upskill their workforce in data, artificial intelligence (AI) and other digital technologies so that they can take advantage of predictive and visualization tools to make data-driven decisions. For addressing the skills gap, creating tailored/customized interventions known as personalized learning pathways is a feasible, scalable and economical solution. As suggested in the report, companies need to invest more in upskilling and reskilling programs to create a ‘resilient and agile’ workforce.
Steps towards building resiliency
The report ‘Resiliency in the Making’ also talks about how businesses may begin implementing resilience-building strategies/measures in engineering, supply, production, and operations. It suggests:
- Assess existing capabilities within each of the areas in scope to identify the gaps, if any.
- Develop the “North Star Vision” for what a resilient future-state function might look like. To share the vision and to make the necessary modifications, conduct collaborative and open-door workshops.
- Examine your needs for investments from a broad perspective. (To achieve results, are the investments in automation, digitization, and relocation balanced?).
- Consolidate IT and OT budgets and solutions to streamline and expedite digital maturity by establishing financial and execution governance.
How resilient are Indian businesses?
To reduce their susceptibility to disruptions, Indian businesses are Increasing their reliance on local suppliers and production facilities. The report highlighted that by 2026 about 63% of the companies in India plan to buy a majority of essential goods from regional suppliers, up from 34% at present. It further states that by 2026, 77% of Indian businesses intend to produce and sell much of their goods in the same region, as compared to the current 29%.
Accenture research noted that only 13% of companies in India have near real-time alerting mechanisms for supply chain and production process disruption. It highlighted that, of the businesses operating in the country, just 25% have a multi-skilled digitally literate workforce, while 67% are planning to do so by 2026.
The report said that businesses in India are expected to invest about US$70 million in 2023 to digitize, automate and relocate supply and production facilities. This figure is projected to increase to at least US$2.3 billion by 2026.
Accenture also developed a model to assess the resilience of engineering, supply, production, and operations on a scale of 0-100, as part of the study. Companies in India achieved an average score of 51 compared to the global average of 56.
Sine qua non; plan proactively
Resilience is essential in every operational domain of a business, from engineering and production to operations and supply chain. The urgent need to develop resilience has abundantly been demonstrated by the unprecedented disruptions that have and continue to impact businesses across various industries.
Companies that invest in resilience-building capabilities and digital maturity enhancement do considerably better than their counterparts. Such companies will be favourably positioned to capture market share from those lagging. Companies seeking to unleash new value and transform in the current fast-paced consumer and technology-driven environment must invest in resilience-building capabilities and enhance their maturity. Hence, now is the ideal time to invest in building up ‘resilience’ and to do it fast before the next disruptive crisis strikes.
(The “Resiliency in the making” research (in 2023) is based on a survey conducted among 1,230 senior executives across engineering, production, supply chain and operations. The survey covered various sectors including: Industrial Equipment, High-Tech, Utilities, Automotive (OEMs), Oil & Gas, Consumer Goods & Services, Life Sciences, Automotive (Ancillary/Parts), Chemicals, Metals & Mining, Aerospace & Defense. Respondents were from Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Spain, Sweden, the United Kingdom and the United States.)
