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Improving supply chain ethics with the industrial metaverse

In today’s globalised business world, there is a growing need for ethical supply chain practices. Manufacturing companies are facing complex challenges in modern production, and the importance of transparency and accountability has never been greater.

In this article, leading InterAct funded researchers from the Institute for Manufacturing (IfM) at the University of Cambridge explore the potential of the industrial metaverse to help elevate ethical standards across supply chains. Examining the intersection of technology and ethics, the IfM team offers valuable insights into how manufacturers can navigate regulatory environments, build consumer trust, and promote positive social change.

In a world of globalised supply chains, manufacturing firms often lack awareness and control of their external operations, which can result in unintentional non-compliance with regulations. While forced labour generates $236 billion in illegal profits annually (International Labour Organization), European companies will soon have to show compliance with environmental and human rights standards within their supply chains.

In response to mounting concerns, Europe is poised to implement stringent measures to hold corporations accountable for their supply chain practices. The forthcoming ‘Corporate Sustainability Due Diligence Directive’ heralds a new era of corporate responsibility. Large companies must conduct comprehensive audits of their supply chains, identifying and rectifying instances of forced labour and environmental degradation. Compliance will hinge on demonstrating adherence of the supply chain ecosystem to human rights and environmental standards.

The regulatory landscape is not confined to Europe alone. The UK, through initiatives like the Modern Slavery Act of 2005, has committed to fostering transparency within supply chains to eradicate all forms of worker exploitation. Moreover, further legislative reforms are on the horizon, promising a paradigm shift in corporate accountability.

How high is the risk of being penalised for suppliers’ actions?

Currently, the lack of production transparency allows non-ethical manufacturers to cut corners, giving them a competitive cost advantage that appeals to consumers. Unfortunately, many of these consumers are unaware of the wider context and end up supporting production that causes serious harm to societies and the planet.

Manufacturers can’t wait for new regulations about environmental and human rights standards in the UK. They must lead the development of digital tools for their production environments that delve into the existing supply chain data. This will demonstrate that their products are made with minimal adverse impact.

To enable this, it is crucial to make the production processes more transparent. One possible way to achieve this transparency is by leveraging augmented reality technologies, which can interpret and explain the existing complex data along supply chain echelons and incentivise the creation of new data sources.

So, in light of these developments, how can manufacturers ensure compliance with the new regulations and help uphold human rights and environmental protection?

The industrial metaverse: the foundation for a more transparent supply chain?

Recent research conducted by IfM (supported by the UKRI Made Smarter Innovation Challenge and funded via the Economic and Social Science Research Council (ESRC)-led InterAct Network) offers an extensive overview of 1,680 international studies which reveal how extended reality technologies can support UK manufacturing by demonstrating production provenance in the Industrial Metaverse.

The Metaverse is a term used to describe the merging of the physical and digital worlds. It was first introduced by Neal Stephenson in his novel Snow Crash and later popularised by Mark Zuckerberg with Meta, a social network in extended reality.

The Industrial Metaverse comprises a series of ‘snapshots of realities’ around the data on sourcing, production, and delivery of components of a manufactured product, which can be explored in augmented reality. By exploring the upstream supply chain of components leading to the product, manufacturers can identify risks and take corrective action to comply with upcoming regulations.

Deploying industrial metaverse technology in practice requires:

  • access to data sources;
  • software (e.g. Unity Engine);
  • augmented reality headsets (e.g. Microsoft Hololens, Meta).

Although 3D virtual productions might look complex and expensive, new AI techniques such as Gaussian splatting can significantly reduce the cost of reality reproduction: a ‘reality snapshot’ can now be created by anyone using a smartphone. This means, UK manufacturers can demand the video screening of the production environment from potential suppliers at the procurement stage. This is where lower-tier suppliers are incentivised to agree to increase transparency in exchange for eligibility to sell products and services.  Decentralised databases can be used to store this information at the supply chain level. It is important to note that creating fake snapshots could lead to legal repercussions and regulatory requirements.

Case study: contrasting opaque and transparent chocolate supply chains

Agriculture is almost uniquely resistant to technological change because of the remoteness/lack of oversight/scale of sites, and it is an area desperately in need of innovation. Leading chocolate brands have long been criticised for neglecting ethical standards in cocoa procurement, and many of the brands can’t effectively enact change since the market behind wholesalers is not transparent. This situation creates a high risk potential for social injustice and modern slavery, i.e. when the wholesaler purchasing prices make cocoa sales below the point of profitability, and farmers are forced to take children out of school to work on the farm.

Industrial metaverse, established along such supply chains, can spur transparency and influence to change the status quo. As European consumers are the primary market for cocoa harvesting, they have the market power to improve conditions for farmers in West Africa. To end forced labour and enable children to access education, requires new tools that support the transparency of cocoa supply chains for consumers.

While labour and environmental abuses exist in many supply chains, shocking 60% of cocoa-growing households in Ghana’s upstream cocoa supply chain are estimated to use child labour. Ensuring manfuacturers and consumers have access to accurate information about these unethical practices is therefore an urgent issue. A famous example of good practice is the ‘Bean to bar’ Tracker, along with QR codes,  barcodes,  biological markers of specific farms and fermentation processing locations, all of which can link chocolate bars to their potential origin. By comparing the known land size of a farm and the claimed cocoa harvest from that land, we can identify if cocoa of unknown origin is blended into the batch. While such tools are currently being used internally for supply chain traceability, adding an Industrial Metaverse component can open up and showcase the evidence to consumers. Consumers will be able to witness vivid experiences demonstrating the potential impact of supporting the chosen brand. This can showcase the positive changes to society (e.g. freeing children labouring to get an education) or highlight negative practices (e.g. the realities of environmental damage or modern slavery). Such evidence can build a strong identification that by purchasing ethical brands, consumers will be supporting the continuity of ethical production practices and local communities’ upstream supply chains.

Transforming production practices in the industrial metaverse

The Industrial Metaverse will increasingly move from merely representing reality, to shaping it. By shifting demand to ethical products, manufacturers will be able to increase their production scale, reducing the cost per unit and creating a greater impetus towards sustainability.

Instead of waiting for new regulations about environmental and human rights standards to be implemented in the UK, manufacturers must lead the development of similar immersive experience prototypes to confirm the ethics of their production environments. Going beyond the food production case, electronics and automotive manufacturers can validate their production processes by establishing an industrial metaverse around their products and demanding ‘reality snapshot’ data from their supply chains. It will propagate the impact across supply chains towards reaching multiple firms worldwide and make production more transparent for consumers. Not only will that reduce risks of non-compliance with upcoming regulations, but it will also anchor consumer demand with positive societal changes along supply chains.  By doing so, manufacturers can champion Sustainable Development Goal 12: “Responsible Consumption and Production”.

What practical steps should manufacturers take from this?
  1. Audit internal cost structures and visibility of operations along supply chains. Instead of aggregating costs at the wholesale level, manufacturers must enquire about the work conditions, energy sources, and potential carbon dioxide emissions through supply chain tiers.
  2. Collaborate with extended reality solution providers to prototype Industrial Metaverse around their products and reveal production ethics along supply chains.
  3. Analyse the integrated data and leverage alternative ways to reduce ethical risks. Communication throughout the industrial sector will help address industrial concerns about data privacy and confidentiality, leading to the industrial standard.

The IfM is currently working on developing a metaverse pilot for highly regulated sectors like aerospace, automotive, and food. These industries have very strict regulations that limit transparency. The goal is to enable a more transparent supply chain, which would contribute to the adherence of human rights and environmental protection. If you would like to collaborate with the team, contact Dr. Nikolai Kazantsev – nk622@cam.ac.uk or IfM Engage.

Acknowledgement: This work was supported by the UKRI Made Smarter Innovation Challenge and the Economic and Social Research Council via InterAct [Grant Reference ES/W007231/1]. We thank Prof Letizia Mortara, Dr Michael Rogerson and Alice Mumford for their feedback on this article.

This article draws from the InterAct report ‘Manufacturing in the Metaverse’

This article was originally published on The Manufacturer

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InterAct Blog

More than just a desk: Can co-working spaces make labour markets more inclusive?

This article was originally published on the OECD COGITO blog

Since the pandemic, co-working spaces have exploded in popularity. The number of people working in these spaces worldwide is predicted to double in 2024, relative to 2021, reaching 5 million users. They offer an accessible, flexible mode of working that appeals to professionals, leading policy makers to look for ways to harness their potential to drive growth. But can they also have a role in making growth more inclusive? 

More than just a desk

Co-working spaces (CWs) come in various forms. The physical spaces range from adaptable layouts in industrial settings, including converted warehouses and historic buildings, to specialised studios tailored for comfort. They can be for-profit companies and non-profits, and many are supported by local governments or regional development agencies.  

Public support can be directed to the owners of a co-working space. For instance, local governments have provided financial support to run a co-working space or incentives for the creation of co-working spaces in unused public buildings. In other cases, the use of co-working spaces can be encouraged, for instance through the provision of vouchers to freelancers, self-employed workers and businesses.  

Co-working spaces offer cost-effective solutions for individual users through shared infrastructure. Moreover, they foster a diverse in-house community for start-ups, entrepreneurs, freelancers and companies. Firms of all sizes increasingly use co-working spaces to allow their employees to work away from headquarters, resulting in a trend where office workers now live further from their jobs than they did before the pandemic. 

As a hotbed of new activities, from fostering entrepreneurship to networking among workers from different companies, co-working spaces may provide a boost to local economies. For instance, the Ludgate Hub in County Cork, Ireland, can point having created over 300 new jobs in the region. However, there are more ways in which co-working spaces can benefit their communities. 

How co-working spaces can make local labour markets a little more inclusive

Many co-working spacess have become vibrant community hubs, closely integrated with their local environments. A 2019 study on co-working spaces in Italy reported that three-quarters of the surveyed coworkers noted a beneficial impact on the urban and local context. Due to their connections with local communities, evidence is also mounting that co-working spaces can support those facing challenges in the labour market in at least three ways. 

First, by providing a convenient solution for workers with family or caring responsibilities. A national panel survey of 2 500 working parents conducted by Harvard Business Review revealed that “nearly 20% of working parents had to leave work or reduce their work hours solely due to a lack of childcare. Only 30% of all working parents had any form of back-up childcare, and there were significant disparities between low and high-income households”. Some co-working spaces, like The Tribe in Devon, UK, tailor their support and community building to focus on the needs of women – especially working mothers and carers. Others, like Coworking Toddler in Hannover and Berlin, Germany, take a step further by providing workplaces that integrate professional settings with childcare, enabling parents to concentrate on their work while their children are cared for in an adjacent daycare facility. 

Second, by providing a space for more experienced workers to share their knowledge with individuals Not in Education, Employment or Training (NEETs) and other vulnerable groups. Co-working spaces have been actively creating opportunities for young artisans to work alongside experienced professionals, some retired, who are eager to pass on their manufacturing expertise. For instance, Fablab in Verona, Italy, and Center-Rog in Ljubljana, Slovenia, provide an entry point for people of all age groups to learn new skills, with trainings offered ranging from 3D-printing to food preparation.  

Third, by supporting the attraction and retention of high-skilled workers. Co-working spaces can contribute to the retention of local workers by providing them an option to combine remote work with occasional office attendance. This is particularly critical in rural areas, as it allows such places to retain and attract high-skilled workers, for instance, in the Ems-Achse, a group of mostly rural districts in north-west Germany. However, co-working spaces also provide these high-skilled remote workers with a vital connection to the local community, through which they can share knowledge and inspire others.  

Supporting innovative initiatives

In short, co-working spaces can provide communities with valuable new hubs that can connect workers, helping share knowledge, skills, and opportunities. This can help regions address pressing labour shortages and skills gaps while supporting vulnerable workers into new opportunities. Many local governments and employment agencies are therefore finding creative ways to support co-working spaces as part of a broader strategy to build thriving communities.  

“In my experience, my coworking community helps more with mental health balance for my coworkers – as most come to my space for the social links that are created here. The networking aspect which stems from this means that most of my coworkers have used services offered by other coworkers (coaching, communications services, building renovation …) or collaborated with other coworkers on projects (an architect with an interior designer, two coaches on a new service offering…).” 

Antonia Mahon, Founder of The Hub in Sèvres, France 
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InterAct Blog

‘Making Things Work’ – Perceptions of Manufacturing

The InterAct Network ‘Future of Work’ team has recently completed analysis of a survey of over 2000 people drawn from across the UK to provide insights into their perceptions of the manufacturing sector and jobs.

We hear much about the ongoing ‘war for talent’ in manufacturing and concerns that the older industrial legacy of manufacturing makes it less attractive to jobseekers. In this sense, the emergence of new technologies present both a challenge and an opportunity for employers to positively reshape jobs, careers, and address negative sector imagery through better job quality. Improving job quality in the post-Covid labour market should help manufacturers better compete for emerging Gen Z talent and extend their reach into under-represented groups such as women and minorities.

In the ‘war for talent’ perceptions matter because they provide a snapshot of public opinion about the attraction of working in manufacturing for different groups. They may not measure up against ‘reality’, they may be ‘misinformed’ but ultimately this may not matter to many in our sample. However, if you are looking to attract people into your sector, ignore them at your peril.

Our results confirmed some of the usual suspects but also threw up some surprising and interesting findings that we hope will be useful to employers and industry stakeholders.

People still value manufacturing but visibility is lacking

People still attach a high value to the manufacturing sector, describing it as ‘essential’ for the supply of goods, innovation, prosperity, industrial reputation, living standards, national security, and as a source of local jobs. While most feel positive about manufacturing as an important part of the UK economy, our study identified a weakness in terms of the sectors wider media reach and visibility: less than a third said they saw anything about manufacturing over the past year.

Images of manufacturing work are putting people off

Manufacturing is seen as creative blue-collar work with (on the balance of opinion) poor pay for inflexibile, low status jobs in an old-fashioned sector. On a positive note, of course, manufacturing does mean different things to different people. Gen Z plug into the creative and innovative side of the sector, think pay and security are more likely to be good. The problem for them (and women) is they mainly associate work in the sector with ‘boring old industry’ and think that young people are less aware of digital careers in manufacturing. This latter finding is similar to those more familiar with manufacturing work (workers) but they think of the sector as modern with very reasonable amounts of quality in jobs. One of the questions, this raises for us is how does the sector translate some of these positive insider images (creative purposeful work with career opportunities) to a wider ‘uninformed’ audience? Rightly or wrongly, nearly a fifth of our sample associate manufacturing with poorly paid work.

Does job quality matter in manufacturing?

The short answer is that job quality (whether we express that in terms of ‘good jobs’ or ‘fair work’) tells us what people are looking for in work, including manufacturing. Good job quality is essential for attracting new talent and retaining skilled workers. In our sample, quality is largely driven by pay, wellbeing and flexibility, a desire for clean and safe working environments, contractual security and stability, and employee voice. Gen Z have a strong desire for ‘employee voice’ (where their opinions are heard and valued), whilst women have a strong preference for employers offering wellbeing and flexibility practices.

The good news? Job quality for those people in the sample who currently work in manufacturing looks reasonably satisfactory. Over three-fifths of workers identify manufacturing work as purposeful, delivering reasonable levels of contractual stability, career development, EDI, and safe work. Interestingly, this still means that a significant number of workers don’t rate manufacturing jobs as purposeful and, also jobs appear to be slightly ‘weaker’ on pay, wellbeing (and flexibility), and employee voice. There are some good messages on job quality to sell the sector to ‘outsiders’ but more work to be done in reaching, telling, and convincing people, about the benefits and upsides of working in UK manufacturing.

The digital future looks bright but hold back on the shades

Most people think that tomorrow’s manufacturing jobs will be more advanced and hi-tech wit less environmental waste. Although people think that increased leadership diversity will fuel more innovation, over a third are sceptical about whether there really will be more representation from women and minorities in the future.

People have concerns about the destruction of jobs in manufacturing

We hear plenty about people using new technology (especially AI and robotics) to autopilot or co-pilot work and how new manufacturing technologies will continue to replace the ‘dull, dirty and repetitive’ manual tasks. In practice, the technological future will likely be the same old melting pot mix of greater creativity, augmentation, and job destruction. On a positive note, most people think that new technologies will augment (and co-pilot) tasks and people’s skills – upskilling not downskilling – and make jobs more interesting and rewarding for workers. Less reassuring is that just over a quarter think that they will have a destructive impact on the numbers of jobs in the sector. The link between new technologies and their impacts on jobs is a divisive and uncertain issue, with potentially negative implications for attracting talent, workers job stability and security that must be addressed by businesses. It is not surprising that those in the lowest socio-economic groups (those most at risk from job elimination) think more negatively about the impact of new technologies in future manufacturing.

Attracting future talent means more good people practice

Gen Z are the most optimistic about manufacturing jobs of the future. To harness that optimism how should employers’ best harness that potential and attract more digital talent into the sector, particularly from digitally ‘native’ younger generations and from groups such as women and minorities? The largest positive factor for attracting young digital talent and women concerns the promotion of wellbeing and flexibility practices. Young people are perceived as less ‘threatened’ by digital technologies, linked with greater innovation potential but thought to be less aware of digital careers in manufacturing workspaces. There is also a recognition that manufacturing employers may need to refresh their practices to attract more women and minorities into jobs. Working practices and environments need to adapt to become more inclusive.

What does it all mean?

There are some key messages for employers and industry stakeholders from our survey:

  • Keep talking up the value of your sector, people know you are essential and valuable, but the media reach and messaging of the sector isn’t reflecting that effectively.
  • Legacy images of old-fashioned manufacturing work impact negatively on how people look at jobs and careers in the sector. Although job quality is reasonable for many manufacturing workers, more needs to be done selling this message outside the sector to hard-to-reach groups such as women and minorities.
  • People anticipate that new technologies will improve the quality of future manufacturing jobs but have concerns about job destruction and its likely impact on opportunities and job security.
  • Going forward, attracting new talent will mean employers making greater investments in positive people practices in areas such as well-being, flexible working and inclusive workspaces.
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InterAct Blog

Workshop insights: International Perceptions and Megatrends of Manufacturing

I recently attended a workshop on international perceptions and megatrends in manufacturing. Hosted by Aston Business School, it featured various experts and practitioners sharing their insights on the current manufacturing landscape and the strategies required for its positive future. The research team (Dr Guendalina Anzolin, Dr Jennifer Castañeda–Navarrete, Dr Dalila Ribaudo and Yanan Wang) included researchers and practitioners from Aston Business School and the Institute for Manufacturing, University of Cambridge. The research is funded by InterAct, a network led by the Economic and Social Research Council and Made Smarter UK.

Initial findings from the research

During the event, the project team shared some initial findings from their research. This has involved a systematic review and expert validation, with a specific focus on how manufacturing is discussed in contexts where digital technologies have been adopted, and widely addressed at the policy level. The analysis encompasses the following countries: Canada, Germany, Korea, Singapore, Switzerland, the United Kingdom and the United States.

The results emphasised the different connotations manufacturing holds for various demographics and how manufacturing, ranging from robotics to engineering systems, varies in definition based on individual perspectives. There is an observed dichotomy in public perception of the sector, ranging from antiquated views of dirty factories to a modern, automated image. Consequently, while the industry still captures public interest and is deemed essential, there are disparities between generations in understanding its significance.

Furthermore, the research has found familiarity with the sector positively influences opinions, indicating a gap between the familiar and unfamiliar regarding job quality perceptions. The discussion also emphasised the shift of countries from manufacturing to services and explored the importance of a robust manufacturing base for sustainable growth. Gender dimensions and the impact of COVID-19 perceptions on the industry’s role in innovation were also explored.

External speakers

The external speakers included Professor Fumi Kitagawa (City-REDI), Ollie Burrows (West Midlands Growth Company), Stewart McKinlay (National Manufacturing Institute Scotland), and Alain Dilworth (Made Smarter UK) shared initiatives and challenges faced in different regions. From the UK’s creation of the ‘Catapult’ technology and innovation centres focusing on manufacturing-related R&D and emerging technologies, modelled on the German Fraunhofer Institutes, to regional strategies focusing on net-zero, automotive innovation, and the intersection of technology with manufacturing, various initiatives are driving growth and sustainability.

Insights

Insights highlighted a stark disparity between perception and reality, with challenges like labour shortages, health and safety concerns, and the need for upskilling the workforce. Additionally, a Senior Policy Manager at Make UK, highlighted upcoming narratives for the manufacturing sector, especially in the context of elections and economic resilience. Emphasizing net-zero goals and a push to increase manufacturing’s GDP contribution. There was consensus that an overarching industrial strategy is needed focusing on skills, supply chains, and technological advancements.

The workshop offered a comprehensive view of global manufacturing perceptions, challenges, and the need for a strategic shift in how we perceive and position the sector. Addressing misconceptions, advocating for skills development, and aligning policy with industrial strategies emerged as critical themes for the future of manufacturing. As industries navigate an ever-evolving landscape, bridging the gap between perception and reality will be pivotal for sustained growth and innovation in manufacturing worldwide.


This blog was written by Dr Chloe Billing, Research Fellow, City-REDI / WMREDI, University of Birmingham and originally published online by the University of Birmingham.

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InterAct Blog

Rethinking manufacturing: It is everything, everywhere, all at once

In a world where perceptions shape industries and policies, understanding the narrative surrounding manufacturing is crucial. InterAct has recently published a report which analyses the perceptions of manufacturing in the United Kingdom and compares it with six other countries.

The report “How to make manufacturing charming again? It is everything, everywhere, all at once”, authored by researchers from Aston University and the University of Cambridge, examines the factors that influence these perceptions and tracks how the UK public’s perception has evolved over time.

The aim of the report is to support InterAct research on the future of manufacturing by providing insights into attitudes to manufacturing and industrial strategies, and how manufacturing is discussed in other countries, particularly where digital technologies have been adopted.

Public perceptions of manufacturing across countries and over time

Although governments remain hesitant to explicitly champion “industrial policy”, the renewed commitment to manufacturing, as evidenced in the UK’s Advanced Manufacturing Plan, underscores its pivotal role in national economies which is increasingly acknowledged by policymakers.

The multi-country review, encompassing the UK, Canada, Germany, Singapore, South Korea, Switzerland, and the US, revealed more positive perceptions of manufacturing in Germany and the US compared to the UK. However, perceptions within the UK have shown improvement. In 2001, the British public believed that the country could thrive without manufacturing. In contrast, by 2023, 93% of the public believe that the manufacturing industry is essential to economic growth and resilience.

Across countries, including the UK, a consistent trend persists; younger people exhibit the least interest in pursuing careers in manufacturing. The prevailing perception, widely held among teenagers and young adults, is that the industry is predominantly male and lacking diversity compared to other sectors. Additionally, manufacturing is perceived as being poorly paid, repetitive, and not requiring high-skilled labour. These misconceptions pose significant challenges in attracting new talent to consider the manufacturing sector as a viable and rewarding career path.

Understanding the policy and perception nexus

Industrial and innovation policies play a significant role in shaping public perceptions, which can sometimes differ from reality. Terms like “advanced manufacturing” increasingly highlight the high-tech nature of the industry. National strategies also underscore manufacturing’s role in economic growth, innovation, and regional development.

Women tend to be underrepresented in manufacturing, especially in high-tech industries. For instance, in the UK, women account for 26% of the manufacturing workforce, and their representation is even lower in high-tech sectors such as automotive and aerospace. However, gender disparities within the sector remain largely unaddressed across policies, reflecting a notable blind spot.

Megatrends reshaping manufacturing

Megatrends reshaping manufacturing, such as environmental sustainability and digitalisation, persist as top priorities in industrial and innovation strategies. The interrelation of such megatrends is also becoming an area of interest in policy making. In addition, the impacts of the COVID-19 pandemic and geopolitical tensions have led to an increased emphasis on resilience, national security, value chain reconfiguration, and technological sovereignty.

These shifts in priorities and the continued focus on digitalisation and environmental sustainability have broadened the scope of activities and value chain segments within manufacturing. Notably, there is a growing emphasis on areas such as design and recycling, and the blurring boundaries between manufacturing and services.

Addressing challenges and charting a new path

This latest InterAct report highlights the evolving perception of manufacturing, emphasising the intrinsic link between policy and public perspectives. It highlights manufacturing’s multifaceted role in economic growth, innovation, and social inclusion, while also indicating pathways for improvement.

The report provides four recommendations in moving forward:

  1. Systematic collection of data (yearly or every 2 years) about how the public perceives manufacturing and the role of the digital and green transformations in shaping perceptions.
  2. Leveraging the manufacturing observatory, outlined in the UK Advanced Manufacturing Plan, to constantly monitor policy developments across different contexts. This includes how manufacturing and related terminologies are defined and portrayed.
  3. Setting measurable targets and initiatives aimed at enhancing diversity in manufacturing.
  4. Providing education and career information about manufacturing from the early stages.
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InterAct Blog

Charging ahead or falling behind? The UK’s preparedness for EU battery regulations

The European Union’s (EU) new battery regulations (Regulation 2023/1542 ), introduces many new legislative measures, including specific requirements for battery passports and smart labelling. It marks a significant shift towards enhancing sustainability and transparency within the battery value chain.

These battery regulations are pivotal in advancing the EU’s Circular Economy Action Plan. As the UK navigates its post-Brexit landscape, aligning with these regulations is crucial for maintaining trade relations and environmental standards. Recent InterAct funded research provides a comprehensive analysis of the UK’s readiness to adapt to these regulations, offering insights that highlight both opportunities and the challenges ahead.

New regulatory requirements

Under the new rules, there will be enhanced information and ICT system requirements for entities introducing batteries and battery powered products to the market. This applies to any economic operator involved in making batteries available in the EU, whether as separate components like cells, modules and packs, or as part of larger products. It also includes those who change a battery’s intended use or are involved in refurbishing or remanufacturing.

A key feature of the regulation is the mandatory inclusion of a QR Code on all batteries, facilitating the use of ‘smart label’ and ‘battery passport’ functionalities, varying by battery type. While specific operators are obligated to provide this information, in practice, a broader network of stakeholders will likely contribute, creating an integrated, multi-stakeholder ‘battery information ecosystem’. This ecosystem will span the entire value chain and lifecycle of battery products, supporting both passport and smart label functions with information from a diverse array of operators.

UK readiness

Recent research conducted by Loughborough University (supported by the  Made Smarter Innovation Challenge and funded via the Economic and Social Science Research Counil (ESRC) led InterAct Network) offers an extensive overview of the UK’s readiness for the impending regulations, specifically Battery Passports and Smart Labelling requirements.

The analysis includes results from a nationwide survey, completed by 80 organisations, including 21 large, 28 medium-sized, 23 small enterprises, and eight micro-businesses, also representing a wide spectrum of products and activities across the battery value chain/system.

The findings from the survey were discussed in a roundtable discussion and follow-up interviews, available here, which offer a multi-dimensional perspective on the readiness and concerns of the UK battery sector. This breadth of participation underscores the comprehensiveness of the findings, capturing a wide array of viewpoints and insights from a variety of actors along the value-chain from beginning of life to end of life.

Awareness and attitudes towards regulation

The survey revealed that 63% of organisations were unaware of the new regulations, with this figure rising to 73% among UK-based suppliers to the EU. This lack of awareness is concerning, as it indicates a potential gap in readiness for compliance.

The industrial context of these regulations is complex. While there is optimism about the potential for more sustainable and circular business practices, there are also concerns about the administrative, technical and financial burdens the Battery Passport and Smart Labelling requirement might impose. The majority view these requirements as a significant challenge, with only a minority seeing any substantial benefits.

Information readiness: a critical gap

A significant challenge identified in the survey is information readiness. Many businesses reported inadequate access to crucial data on battery materials and supply chain details. This includes information on recycled material content, hazardous substances and critical raw materials, as well as supply chain transparency for components like battery separators and cell casings.

Only about half of the respondents felt confident in the accuracy and completeness of their records, highlighting a pressing need for improved information sharing and data management systems.

ICT challenges and opportunities

The survey underscored the significant challenges in ICT, data, and workflow requirements for compliance. The responsibility for the Battery Passport primarily lies with the manufacturer, who is required to create and maintain these records for each battery throughout the battery’s lifecycle.

In some cases, other economic operators also have roles to play in maintaining or updating certain information, yet many organisations lack the necessary systems and expertise to collect, create, share and report the required data. However, this also presents an opportunity for innovation in the sector, with the potential for new technologies and systems to streamline these processes.

Implications for UK battery producers and UK policy

More needs to be done to raise awareness and demystify the compliance obligations of UK battery manufacturers and producers. It was felt that the new regulations would dominate the focus of day-to-day business activities for several years.

Other issues raised – such as fragmented industry practices, lack of clear guidelines, and the complexity of supply chains – would benefit from clear policy directions, enhanced data management systems, and increased international and value-chain collaboration, which were seen as critical to overcoming these challenges.

The regulation necessitates a collaborative effort from manufacturers, producers, importers, and distributors of all battery types and is essential for implementing substantial changes in areas such as labelling, end-of-life management, and supply chain due diligence. Additionally, there is a need for establishing incentives that will enable increased collaboration between beginning-of-life and end-of-life operators.

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InterAct Blog

Manufacturing a better future – exploring disability inclusive digital manufacturing

In 2021 Make UK1 outlined the need for manufacturing to attract skilled workers from all sections of society acknowledging the continuing challenges of the lack of diversity in the workforce. However, the current focus in manufacturing policy and practice on equality and diversity has been limited to gender and ethnic diversity. Although almost a quarter (23%) of the UK working age population are disabled2, the industry has lacked a real interest in the inclusion of disabled people.

The employment gap between disabled and non-disabled people has also remained consistently high at around 30% for the past 10 years, with a pay gap of almost 20% lower for disabled workers compared with non-disabled workers3. Moreover, in the UK, 32% of disabled people do not have basic digital skills4 and those with multiple disabilities are the most digitally disadvantaged. They often face barriers in basic access to the technology such as connection to Wi-Fi-network or finding and opening applications on their devices.

This inaccessibility of technology, together with rapidly growing digital capabilities, is exacerbating the digital divide between disabled and non-disabled people. There is also a strong business case to include more disabled people into work for innovation through diverse workforce. We know that diversity and inclusion have positive effect on firms’ productivity, innovativeness or quality5, so why has this been largely ignored by manufacturers?

Recent research6,7 found that efforts to improve the suitability of industrial manufacturing workstations or the use of Industry 4.0 technologies for disabled people have still been superficial, favouring the inclusion of workers with milder disabilities and missing the complex interaction between the socio-technical aspects of inclusion. Our research explores how digital technologies, alongside an inclusive managerial mindset and accessible business practices, can create inclusive digitalisation in manufacturing.

Our project, ‘Manufacturing a Better Future – exploring disability inclusive digital manufacturing’, embodies the principles of socio-technical systems view where the benefits of the new technology are optimised alongside the humanisation of work, by looking into how the technological and social aspects interact and emerge together. This approach is closely in line with the social model of disability8. Based on this view, it is often the social barriers such as inaccessible physical environments, the attitudes (prejudice and discrimination) and the inflexibility of organisational procedures and practices that exclude disabled people from work, rather than medical conditions.

At the end of this project, we propose that we will have a greater understanding of how the digital inclusion divide, as well as the disability employment gap, can be narrowed through the inclusion of disabled people into the manufacturing ecosystem.


References
  1. Make UK (2021) UK manufacturing diversity & inclusion guide https://ktn-uk.org/wp-content/uploads/2021/11/KTN_Made-Smarter_UK-Manufacturing-Diversity-and-Inclusion-Guide.pdf?=MadeSmarterUK
  2. Scope (2022) https://www.scope.org.uk/media/disability-facts-figures/
  3. Together Trust (2023) https://www.togethertrust.org.uk/news/explaining-disability-employment-gap
  4. Lloyds (2021) Essential Digital Skills Report 2021, https://www.lloydsbank.com/assets/media/pdfs/banking_with_us/whats-happening/210923-lb-essential-digital-skills-2021-report.pdf
  5. Chaudhry, I. S., Paquibut, R. Y., & Tunio, M. N. (2021). Do workforce diversity, inclusion practices, & organizational characteristics contribute to organizational innovation? Evidence from the UAE. Cogent Business & Management, 8(1), 1947549.
  6. Teixeira, E. S., & Okimoto, M. L. L. (2018). Industrial Manufacturing Workstations Suitability for People with Disabilities: The Perception of Workers. In Advances in Ergonomics in Design: Proceedings of the AHFE 2017 International Conference on Ergonomics in Design, July 17− 21, 2017, The Westin Bonaventure Hotel, Los Angeles, California, USA 8 (pp. 488-497). Springer International Publishing.
  7. Mark, B. G., Hofmayer, S., Rauch, E., & Matt, D. T. (2019). Inclusion of workers with disabilities in production 4.0: Legal foundations in Europe and potentials through worker assistance systems. Sustainability, 11(21), 5978.
  8. Oliver, M. (2013). The social model of disability: Thirty years on. Disability & society, 28(7), 1024-1026.
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InterAct Blog

Building supply chain resilience means going beyond reshoring

Ask anyone involved in supply chain management or logistics about the last five years and most will agree they have been tough. Brexit, Covid and the war in Ukraine have caused uncertainty on both the demand and supply side.

Such geopolitical uncertainty raises complex questions for supply chain managers, such as whether supply chains could be better prepared for shocks.

Professor Jan Godsell is the Co-director of InterAct and Dean of Loughborough Business School and Professor of Operations and Supply Chain Strategy. After a career in manufacturing and supply chains, including spells at ICI and Dyson, she moved into academia covering all aspects of supply chains. According to Jan, a common cause of supply chain breakdown is just a lack of joined up thinking between marketing and supply chain strategy.

“It doesn’t matter whether you know why a demand pattern has been caused,” she explains. “If there’s a peak in demand, there’s a peak. The data should show that you get seasonal peaks, and you can react. We know we’re going to get shocks. We won’t know the cause, but we can have a degree of preparedness knowing there will be shocks at some stage.”

Dynamic versus structural flexibility

Dynamic flexibility is possible within the current network design, while the other, structural flexibility, demands a rewiring of relationships between suppliers.

She says the first type should be enough to cope with everyday swings in demand and supply. “If things stay within standard parameters, the network needs the right buffers to deal with that variability. It is a matter of analysing and assessing how unpredictable demand might be and using maths to work out required buffers and what inventory to keep.”

Jan says exceptional events in recent years have seen both sorts of flexibility at play.

“Brexit forced the UK to be fairly well buffered, so when Covid hit it meant we had a lot of inventory for the things we normally need. What also happened was unexpected demand for things we don’t normally require, such as Personal Protective Equipment (PPE) and ventilators.

“That required structural flexibility, creating new networks to produce things at a volume not seen before. With Covid-19, it wasn’t just the UK requiring flexibility, it was the world. We had to repurpose assets in the global network to provide them. And we did a decent job, globally.”

Jan adds that structural weaknesses highlighted by recent events have been partly created by decisions taken over many years, in particular making supply chain decisions based on short-term financials and procurement rather than long-term planning.

Finance runs the supply chain game

Holding buffers or inventory in a supply chain can be expensive, and it’s often not clear who should bear that cost. This, says Jan, is partly why supply chains have not been as resilient as they could be.

“We’ve had a financially orientated view of supply chains, focused on a return on capital employed (ROCE) that enables payback as quickly as possible. That means when building a factory, we don’t factor in spare capacity. And if spare capacity means inventory, we try to maximise return and minimise inventory.”

For Jan this goes back to how we value organisations, and the role finance plays in corporate strategy. And we haven’t learned much from earlier shocks.

She points out that financially driven supply chains had an impact in the recession of the late 2000s. A lot of firms had sent manufacturing and other parts of their supply chains offshore, often to low-cost environments. But they had forgotten to factor in the cost of logistics, which became a problem when the oil price peaked.

“Suddenly, the price of logistics was higher than the price of production. That reminded people to take a ‘total landed cost’ perspective [when deciding on location],” she explains. “People were lazily using manufacturing cost as a proxy for total landed cost. Worse still, they’d started to use labour cost as a proxy for manufacturing cost.”

While current trends such as “nearshoring” and “reshoring” are ways to de-risk supply chains, Jan suggests if cost must be the key factor in a decision, total landed cost is the metric to use. But when deciding where to place operations, she suggests not letting procurement be the drivers. Instead, she says, long-term planning and collaboration across the supply chain will be more effective at delivering efficient, resilient supply chains.

Let the SCOR guide you

Prof Godsell highlights the Supply Chain Council’s Supply Chain Operations Reference model (SCOR). SCOR consists of five core processes:

  • Planning
  • Procurement
  • Manufacturing
  • Logistics
  • The returns process

Planning is the primary element. Too many supply chains, says Jan, focus on a lowest-cost approach with procurement as the primary driver.

She describes this as “lowest cost, at all cost” and says it results in all parties doing things for themselves cheaply as possible, minimising buffers, passing risk to others and leaving the whole chain more vulnerable.

“Planning should be the integrative glue that holds it together,” she says. “It should be the function that connects a supply chain. We see lots of exploitative procurement practices, expecting year-on-year cost downs, because procurement managers have been incentivized on margin.”

End-to-end supply chains?

Jan’s ideal is to build what she calls “end-to-end supply chain optimisation” between retailers, manufacturers and suppliers. This creates flow and aims to manage the supply chain in a fairer way for everyone.

Buffers must be in the right place at the right amount. And there’s a collective responsibility for holding them and we don’t do things like promotions that mess up flow. The cheapest supply chain is one with steady demand, because it means minimal buffers, because you’ve got predictability.

And such end-to-end supply chains are likely to be less carbon intensive. “There is an inextricable link between productivity, sustainability and resilience,” says Jan. “The same principles underpin all three. If we could manage an end-to-end supply chain, so that we have flow and minimised buffers, within the current network configuration, it is likely to have the lowest carbon footprint, because you’ve got nothing in it you don’t need.”

Digitalisation is key

Like much else in modern organisations, supply chain optimisation requires technology. “We can’t do this without digitalisation,” says Jan, adding this is nothing new for manufacturing. “When I worked at ICI, we had electronic process control, it was just hard wired. Now the internet provides connectivity that spans the supply chain.”

Digitalisation enables us to understand demand and supply more accurately and we have the analytics platforms and the computing power to do the analysis we need in minutes.


This article was published by Lombard, read the original version here.

Categories
InterAct Blog

How do we create manufacturing ecosystems from supply chains?

Introduction

The term ‘ecosystem’ is derived from biology, capturing a system of entities interacting and depending on each other and reacting to outside challenges and requirements. Business ecosystems represent the intense relationships between interlinked multilateral, complementary actors or partners interacting for value creation (Adner, 2017; Hannah and Eisenhardt, 2018).

We define a manufacturing ecosystem as a subclass of business ecosystems where supply chain firms arrange demand-driven collaboration in all directions (e.g., with partners, buyers, and even customers), thus competing with large Tier-1 firms for direct manufacturing orders, gaining these orders, fulfilling them and capturing profits. This changes the topology of a hierarchical supply chain into a distributed manufacturing ecosystem, where Tier-1s do not arrange subcontracting of the awarded orders.

In the conventional supply chains, Small- and medium-sized enterprises (SMEs) represent most suppliers worldwide, accounting for 70% of jobs and generating up to 60% of value added (OECD, 2017). For example, the aerospace supply chain starts with the OEM, which places orders in a ‘Calls for Tenders’ (CfTs), organizes tendering processes (often leading to Tier-1s) and awards orders to the team that best matches the requirements. In this industry, SMEs can potentially provide components and services at multiple supply chain levels, but they often miss the scale, scope, standardization or technologies to play a more active role in tendering (Müller et al., 2018). Also, SMEs have reduced ability to act as suppliers due to powerful Tier-1 companies (Schirrmann & Drat, 2018). 

However, what if demand-driven collaborations between SMEs are supported?

We simulate the application of Industry 4.0, Digital platforms, Smart contracts, and Supplier development programs (Kazantsev et al., 2022) and explore the growth of the manufacturing ecosystem from a conventional supply chain. We used system dynamics to simulate these changes and provide insights for manufacturing firms and policymakers about the desired level of support (Sterman, 2000; Akkermans and Wasserhove, 2018). 

An interactive dashboard has been developed that allows the testing of ecosystem development:

Findings

1. Supplier development and digital platforms make marketplaces more transparent so that SMEs can see more calls for tenders

Supplier development programmes and digital platforms are needed to help SMEs identify more calls for tenders and potential partners for collaboration.

2. The collaboration experience and smart contracts reduce uncertainty levels and enable SMEs to submit more collaborative tenders

Participating in tendering would also enable SMEs to learn how to fulfil orders; therefore, allowing some quotas is helpful. The more firms collaborate on tenders, the lower the level of uncertainty in the market. New technologies, such as smart contracting, indirectly increase the number of submitted tenders and further support the development of a trustworthy business environment.

3. Technological support for contracting and coordination reduces the order execution queue and supports the growth of a manufacturing ecosystem 

Insufficient contracting and coordination reduces order fulfilment efficiency and calls for digitalization  (Kazantsev et al., 2023). Adopting smart contracting and Industry 4.0 increases the ability of SME collaboration to execute the awarded orders in time. Specifically, if we double investments into smart contracting and Industry 4.0 every year, the number of delayed orders grows until the 5th year but then starts falling. In the 6th year, 48 calls for tenders will be available (with a 15 % quota), seven orders out of which will be fulfilled the same year, and six orders from the previous year’s queue. In this case, the order execution rate reaches a plateau – executing all awarded orders. Year 5 is a breakeven point when order execution rate, delayed, and executed orders intersect.

Study implications 

Demand-driven collaborations play a critical role in unfolding manufacturing ecosystems. In the early stages of such transitions, investments in collaboration enablers are critical to support ecosystem growth. Thus, we recommend:

  • investing in supplier development and digital platforms as early as possible
  • enabling quotas for SMEs in tendering   
  • increasing digitalization of contracting and coordination to support the efficiency of demand-driven collaborations

https://doi.org/10.1016/j.techfore.2023.122917

References

Adner, R. (2017). Ecosystem as Structure. Journal of management, 43(1), 39-58.

Akkermans, H., & Van Wassenhove, L. (2018). A dynamic model of managerial response to grey swan events in supply networks. International Journal of Production Research, 56(1-2), 10-21.

Hannah, D. P., & Eisenhardt, K. M. (2018). How firms navigate cooperation and competition in nascent ecosystems. Strategic management journal, 39(12), 3163-3192.

Kazantsev, N., Petrovskyi, O., & Müller, J. M. (2023). From supply chains towards manufacturing ecosystems: A system dynamics model. Technological Forecasting and Social Change, 197, 122917.

Kazantsev, N. (2022). Supporting SME Collaborations in Low-Volume High-Variability Manufacturing. United Kingdom:The University of Manchester.

Kazantsev, N., Pishchulov, G., Mehandjiev, N., Sampaio, P., & Zolkiewski, J. (2022). Investigating barriers to demand-driven SME collaboration in low-volume high-variability manufacturing. Supply Chain Management: An International Journal, 27(2), 265-282.

Kazantsev N., DeBellis, M., Quboa Q., Sampaio P., Mehandjiev N., &  Stalker I. (2023). An ontology-guided approach to process formation and coordination of demand-driven collaborations, International Journal of Production Research, DOI: 10.1080/00207543.2023.2242508

Müller, J. M., Buliga, O., & Voigt, K.-I. (2018). Fortune favors the prepared: How SMEs approach business model innovations in Industry 4.0. Technological Forecasting and Social Change, 132, 2-17.

OECD. (2017). Enhancing the contributions of SMEs in a global and digitalized economy.

Schirrmann, A., & Drat, C. (2018). D6.1: Collaboration rules & procedures specification. Retrieved 16.12.2021 from https://6c97d07e-2d66-4f14-9c19-8c5872c4c3ba.filesusr.com/ugd/
2512a7_da7dba0ebb164182803d70e03fe6773b.pdf

Schmidt, M. C., Veile, J. W., Müller, J. M., & Voigt, K. I. (2023). Industry 4.0 implementation in the supply chain: a review on the evolution of buyer-supplier relationships. International Journal of Production Research, 61(17), 6063-6080.Sterman. (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World McGraw Hill.

Categories
InterAct Blog

The three pillars of technology adoption in the agri-food industry: provision, people and practicality

There are terms we hear constantly in the agriculture and food sectors right now – industry 4.0, smart processes, robotic automation, Internet of Things (IoT) and Artificial Intelligence (AI) are all common buzzwords. However, while understanding the benefits of these formative ideas is relatively straightforward, putting them into practice relies on the collection, utilisation and analysis of data – data that needs to be digitally available to make this possible.

Adopting solutions that drive forward these tech advancements offers great potential in leveraging growth and productivity, but there is one sticking point. The UK agri-food industry is notoriously slow in adopting new technologies.

Of course, extraordinary events such as the Covid-19 pandemic, have accelerated the adoption of some digital technologies out of necessity, but the overall feeling has traditionally been one of reluctance, with various contributory factors including cost, resource, and general attitudes.

How to convince the sector to embrace change

There are three pillars that need to be considered to provide agri-food businesses with the confidence to adopt technology: provision, people, and practicality. These will in turn enable businesses to access the benefits that digitisation and data connectedness will bring. Let’s break them down one at a time.

Provision

It’s not that technologies haven’t been developed and tested – they have. It’s that less attention has been paid to actually provisioning tech specifically for the agri-food industry. Often technologies that make their way into the agri-food sector have been developed with a use case or other industry in mind. Only after this is the potential for it to be applied within agri-food production and/or manufacturing recognised.

Look at blockchain – its origins are in fintech, designed to trade digital currency bitcoin without the need for a trusted authority such as a bank. But repurpose this technology into the agri-food space, where it was pivoted to be an emerging technology to disincentivise and prevent fraud, and it’s clear it isn’t completely fit for purpose in its legacy form.

Why? Because the decentralised nature of blockchain means that using a typical payment model based on the number of transactions, where there are many transactions, is just not possible in a high volume/low margin sector like agri-food. So, in reality it, is just too costly to roll out. An obvious takeaway here is that if technologies are to be adapted and provisioned with the agri-food sector in mind, then it is vital that the technology providers have an in-depth knowledge of the agri-food sector.

People

It isn’t just provisioning where technology adoption currently falters. We need to shine a spotlight on how we get people to buy in. The breakdown here might not be where you think. While the benefit technology can bring to businesses is often understood on a macro level within the food industry, particularly by those in thought leadership positions, it is the onboarding of this technology’s main users that has proved more difficult.

This is not generally due to the people, but because of the change it involves. The benefits of this new way of working are not always immediately or overtly obvious to users. In fact, as a technology provider, I am often met with statements of resistance, such as: “because this is the way it has always been done”. However, this struggle to accept new technologies is often associated with a fear of change and being replaced by machines. That’s why it is so important that technology providers acknowledge these concerns and take them into consideration, reassuring users of the benefits during implementation.

Practicality

Addressing the practical aspects of a digital way of working within agri-food is the final part of making technology adoption more accessible. The responsibility here lies with the tech providers.

The processes, changes, and practical steps required to implement a new tech into a business are often confused and even misunderstood, even by the technology companies themselves.

In general, the agri-food sector operates on a high-volume low-margin model, meaning that processes are tightly refined and controlled. The industry has worked hard over the last 20+ years to bring about operational efficiencies through automation, so that cost savings or profitability can be achieved.

During this period there has been less of a focus on digitising data and the value it could bring through actionable insights. When disruptive technologies enter this process, they need to do so with ease and not impact operations or processes. In addition, they need to add value rather than create costs for businesses. Furthermore, these technologies need to be able to cope with the intricacies and nuances that exist in the production and manufacturing environments. Put simply, sometimes technology will not be plug and play – especially in its infancy. 

The outcome here is that the inherent benefits of digitisation are not immediately obvious, as they would be with operation efficiency gains. It is critical that technology providers take the time to understand the specific business where they are attempting to implement technologies and provide solutions that will support and enhance the business.

The sector, the business & the people

Ultimately, an understanding of the many aspects of the agri-food sector is critical for technology providers. Without a clear view of not just the supplier-customer relationships and their dynamics, but also the supply chain, with its global complexity and fragmented nature, and the many actors involved in the supply chain, there are sure to be issues. A grasp of all these issues assures an appreciation of the intricacies involved in technology adoption in this sector. It also ensures that technology providers can recognise any stumbling blocks ahead, while partnership with customers enables the provision of technology that is fit for purpose.

As a technology provider, Foods Connected works specifically on implementing digital solutions with Food Business Operators. The implementation of these solutions in various environments requires knowledge and understanding of how each business operates, accompanied by knowledge about the wider complexities of the sector in general. That’s why our teams have all worked in the industry and understand the intricacies of each step of the supply chain process. Our people are experts – and that’s what we need to take technology adoption forward in the agri-food industry.

After all, technology adoption and implementation are inherently coupled with people – and one cannot exist without the other.

Want to learn more about digitalisation in the agri-food industry? Watch our recorded InterAct x Foods Connected webinar: Overcoming barriers to digitalisation: adding value in the agri-food sector
About the author

Stephanie is a Senior Implementation Manager at Foods Connected. With 11 years’ experience in academia, food manufacturing and food-tech and an undergraduate degree in Food Science and a PhD in Food Supply Chain Management, Stephanie has spent her career working in food manufacturing environments in a R&D capacity, as well as working on and managing several multi million pound research projects while working for Queen’s University Belfast. Stephanie has worked with Foods Connected for the last 2.5 years, implementing, managing and delivering successful digital transformation projects within the food industry.