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People Productivity Resilience Resources Sustainability

InterAct Conference 2023

As we embark on the next stage of our industrial evolution, digitalisation will shape the future of our economy, manufacturing ecosystem, and workplace. Digital technologies can enable us to create the future we want and move beyond consumption driven economic growth.

Our challenge is to create a digital manufacturing future that meets our net-zero ambitions, whilst being resilient and productive. Thus, ensuring that everyone has the things that they need, at a price that they can afford, without damaging the environment or society.

To create the digital manufacturing future we want, we first need to know how that can be achieved, we need to explore the possible and work together to realise these goals. In order to combine our expertise from the broadest range of perspectives around this common goal, we need to InterAct.

How did the InterAct conference benefit attendees?

  • Gaining actionable human insights into the future manufacturing environment.
  • Networking and building relationships with cross-sector experts interested in creating a positive, forward-thinking vision for UK industry.
  • Building narrative development skills to enhance the reach of messaging in the digital environment.
  • The opportunity to take part in a collaborative workshop on the theme ‘How do we create the digital manufacturing futures we want to see, together’.
  • Engagement with a panel of highly regarded speakers from the world of manufacturing, policy, and academia during an interactive Q&A session.

Speakers

We were delighted to welcome a roster of world-leading speakers, who shared unique insights and perspectives on their areas of expertise in relation to the theme of ‘Creating the digital manufacturing future we want’.

Our speakers were drawn from a wide range of backgrounds across industry, policy, think-tanks, and academia. Together they represent a diverse collection of voices that we want to draw into the wider conversation about what it will take to build a future that delivers for everyone.

Peter Cheese

Keynote Speaker

Chief Executive – Chartered Institute of Personnel and Development (CIPD)

Peter is the CEO of the CIPD, the professional body for HR and People Development. Since January 2019, he has been co-chair of The Flexible Working Task Force, a partnership across government departments, business groups, trade unions and charities, to increase the uptake of flexible working. He is also Chair of Engage for Success and the What Works Centre for Wellbeing.

Peter writes and speaks widely on the development of HR, the future of work, and the key issues of leadership, culture and organisation, people and skills. In 2021, his second book ‘The New World of Work’ was published, exploring the many factors shaping work, workplaces, workforces and our working lives, and the principles around which we can build a future that is good for people, for business and for societies. 

Prior to joining the CIPD in 2012 Peter was Chair of the Institute of Leadership and Management, an Executive Fellow at London Business School, and held a number of Board level roles. He had a long career in consulting at Accenture working with organisations around the world, and in his last seven years there was Global Managing Director for the firm’s human capital and organisation consulting practice.

He is a Fellow of the CIPD, a Fellow of AHRI (the Australian HR Institute), the Royal Society of Arts, and the Academy of Social Sciences. He’s also a Companion of the Institute of Leadership and Management, the Chartered Management Institute, and the British Academy of Management. He holds honorary doctorates from Bath University, Kingston University and Birmingham City University, and is a Visiting Professor at Aston University.



Ben Armstrong

Keynote Speaker

Executive Director – Massachusetts Institute of Technology (MIT) – Industrial Performance Center

Ben Armstrong is the executive director and a research scientist at MIT’s Industrial Performance Center, where he co-leads the Work of the Future initiative. His research and teaching examine how workers, firms, and regions adapt to technological change. His current projects include a working group on generative AI and its impact on work, as well as a book on American manufacturing competitiveness. He received his PhD from MIT and formerly worked at Google Inc.



David Rea

Speaker – Future of the Economy

Chief Economist – JLL

David is Chief Economist EMEA at JLL, one of the world’s largest commercial real estate services companies. At JLL, David advises the firm’s leadership and its clients on how the economy is evolving and the impact it will have on real estate. Prior to JLL, David spent six years as Chief Economist at Jaguar Land Rover and also led the company’s work to prepare for Brexit. He has previously held other economist positions at Capital Economics, RBS, and the Bank of Sierra Leone.


Professor Vania Sena

Speaker – Future of the Economy

InterAct Network – Future of the Economy: Principal Investigator
Chair in Entrepreneurship and Enterprise – University of Sheffield

Professor Sena’s first degree was awarded with laude by the University of Naples, Federico II, Naples, Italy; her postgraduate studies in Economics were carried out at the University of York, UK, where she was awarded both the MSc and the DPhil in Economics.

Her research focuses mainly on productivity growth, both at the micro and macro level with an emphasis on innovation, human capital and intellectual property. Her most recent research looks at the relationship among innovation activities,trade secrets and total factor productivity. She is a member of the Operational Society General Council and Board. She has been a visiting fellow at Harvard University, MA and at Rutgers University, NJ.

Vania is leading the InterAct workstream ‘The Future of the Economy’, which is examining the impact that the uptake of industrial digital technology in manufacturing will have on the wider economy and the implications of of this.


Dr. Adrienne Houston

Speaker – Future of Work

Company Director – Eurovacuum

Dr Adrienne Houston is Company Director at Eurovacuum Products Ltd. She is a Mechanical Engineering specialising in high vacuum and low pressure compressor systems and vacuum evaporator for the biogas, chemical and pharmaceutical industries.  

To complement her professional work, Adrienne is a keen promoter and champion of women in engineering, diversity and inclusion. In 2019 she was appointed by the Royal Academy of Engineering for the role of Diversity and Inclusion Visiting Professor at the University of Birmingham. She is a board member at the Research, Information and Knowledge committee at the Engineering Professors Council and Honorary Visiting Design Professor at the School of Engineering, University of Leicester. 


Professor Jillian MacBryde

Speaker – Future of Work

InterAct Network Co-director
Professor of Innovation and Operations Management – University of Strathclyde

Jill MacBryde is Professor of Innovation and Operations Management at Strathclyde University where she is also Director of the Hunter Centre for Entrepreneurship. Jill is Co-Director of the ESRC Made Smarter Network Plus, InterAct network, which aims to bring insights from the social sciences to support the innovation and diffusion of digital technologies that will result in a stronger, more resilient, manufacturing base.

The theme throughout Jill’s work is operations management in changing environments and her current research projects include productivity in manufacturing, the impact of Covid on UK manufacturing, and the future of manufacturing work. Jill also works with policy makers and the public sector. She is currently a member of the Innovate UK/ESRC Innovation Caucus and a member of the Innovate UK Future Flight Advisory Board.


Matt Tootle

Speaker – Future of Digital Manufacturing Ecosystems

Senior Business Analyst – Aerogility

Matt is an energetic and passionate leader who joined Aerogility with over 16 years’ experience in defence aerospace, primarily within support engineering and manufacturing. Matt’s specialisms include capturing and shaping complex customer requirements, designing and developing deliverable solutions and translating technical problems to non-technical individuals. Matt has extensive experience working with international customers and colleagues to deliver value to their operations. Matt’s current role sees him working across a variety of sectors to deliver innovative, model-based AI solutions to enable customers to better operate, sustain and optimise platforms, services and infrastructure.


Sue Williams

Speaker – Future of Digital Manufacturing Ecosystems

Managing Director – Hexagon Consultants

Sue Williams is a strategic and focused Supply Chain Director with over 25 years’ experience in multiple industries including automotive, aerospace, defence and FMEG as well as aftermarket and aftercare support.  Sue’s specialisms include supply chain design and modelling, inventory planning, demand management, S&OP and supply planning.  Sue has worked with organisations such as Jaguar Land Rover, Dyson, GKN and Meggitt among others, to deliver sustainable, high value change to their supply chains.  Sue was also the Head of Supply Chain for the Vaccine Taskforce, responsible for supply chain risk and resilience and the inbound modelling and planning for the vaccine supply.


Martin Bach

Speaker – Future of Digital Manufacturing Ecosystems

Martin Bach’s background is in process engineering and manufacturing management.  He has extensive business management experience in the UK, Europe and the US, running a wide range of businesses in the automotive and industrial sectors.  Most recently he was Managing Director of Cooksongold, the UK’s leading supplier of jewellery making materials and products.


Professor Janet Godsell

Speaker – Future of Digital Manufacturing Ecosystems

InterAct Network Co-director
Dean of Loughborough Business SchoolLoughborough University

Jan Godsell is Dean of Loughborough Business School and Professor of Operations and Supply Chain Strategy at Loughborough University. Her work focuses on the pursuit of more responsible consumption and production through the alignment of product, marketing, and supply chain strategy with consumer needs. Jan’s work focuses on the design of end-to-end supply chains to enable, responsibility, sustainability, resilience and productivity.

Jan is the workstream lead for ‘The Future of Digital Manufacturing Ecosystems’. This will examine how to develop more sustainable manufacturing business models, supply chains, and the role of innovative digital technologies (IDTs) in facilitating this shift.


Ved Sen

Keynote speaker

Head of Business Innovation – Tata Consultancy Services (TCS) UK

Ved is passionate about the impact of technology on business, culture, and society. He enjoys speaking and writing about technology and the future. He writes a weekly innovation newsletter, and is a regular speaker at industry forums. He has been a guest lecturer at the HSE Ireland Masters in Digital Healthcare Programme in Dublin for the past 3 years, and a regular speaker on AI and future systems.

Ved works as the Head of Business Innovation for Tata Consultancy Services UK. His primary focus is to help drive future thinking conversations with clients in solving tomorrow’s problems. He has been working with and advising senior clients across retail, travel, education, healthcare, financial services, public sector, and other businesses. Ved runs an innovation team in London and is leading the design and set up of Pace Port London. Currently his work spans areas such as reinventing social care for the elderly, connected homes and environments, and urban mobility, Generative AI, and more. Over the past 20+ years, Ved has been working on emerging technologies, and their adoption into organisations. An avid writer and regular speaker, Ved’s book “Doing Digital” was released in January 2023, and he writes a regular innovation newsletter.  


Fhaheen Khan

Panellist

Senior Economist – Make UK

Fhaheen Khan is a Senior Economist at Make UK, the manufactures organisation. His role primarily focusses on monitoring and evaluating the economic performance of manufacturers, which is published in a quarterly outlook report. In addition, Fhaheen’s role covers a myriad of topics relevant to manufacturing to advise Government bodies to develop policy with a focus on tax, investment and the business environment and is a regular commentator on public statistics.


Ben Farmer

Panellist

Deputy Director – Made Smarter Innovation Challenge

Ben is the Deputy Director of the Innovate UK-led £300 million Made Smarter Innovation Challenge; a collaboration between UK government and industry designed to support the development and novel application of industrial digital technologies.

Prior to this, Ben held positions at HiETA Technologies, Airbus Group, University of Bath and Cobham. He is also founder of Added Lightness, a technology strategy consulting business, and Atherton Bikes, which brings together multiple-world champion and world cup winning athletes with the latest composite and additive manufacturing technologies.

Ben holds a degree in Materials Science and Engineering and an MBA from the University of Bath, a PhD in Materials Science and Metallurgy from the University of Cambridge and is a Chartered Engineer.

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People Productivity Resilience Resources Sustainability

Future of Digital Manufacturing Ecosystems – 2040 scenarios

Overview

Disruption, digital innovation, new business models… the world of manufacturing is changing rapidly, perhaps faster than ever before. To adapt and survive, businesses must anticipate changes, identify opportunities and make informed decisions.
 
So, how can you be ready for the changes that lie ahead? How can you pivot to be equally productive and sustainable, delivering progress with purpose?
 
The InterAct Future of Digital Manufacturing Ecosystems research team has put together a vital report that brings you the information you need, at your fingertips, outlining potential future scenarios and the associated opportunities for the manufacturing world.
 
Future of Digital Marketing Ecosystems – 2040 Scenarios

These scenarios map out four potential alternatives for the digital manufacturers of tomorrow, including:

  • Productivity Powerhouse
  • Flexibility as Standard
  • Sustainability Champion
  • Happy and Sustainable Workforce

Download the report to find out more about how the most useful measure of sustainable progress is total factor productivity, which accounts for inputs beyond labour – such as materials, energy and administrative time – to compare them against total outputs. You will also learn how these inputs can be measured against one another, and how businesses can begin working towards achieving them.

As the report shows, by considering the human factors behind digitalisation today, you’ll be much better placed to build true resilience into your business tomorrow.

This research was conducted by Dr. Wanrong Zhang, Professor Janet Godsell and Dr. Kamran Chatha (Loughborough University). 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].

For further discussions or potential applications/collaborations, please contact Jan Godsell.

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Resilience Resources Sustainability

EU battery regulations 2023: UK readiness for battery passports and smart labelling

Overview

With the enactment of the new EU Battery Regulations, organisations are required to embrace Battery Passports and Smart Labelling, enabling transparency and sustainability in battery production and consumption. Recent research from InterAct funded researchers, however, highlights critical gaps in awareness, information availability, and operational readiness faced by UK organisations in aligning with these legislative changes. 
 
A representative survey was conducted to gauge the awareness and preparedness of 80 organisations in regard to the new EU Battery Regulations. An Industry-Academic round table discussion and follow-up interviews were then held to reflect on the implications for industry.  The results can be downloaded in the two reports below.

This research was conducted by Dr. Melanie King and Paul Timms (Loughborough University). 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].

For further discussions or potential applications/collaborations, please contact Melanie King.

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Resources

Delivering the digital future we want, together

On Thursday 8th June, InterAct Co-director, Professor Janet Godsell delivered a talk on the progress of the Future of Digital Manufacturing Ecosystems workstream to an audience at the Smart Factory Expo in the NEC, Birmingham.

In her talk, Professor Godsell addressed the need for self-sufficiency in critical production, lessons from the manufacturing past and the work of the Future of Digital Manufacturing Ecosystems team on analysing scenarios for the future.

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InterAct Blog

Future workforces: job quality & perceptions of UK manufacturing

Has the impact of the global pandemic and spiralling household living costs changed what people in the UK value in jobs? If so, what factors are important for people looking at jobs in 2023 and what are the implications of this for UK manufacturers?

As part of the recent InterAct Making Things Work Survey , we asked people what things they would look for in a new job. We found that the top five reasons are an interesting mix of the usual economic and non-economic (i.e. the quality of work settings) suspects. Our top 5 job choice factors are: pay and benefits; well-being and flexibility; clean and safe work settings; contractual security and stability; and having an employer who listens and values people’s opinions (voice).

The prominence of these five job quality factors is probably not surprising. Apart from the legion of Health & Safety sceptics on social media, what manufacturing workforce wouldn’t prioritize a safe and clean working environment? What is surprising is that both pay and wellbeing are rated equally highly by our sample because in survey questions of this type, pay is usually out on its own as the main reason for job choice. This makes perfect sense for those of us who don’t live to work, or who aren’t strongly morally and vocationally wedded to our labour or employer. The importance of pay and reward and these other job quality factors should never be understated: especially in competitive labour markets with shortages of people and skills.

All of these top five factors play very nicely into wider debates about job quality and what we mean by ‘good jobs’. For manufacturers, understanding what people value in jobs and tailoring the recruitment messaging towards this should keep you up and running with the talent war pack. Good jobs are essential for successful recruitment and retention. As every decent manufacturing employer knows, if people’s working needs are being supported, the better the chances are that you’ll get the talent you need for the business, be more able to keep your ‘key’ people and get performance and productivity benefits over the longer term: ‘happy people, happy customers, better productivity.

In our sample, there wasn’t too much statistical distance between the top five factors. The relative prominence of wellbeing is interesting. Although wellbeing always been a central topic in conversations about job quality, the pandemic shone a unique spotlight on health at work. Wellbeing issues have come a long way from the days when it was mainly about masking or softly managing people’s problems, or just tackled by asking people to try whistling a happy tune.

Part of our new normal seems to be having a reset on long hours culture and achieving more work-life balance. The pandemic also showed us that discussing different ways of working was not only possible but operationally practical (especially non-production staff) in manufacturing businesses, though this remains a work in progress for production staff. Take a brief look across many manufacturers’ websites today and you’ll see that most companies do explain how they support people’s wellbeing.

We know about job quality, but what are people’s perceptions about what manufacturing jobs offer? We are only at a very early stage of survey analysis and getting under the skin of the topline figures, however we can examine pay as an example.

Unfortunately, for UK manufacturers, the great British public are telling a familiar tale. The good news is that most people think that manufacturing jobs offer comparable levels of pay and benefits to those in other industries. The less great news, however, is that there are just as many who are sceptical or unsure about relative pay rates in the sector.

These figures look consistent with what we know from the past about public perceptions of manufacturing jobs in the UK and the US: that while the sector objectively pays people comparable or higher than average levels of pay, this reality doesn’t carry through into public opinion . In other words, there still seems to be a reasonable gap between what most people would want in a job and what most people think is on offer in manufacturing. This latter point also seems to hold true across all of the top five job quality factors that we outlined at the start.

Therefore, an early message from our survey may be that many people are largely uncertain about the quality manufacturers are offering in terms of jobs: a persistent perception that will influence the attractiveness of jobs in the sector. Going forward it may require more focused attention from employers, industry shakers and policy makers if they want to remake the image of jobs in the sector.

Read the first entry in the the ‘future workforces’ series: ‘advanced manufacturing & Generation Z’.

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InterAct Blog

Putting the East Midlands at the heart of the future UK manufacturing ecosystem

The UK was at the heart of the first industrial revolution. Powered by coal, the UK was able to move from craft to mass production, creating new jobs, increased wages, and improved standards of living. Consumption driven economic growth was fuelled by huge increases in productivity. Key to the UK’s success, was its global access to raw materials, its local access to energy (coal), and innovation to develop the technology to enable the shift to mass production.

Little thought was given to the broader environmental and social considerations, with cities engulfed in smog, and children working in factories.   Over time, these issues were addressed but the long-term impact is only beginning to be fully realised.

We are now in the era of Industry 4.0, or the 4th industrial revolution. Initially a name for the German Government’s strategy, to reinvigorate German manufacturing post-2008 global economic crisis, the term has gained widespread popular appeal. At its core was the adoption of digital technologies to create the Internet of Things (IoT).  Over the last decade, with increased awareness of the environmental and societal impacts of consumption driven economic growth, it signifies a more fundamental shift.

There is increasing recognition of the need to decarbonise the manufacturing ecosystem if the UK is to meet its Net Zero 2050 goals. This is driving the adoption of low carbon energy sources, and more resource efficient methods of production. It is also creating a more fundamental change. United Nations Sustainable Development Goal (SDG) 12, identifies the need for more responsible consumption and production.

There is a pressing need to consider new models for economic and business development that decouple consumption from production.  Business models have traditionally been built on ‘linear economy’ models where raw materials are mined, converted into components, assembled into products, that are used, and sent for recycling, energy recovery and land fill at end of life. As consumers have valued newness over utility, and manufacturers have sought to make products as cheaply as possible, the ability to reuse, repair and remanufacture products has become more difficult. 

The future manufacturing ecosystem is built on the principles of a ‘circular economy’. An economy where we seek to keep products in their highest possible value state, through reuse, repair and remanufacture.  A future where recycling is a last resort.  Digital technologies enable the more effective monitoring of the physical location of assets, their condition and usage. They can also enable digital payment, and technical support. 

Innovation is key to supporting the transition to a more circular economy.  It starts with the innovation required to develop the new digital technologies to enable the transition. Innovation may be more transformational and involve the development of new business models. HP Instant Ink is a great example of how IoT technology in home printers enables the provision of home printing as a service.

For a fixed rate, subscribers can print an agreed number of pages per month with a guarantee that they will never run out of ink. The ink levels are remotely monitored, and new cartridges sent in the post when required. Used cartridges are returned to be refilled and reused. These new business models are often run in parallel with existing business models (e.g., traditional purchase of ink cartridges) that may use innovation to improve the productivity and sustainability of existing manufacturing processes or supply chains. 

At the heart of the UK manufacturing ecosystem, the Midlands can lead the UK in creating the first regional manufacturing ecosystem, that is low carbon and supports the principles of the circular economy.  Using innovation to create new business models, products, services, and technologies that enable economic prosperity in a responsible and sustainable way.   Through the Made Smarter Innovation (MSI) funded Interact Project, Loughborough University are working with key stakeholders in the region to develop a 2040 Future Digital Manufacturing Ecosystem roadmap for the Midlands.   Be part of the change, reach out and start to Interact.

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News

Making Things Work: Public Perceptions of UK Manufacturing 2023

In February 2023, the InterAct team based in the Business School at Strathclyde University conducted an online survey asking the opinions of a representative sample of 2100 people across the UK what they think about the attractiveness of modern manufacturing jobs and careers. Their survey is topical and timely, offering academics, policy makers, trade bodies, industry commentators and employers a fresh and stimulating in-depth insight into public opinion about working in this sector at the present time and in the future.

They are primarily interested in what factors shape people’s views on UK manufacturing but we know very little about how people of different gender, ages and ethnicities look at the sector and as a potential career destination of ‘choice’. We know that manufacturing may be associated with some older perceptions of repetitive and insecure job but Industry 4.0 (advanced digital manufacturing) potentially changes future jobs and careers in the sector with a bigger emphasis on having people with innovation, problem-solving, creative and digital skills. To achieve this (and competing against other industries), advanced manufacturers will have to broaden the appeal of the sector to younger or mid-career workers, and people in under-represented groups such as women and minorities.

They asked the UK public questions on some key issues and big debates: the importance of the manufacturing sector for the wider UK economy; the ‘quality’ of manufacturing jobs; and about what work may look like in the years ahead. Will some manufacturers have to give more thought to how they invest in people and support worker engagement, wellbeing and skills? Will new advanced digital manufacturing technologies offer more interesting and rewarding jobs and careers? Alternatively, will more technologies, robotics and AI just generate concerns about jobs, downskilling and security?

These are all key questions that will resonate with a range of audiences. Our survey will stimulate debate, not just about what people think of UK manufacturing today and what factors help shape their interest, uncertainty or antipathy, but what may lie ahead when the emerging worlds of SMART factories, co-bots and augmented reality are drawing ever closer to our workspaces.

The team is looking to stimulate some further debate on the Future of Work in manufacturing. They welcome comment and opinion from a range of industry stakeholders: academics, policy makers, employers and trade unions.

The survey findings will be available in April/May 2023. Before this, they will be publishing a series of short blogs and commentary on some key future of work debates in UK manufacturing. The first of these – ‘Future Workforces – Advanced Manufacturing & Gen Z’ is now available to read.

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Resources

Storytelling Fellowship videos

The Storytelling Fellowship programme is a core element of the InterAct Network. It aims to harness the power of stories to learn from, and address, the human aspects of the diffusion of new technologies in industry. These human aspects include themes such as:

• Productivity
• Resilience
• Competitiveness
• Sustainability
• Levelling-up/inclusion
• Wellbeing

Our Storytelling Fellows have created a growing archive of digital, video stories that you can access below:

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InterAct Blog

Supply chains need buoyancy, not just resilience

Pre-pandemic, businesses were already working through the challenges of a VUCA world – where volatility, uncertainty, complexity, and ambiguity in general conditions and situations were often seen. Faster technological changes, digitization, shortening product life cycles, rapid changes in consumer preferences, and political changes all contribute to this view.

The events of the last three years have created even more instability in Supply Chains, and resilience is now a key topic of debate. We can define resilience as the “capacity to recover quickly from difficulties,” but this implies a return to how things were rather than a new, constantly changing paradigm. It is the challenge of an increasingly uncertain future that forces the question of Supply Chains’ purpose and how they should be designed, governed, and operated to continue running productively in the face of whatever challenges are thrown at them.

Just as a ball will float in a storm on the sea, so must our Supply Chains! They need to be buoyant.

Purposeful Supply Chain design

The purpose of a Supply Chain is to get products to people who need them, when they need them, and at an affordable price. This is the definition of a productive Supply Chain.

supply chain productivity model

This should be done sustainably and responsibly. Supply Chains often operate in a non-responsible way, presenting numerous examples of unfairness in the distribution of value along the chain. The control of data and information is a key enabler of negotiating power plays between parties – it is incredibly challenging to get two entities to collaboratively plan just for mutual benefit.

Large enterprises often optimize their operations to the cost of their SME suppliers. From a Supply Chain finance perspective, the bigger players have better credit terms but pass the risk and costs to their supply base – increasing their own cost and risk and leaving the Supply Chain sub-optimized.

Key supply chain design considerations

As part of a Business Model Design, product and marketing strategies should inform and drive Supply Chain strategy and ensure strategic alignment.

supply chain business model design

In a fast-moving consumer goods context, the Supply Chain design requirements for an everyday low-price (EDLP) pricing strategy with relatively stable demand differs from one with deep-dive Hi-Lo promotions and unpredictable demand. The challenge of the Supply Chain design is that within the life cycle of assets, a business may switch between EDLP and Hi-Lo many times. If the design is optimized for EDLP or has high predictability, there will be issues!

The design principles need to work through the infrastructure and operating model to deliver the necessary level of structural flexibility and dynamic flexibility.

Structural flexibility concerns the infrastructure and set-up of the physical Supply Chain and the assets. This includes:

  • in-house capacity
  • outsourced manufacture capability
  • multiple supplier capability
  • geographic location (in-country, near-shore, off-shore)
  • the option to extend or move nodes in the supply chain.

Dynamic flexibility focuses on the operating model – how the physical assets will be managed. The model covers the following:

  • business processes
  • governance and decision rights
  • organizational design
  • performance management processes (e.g. who determines the levels of stock, where it should be held, and the approval processes for those decisions).

Orchestration and synchronization of the Supply Chain are critical enablers for ensuring it is as productive as possible. This is achievable by maximizing flow through the Supply Chain and rightsizing the buffers for stock and spare capacity.

Actions are driven from the source

The signal from the head of the chain closest to the point of final demand should drive actions across the whole chain. Essentially, interactions between business entities within the Supply Chain should be principally taken from a planning perspective rather than a procurement perspective.

There is a need to understand the constituent elements of the buying demand behavior, such as surge and base volumes, to inform the decisions taken in the chain. For example, increased demand for mobile phone gifts may be seasonally driven by Christmas versus purchases for birthday presents or end-of-contract replacements, which are more likely to be spread throughout the year.

A segmentation approach to the demand signal is required to determine the right supply action – an example being the setting of production wheels within a factory or a runners/repeaters/strangers approach to planning.

supply chain flexibility model

Decisions on the required level of dynamic and structural flexibility are critical for businesses. There is a direct cost for resilience as businesses choose to move to lower-cost, more efficient Supply Chains from ones more sensitive to shocks. The positive financial impacts are facilitated by delivering a more responsive approach. An adaptable Supply Chain model, in short, brings new capabilities into the network.

We can consider this cost in a similar way to an insurance premium. Business cases for resilience will be needed – but how is that developed, measured, and articulated against traditional business cases optimized to ROI cash? A traditional business case based on a single number and set of assumptions is inadequate for the unknown storms which may lie ahead. They must incorporate tolerance for different assumptions to give range and richness to thinking.

A balanced response enabling flexibility

Business processes need to develop. One example would be the S&OP process. A traditional S&OP process focuses on dynamic flexibility – aligning Sales and Supply Chain plans to meet demand – often over a relatively short time frame. So, what is the trigger for a structural network design change? How would a review of structural flexibility sit alongside the S&OP process?

Supplier resilience strategies also need development. If one of the needs for structural flexibility is multi-sourcing – how will volume be allocated? Will businesses pay for suppliers to be ready to supply (just in case they are needed), even in a high-inflation economy? Supplier relationship management will need to develop longer-term, more collaborative processes rather than playing a zero-sum transactional game where the price is the key focus.

Top tips for improving Supply Chain flexibility and resilience

So, what are the actionable insights?

  • Commercial and Supply Chain Strategies need to work together over the lead time for structural flexibility.
  • Creating the capability to react to unknown future Supply Chain shocks will increase upfront costs. This needs to be reflected in business cases. Scenario evaluation tools provide insight into the decision-making process.
  • Design for uncertainty and segment the Supply Chain. Actively manage the inventory and capacity buffers to enable a stable beat.
  • Collaboration for network orchestration, both within and between enterprises, needs visibility of data across end-to-end Supply Chains. The use of advanced planning systems is an enabler for decision-making. Procurement’s role and behavior are likewise critical to supplier relationship management.
  • Businesses need to develop collaboration and governance processes for business process design and decision-making. Self-sufficient, empowered teams are enablers for dynamic flexibility.

One of the lessons from the last five years within Supply Chain management is that simply being resilient to recreate the previous conditions and Supply Chain set-up is no longer sufficient for future success. Teams constantly battle from one shock to another – and this is not sustainable. A reactive way of working creates burnout and costs businesses money.

Businesses must actively decide the right level of dynamic and structural flexibility they need. This creates the required capabilities, so they can bounce back from Supply chain Disruptions, use the next crisis to produce opportunities, and create competitive advantages.

Supply Chains need buoyancy, not just resilience.

Ready to learn more?

The insights in this blog are taken from our Innovating Profitable Manufacturing Supply Chains with Resilience webinar organised by
Board International

Watch it on-demand now to take a deeper dive!

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InterAct Blog

Making investments into digitalisation – the manufacturer’s perspective

Digitalisation offers significant opportunities for manufacturers. By leveraging digital technologies and data, manufacturers can generate substantial efficiency gains in their own processes, create new forms of value for their customers, and develop innovative business models. These digitalisation opportunities are critical to address the productivity and sustainability demands the manufacturing industry is facing.

Although the range of opportunities digitalisation offers to the manufacturing industry is widely recognized it is of concern that only 35% of surveyed firms have adopted digitalisation solutions at scale[1]. One of the root causes of the lack of adoption in the UK is the lack of investment[2]. According to the Manufacturing Digital Productivity Report from iBASEt[3], 94% of UK manufacturers believe their industry has already fallen behind the US because of a lack of investment into digitalisation, and more than half of UK manufacturers are losing sales as a result. It is even more worrying that 93% of respondents expect that this lack of investment into digitalisation will lead to many UK manufacturers going out of business in the next decade.

To help manufacturers invest effectively in digitalisation, it is important to understand the range of challenges manufacturers commonly face. Only then can the appropriate solutions be identified and put in place. Aston University used a systematic review method to study the challenges for manufacturers and identify critical questions. The results are summarised in Table 1 and discussed below.

Digitalisation goalsThe lack of agreement on the goals of digitalisation encumbers the investment process.
The lack of ambitions in the goals of digitalisation limits the leaders’ ability to justify significant investments.
Investment processDigitalisation integrates a wide scope of investment domains which makes it difficult to apply established processes to assess and prioritise investments. 
The metrics used to evaluate business cases for investment do not relate to the opportunities that are particular to digitalisation.
Digital technology attributesThe high cost of digitalisation and the high uncertainty of return make it difficult to justify investments.
The rapid innovation (and obsolescence) of digital technology acts as a discouragement to making substantial investments.
People and their expertiseThe lack of expertise on acquiring external funding for digitalisation creates an investment barrier.
The lack of senior leaders with digitalisation expertise hampers investments into digitalisation.
Organisational cultureThe difficulty of accepting investment uncertainties inhibits investments into digitalisation.
The lack of openness and trust creates barriers to making effective investments into digitalisation.
Business networkThe lack of digital readiness of the wider network limits investments into digitalisation.
The lack of experienced or relevant finance partners reduces the opportunities for making investments into digitalisation.
Table 1. Challenges for manufacturers investing in digitalisation
Digitalisation goals

In manufacturing, digitalisation affects a wide range of stakeholders and they all feed into the development of the goals. The lack of a specific and widely agreed goal is a critical barrier to making investments into digitalisation.

Digitalisation offers manufacturers opportunities to significantly change how they operate, what kind of relationship they have with their customers, what products or services they offer and who they offer these to. However, many manufacturers restrict their goals to incremental changes and, therefore, struggle to justify making the necessary investments.

Investment process

Digitalisation cuts across established investment categories as it involves aspects of R&D, employee training, and education, as well as the acquisition and implementation of technology solutions. The multi-dimensional nature of digitalisation challenges the traditional investment processes of manufacturers.

Manufacturers traditionally rely on internal rates of return or net present values to justify their investment decisions, and these are not well suited to the possibility of dynamically adjusting an investment after it has been initiated. With digitalisation opening future and potentially unknown opportunities, metrics are required that reflect the flexibility to adjust an investment, change a technology or even abandon it.

Digital technology attributes

The research identified the high costs of required technologies as a major reason that manufacturers do not carry out investments into digitalisation. The cost of technology is particularly high to early adopters, before economies of scale are achieved. Furthermore, while digital solutions are highly scalable, the returns on investments are limited if scale is not achieved.

The pace at which digital technologies develop is unprecedented. Any technology manufacturers choose could become outdated rapidly and require updating, which increases costs. Manufacturers may, therefore, decide to wait for the next digital technology generation to become available or for further standards to emerge before making investments.

People and their expertise

To make significant investments requires manufacturers to raise external finance; but manufacturers often lack the expertise to raise external finance for investments into digitalisation, which significantly differs from raising finance for investments into capital equipment: it requires different funders, business case details and preparations.

Also, decisions on investments in production machinery are often made at the plant level, and are aligned with responsibilities for performance and quality. As digitalisation affects the direction of manufacturers, with implications for their customers and wider networks, identifying the right locus of decision-making is critical for making effective investments. It requires a senior leader with the authority and expertise to make such wide-reaching decisions.

Organisational culture

Creating value with digital technologies requires product and process experimentation following test-learn-tweak cycles. Organisations need to develop a ‘tolerance for uncertainty’ to make effective investment decisions within this context. For manufacturers with limited R&D activities, dealing with these uncertainties is particularly difficult.

Although digitalisation will require changes in organisational roles and processes, the creativity and imagination of staff members across the organisation need to be drawn on to capture the opportunities presented. It is critical to ensure that digitalisation is not perceived as a cost-cutting exercise aiming to create redundancies to ensure the widespread support and effectiveness of investments.

Business network

It is not only the manufacturer’s own investment into digitalisation but also that of their customer and wider network that is critical to making an effective business case. Ultimately, value is co-created by the customer and the wider network, and if these parties do not make investments into digitalisation themselves then the manufacturer’s chances of deriving a return from their investments are reduced.

Making investments into digitalisation also puts a focus on the external finance partner as a member of the network. Finance partners are often overlooked in industrial value networks, but in a digitalisation context their role is critical. This is because these partners are not just financing a machine but also a business process or business development, which requires a much closer relationship.

Making effective investments into digitalisation is a critical challenge for manufacturers. These investments not only determine the success of current digitalisation initiatives but also affect the viability of future digitalisation journeys. It is today’s investments into digitalisation that enable the future competitiveness of the manufacturing industry. Manufacturers need to rethink their established investment processes and organisational practices as many of them stand in the way of making effective investment decisions into digitalisation.


References

[1] https://stories.ability.abb.com/better-decisions

[2] https://www.makeuk.org/-/media/files/insights/reports/infor-make-uk-innovation-monitor-report-final.pdf

[3] https://info.ibaset.com/hubfs/ibase_PDM_090522.pdf