Supply chain disruption could continue for more than another year, according to the newest Resilient M4.0 Supply Chain survey conducted by the NAM’s Manufacturing Leadership Council. The MLC is the digital transformation arm of the NAM.
What’s the holdup? A combination of factors is causing fundamental shifts in supply chain approaches across the industry. These include pandemic lockdowns, blocked shipping lanes, container scarcity, material and component shortages, extreme weather events, rising prices and military conflict.
What manufacturers are doing about it: Supply chain organizations are reassessing traditional supply chain strategies, reducing network complexity and integrating key functions.
- They are also redesigning processes and harnessing the power of digital tools to transform their supply chain ecosystems.
Universal disruption: Even supply chain structures with some local or regional networks have been affected by recent events, according to the MLC’s survey.
- Ninety percent of respondents reported suffering either significant (52.5%) or partial (39%) disruption in the past two years. Just 0.5% said they had seen no disruption.
Improving resilience: While many manufacturers have taken action to reduce supply vulnerabilities, 73% of companies said their current supply chains are not fully protected, and 12% said they believe their supply chains lack resilience.
Integrated supply chains: While today just 19% of companies said their supply chain structures are fully integrated, this proportion is set to more than double (to 47%) within the next two years.
- The number of companies that remain dependent on siloed operations is set to fall from 14% to 4% over the same period.
Digital opportunities: The race to fully digitize more supply chain operations is picking up speed.
- In nearly every supply chain function, companies said they are planning significant increases in digital adoption in the next two years to streamline their supply chain organizations.
Obstacles to progress: Many obstacles to future supply chain development involve issues with industry partners. Among the challenges cited by manufacturers in the survey were the following:
- Differences in digital maturity among partners (54%)
- A lack of common data platforms (53%)
- Problems transforming traditional supply chain processes (29%)
- Upgrading legacy equipment (26%)
- A lack of skilled employees (22%)
Review the data: Click here to review the data in detail and read manufacturer responses to survey questions.
Workforce planning should be part of every manufacturer’s supply chain strategy, helping to maximize digital opportunities and drive industrial growth.
For decades, the goal was globalization. In the early 1990s, the end of the Cold War and the growing ubiquity of the internet ushered in an age of new possibilities for American manufacturing, which caused supply chains to sprawl worldwide. Recent years have provided strong incentives to reverse this trend and encourage investment in reshoring. As BlackRock CEO Larry Fink noted in a March 2022 letter to shareholders, we are seeing the “end to the globalization we have experienced over the last three decades.”
Manufacturing today is also plagued by a variety of negative forces from material scarcities to shipping delays to rising costs. At the same time, manufacturers are rethinking their geographic footprints and adopting Industry 4.0 tools and technologies to improve resiliency, meet heightened customer expectations, and decrease risk in the face of continued supply chain disruption. However, an ongoing labor shortage stands in the way of these future plans. Fortunately, there are multiple steps manufacturers can take to address workforce issues and pave the way to continuing success.
Manufacturing Workforce Trends
The manufacturing workforce is aging. According to the National Association of Manufacturers, nearly one-quarter of the manufacturing workforce is age 55 or older. The workforce’s march to retirement was accelerated by COVID-19, which prompted approximately more than 2.4 million Americans to retire early. Nearly all industries were rocked by a mass exodus of employees of all ages during the pandemic, but manufacturing was hit the hardest and experienced a nearly 60% jump in resignations compared to pre-pandemic rates.
“Chronic supply chain disruption serves as a motivation for manufacturers to move closer to key U.S. markets and better mitigate external disruption.”
The pandemic also dealt a major blow to manufacturing’s workforce pipeline. Community and technical colleges are common sources for manufacturing employees, but the in-person nature of lessons made that type of coursework difficult to sustain at the height of COVID-19. Enrollment in two-year vocational degrees for precision production fell 18% between the fall of 2019 and the fall of 2020.
Countering these workforce trends will play a key role in manufacturing’s ability to stabilize the supply chain, and in supporting manufacturers as they embrace Industry 4.0 and realize the benefits.
The Onshoring Movement
Chronic supply chain disruption serves as a motivation for manufacturers to move closer to key U.S. markets and better mitigate external disruption. The ongoing semiconductor shortage, which originated in the early days of the COVID-19 pandemic, is perhaps the most well-known example of a manufacturing sector pushed to consider onshoring due to supply chain dysfunction. According to the Semiconductor Industry Association, U.S. semiconductor manufacturing capacity has dwindled from 37% in 1990 to 12% as of 2020. However, the tide is beginning to turn. Semiconductor titans Intel and TSMC have already committed $20 billion and $12 billion respectively to build new U.S. factories. After surging 36% in 2021, capital spending in the semiconductor industry is projected to increase a further 24% in 2022 to $190.4 billion, an all-time high.
Though initial drafts have passed in both the House and the Senate with wide margins of bipartisan support, as of April 2022, funding for the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act has not yet been passed. The legislation would provide $52 billion in federal funding to allocate under the CHIPS Act would provide $52 billion in federal funding to support investment in semiconductor manufacturing capacity as a match to what states and municipalities could offer by way of discretionary incentives, which could encourage greater direct investment in U.S. manufacturing.
Efforts to stimulate U.S. manufacturing require the support of a fully staffed supply chain. However, a major hurdle for semiconductor organizations and other manufacturers interested in onshoring will be finding and retaining adequate labor in their new locations to support manufacturing operations.
Workforce Considerations with Onshoring
Workforce planning should be an integral part of any manufacturers’ site selection strategy. When determining a new site’s viability, manufacturers should conduct a labor assessment to determine whether there is an adequate labor supply locally with the right skill sets to support their operations. If there is not sufficient local talent, manufacturers should either choose an alternative location or develop the talent pipeline themselves along with municipal and educational authorities.
“Workforce planning should be an integral part of any manufacturers’ site selection strategy.”
Similar to how Silicon Valley is a talent incubator for the technology industry, a manufacturing talent hub is a community or region that develops around industry opportunities. Workers are willing to move from other locations to the area. The talent hub should have transportation infrastructure, cultural attractions, and lifestyle draws, in addition to career opportunities. A high volume of programs that aim to convey the full benefits of a career in the skilled trades — combined with rapid population growth — are currently making the Sun Belt a popular location for new construction projects, so it is fertile ground for the creation of talent hubs.
Manufacturers can partner with state and local governments, as well as local universities, to launch training initiatives to upskill an area’s existing workforce. Training should coincide with facility construction to ensure there is adequate labor available upon opening.
Broader Supply Chain Workforce Issues
Workforce issues plague manufacturers’ supply chain plans beyond onshoring. The pandemic exposed the perils of just-in-time manufacturing. In addition to ensuring warehouse shelves are well stocked, many companies are shifting their attention to optimizing last-mile delivery. As consumer expectations move from next-day to same-day delivery, manufacturing’s labor shortage is acutely felt in transportation. Last-mile delivery is one of the most important, expensive, and time-consuming steps in a product’s journey from the factory floor to the end-consumer.
Optimizing last-mile delivery is complicated by the dearth of truck drivers, which is projected to get even worse. The American Trucking Associations (ATA) claimed in 2021 that there was an estimated 80,000-person shortage of truck drivers, due in part to low earnings and difficult working conditions. Some smaller manufacturers are turning to rideshare services to deliver goods to consumers in a timely fashion. This tactic might be a quick fix to an immediate problem, but reliance on rideshare drivers is not feasible for larger manufacturers. Also, in areas where rideshare drivers are less available, this solution is not viable for servicing a large customer base. To help address the shortage, manufacturing and transportation companies should review the systemic issues that can lead to high turnover rates for truckers.
In the last decade, the ATA and other agencies have launched initiatives to help military veterans, a demographic typically accustomed to spending long stretches of time away from home and experienced in operating heavy machinery, to secure truck driving jobs. More recently, the Biden Administration’s Trucking Action Plan was set in motion to achieve the following:
- Take steps to reduce barriers to obtaining a commercial driver’s license (CDL).
- Kick off a 90-day challenge to accelerate the expansion of registered apprenticeships.
- Conduct outreach and recruitment focused on veterans.
- Launch joint Department of Labor (DOL) and Department of Transportation (DOT) Driving Good Jobs initiatives.
Companies facing worker shortages in their supply chain can consider taking a similarly comprehensive approach to recruitment. Manufacturers should not only devote time and resources to attracting staff but also to retaining staff. Pairing new hires with mentors during the onboarding phase can aid in the transfer of skills and foster camaraderie among employees. Training programs should not end when an employee has been sufficiently upskilled to fill a new role. There should be training opportunities available throughout an employee’s career. For example, the company could offer above-average wages for in-house positions and provide training to help existing employees transfer to an understaffed department like transportation.
Continuous upskilling can help workers grow with the company, increasing the value of their contributions and their incentive to remain with the organization. Roles should be designed as stepping stones on the path to advanced skills and greater opportunity. Internal communications should clearly outline employees’ projected career path so that workers are aware of upcoming opportunities.
Manufacturers may want to revisit their compensation and benefits policies to ensure they are competitive in the current labor market. They may want to provide monetary incentives for longevity, such as issuing yearly bonuses or other rewards. Additionally, companies can potentially diversify their labor pool by offering non-monetary benefits, such as providing working parents a stipend for childcare. Education sponsorships can help employees gain new accreditations or degrees to expand their skill set and motivate them to remain with the company.
Workers now expect more from their employers. Upskilling programs and competitive compensation and benefits policies can help manufacturers meet those heightened expectations to better attract and retain top talent.
Industry 4.0 Success Requires a Human Touch
U.S. manufacturers are aware that they need technology as urgently as they need talent. The 2022 BDO Manufacturing CFO Outlook Survey reveals that 50% of manufacturing CFOs consider falling behind on innovation to be a significant business risk. That risk has compelled 68% to pursue digital transformation in the next 12 months. Manufacturers on the path to digital transformation require personnel with the right skills to harness the technology and make Industry 4.0 investments worthwhile. In this way, digital adoption presents both an opportunity and an added workforce challenge.
Workforce should be a core component of manufacturers’ Industry 4.0 strategies. Investments in technology do not yield adequate returns if workers do not have the skills to use the tools to full efficacy. This challenge will require manufacturers to hire new workers with skills they have not traditionally sought in applicants, which means they may be competing with companies beyond other manufacturers for tech-savvy talent. Manufacturers should make their job offers competitive with nontraditional competitors, such as technology companies, to attract and retain talent with in-demand skills. In addition to hiring, manufacturers should also ensure that their existing workforce is adequately trained in the use of new tools. This requires developing a comprehensive change management strategy to enable the adoption of technology throughout the enterprise.
“Investments in technology do not yield adequate returns if workers do not have the skills to use the tools to full efficacy.”
Industry 4.0 investments can also be an asset for manufacturers in a tight labor market. They can market their investments in technology to attract younger applicants and highlight the opportunities a career in manufacturing can provide. A manufacturer that employs sophisticated supply chain technology has an advantage in the race for limited labor. Workers with expertise or interest in these technologies might be willing to relocate for a position at the company. Digitalization can also create opportunities for upskilling, which might appeal to prospective and current employees alike.
The adoption of technology also contributes to a safer work environment. Automation can mitigate the potential for human error and related injuries. Industry 4.0 tools can also make manual labor safer to perform. American manufacturers are equipping employees in physically demanding jobs with wearable technology, such as exoskeletons that support and protect workers’ joints to prevent immediate injury, as well as associated long-term negative health effects like carpal tunnel syndrome.
Industry 4.0 tools can also help manufacturers create a more sustainable work environment. A recent Dodge Data & Analytics survey found that 68% of industry professionals are interested in creating zero-carbon facilities that incorporate green materials. Safer and more sustainable working conditions are in alignment with an environmental, social and governance (ESG) ethos and help position manufacturing as an environmentally and socially conscious line of work.
The Future of American Manufacturing
America’s manufacturing revival rests on the industry’s ability to attract and retain talent, stabilize the supply chain, and streamline operations. Manufacturers that ignore the workforce issues facing the industry will not be equipped to successfully transform their supply chains, implement new technologies throughout their enterprise, or scale effectively.
Addressing staffing issues might entail rethinking existing labor sourcing strategies. For example, consider forming partnerships with local government entities and education institutions to sponsor programs to train students with the promise of gainful employment at graduation. In this way, manufacturers can ensure adequate labor and play an integral role in mitigating the student loan crisis by helping to promote careers in manufacturing that generally require less costly education than traditional four-year degrees. Manufacturing training and upskilling initiatives can help stimulate the U.S. economy, as even manufacturing professionals at the lower end of the salary spectrum will benefit from competitive wages.
“America’s manufacturing revival rests on the industry’s ability to attract and retain talent, stabilize the supply chain, and streamline operations.”
While there are significant hurdles to overcome, investments in the workforce are not just about mitigating risk. For example, initiatives to create a safer working environment, complete with opportunities for advancement, are in line with ESG values and can help improve employee satisfaction, retention, and serve as an asset for attracting talent.
The journey to resolving the workforce crisis begins with every individual manufacturer as they address the needs of their own organization. For manufacturing leaders, the first order of business should be to determine the labor strength of their own organization. This begins with an assessment of their own workforce based on turnover and retirement rates, the strength of their talent pipeline, availability of viable labor in their local market, and their organization’s past success in attracting talent. The output should be a current and future state projection of their workforce. They should weigh these results against their organizations’ strategic roadmap to determine whether their workforce will be an impediment to their business’s plans for growth and what steps they need to take now to adjust. Starting with a labor assessment to assess weaknesses and strengths throughout the organization can inform a long-term strategy for building a workforce that’s future-focused and built to last.
Devoting time and resources to addressing labor issues and adopting new tools and processes can lay the foundation for company growth, the manufacturing industry’s renaissance, and the nation’s economic wellbeing. M
About the authors:
Tom Stringer is National Leader of Site Selection & Business Incentives at BDO USA.
Maurice Liddell is BDO Digital Market Leader, Manufacturing.
Russell Clarkson is Managing Director, Management Advisory Services, BDO USA.
On a recent tour of Intertape Polymer Group’s Tremonton, Utah, plant, manufacturers saw disruptive technology in action. From employing 3D printing to slashing parts-making time to programming floor equipment to identify and fix problems quickly, the Manufacturing 4.0 processes and technologies were on full display. The NAM’s Manufacturing Leadership Council hosted the tour and brought 70 MLC members to the paper- and film-based packaging maker.
Growth: IPG, a Montreal-based manufacturer whose products include the cling film StretchFlex, has seen its revenue double in the past six years, from $750 million to $1.5 billion.
- The company now has approximately 4,000 employees across 34 locations, including 22 manufacturing facilities in North America.
What they saw: In addition to 3D printing and problem-solving floor equipment, tour participants got to see how IPG:
- Manages parts more effectively with an automated storage system; and
- Uses “hackathons” and employs a data-driven, digital-first mindset to find solutions to challenges.
Digital journey: In a briefing before the tour, IPG Vice President of Business Transformation Jai Sundararaman described why and how IPG undertook its digital transformation journey.
- First, the manufacturer conducted an in-depth investigation. This included studying 20 different technologies, attending more than 10 industry conferences, hosting technology summits with vendors and engaging in more than 25 networking sessions with fellow members of the MLC.
Phased transformation: IPG’s phased approach to digital transformation focused on delivering business value. The company undertook the following schedule:
- Phase 1: Align strategy and execution and “homogenize” operating culture. Upskill and retain talent with digital and process knowledge.
- Phase 2: Drive revenue and margin growth by applying digital technologies at scale in other functions, such as customer engagement.
- Phase 3: Leverage digital technologies for business model innovation.
M4.0 discussion: At the end of the IPG plant event, participants joined a panel discussion on data standards and analysis. Panelists discussed how to measure the return manufacturers get from implementing M4.0 technologies and how to get buy-in from employees and leadership.
Upcoming plant tour: Join the MLC’s next plant tour right from your desk on July 27. Participants will take a virtual look inside Accuray’s Global Manufacturing Center in Madison, Wisconsin. This virtual plant tour will highlight the challenges of a low-volume, high-complexity manufacturing and supply chain model. Register today to reserve your place.
With increased pressure from customers, regulators and even shareholders, sustainable business practices are no longer optional for manufacturers. From reduced energy and materials consumption to lower emissions and ethical sourcing, manufacturers are expected to meet ambitious new goals. Luckily, the Manufacturing Leadership Council has established a new member working group devoted to helping manufacturers reach these objectives.
Support set-up: With five virtual meetings each year, the M4.0 Sustainability and Net Zero Decision Compass Group will explore key issues, best practices and challenges related to creating sustainable, compliant and environmentally friendly operating strategies.
- At the first meeting, “Next Steps in Manufacturing 4.0 Sustainability,” on March 10, attendees heard from 3M Senior Vice President of Environmental Strategies and Fluorochemical Stewardship Dr. Rebecca Teeters and Lexmark International Chief Sustainability Officer John Gagel. Both speakers are also MLC board members.
Why the new group: The MLC decided to create the group after a survey of their more than 3,300 members revealed sustainability was a top member business concern.
- “We decided that given the intensity of interest in sustainability and related subjects, such as net-zero and the circular economy, this was an opportunity to dedicate a whole new group to the topic,” said MLC Co-Founder, Executive Director and Vice President David Brousell.
Good for business, too: While manufacturers have been discussing and working toward sustainability for decades, recent growing concerns about climate change and other environmental issues are making the matter increasingly urgent.
- Manufacturers that take on sustainable business practices are seeing competitive advantages ranging from cost savings to higher product quality to increased shareholder and employee satisfaction.
Lessons from manufacturing peers: The new Decision Compass group will share sustainability strategies, the real-world achievements of manufacturing companies, knowledge about the use and application of advanced technologies and timelines for implementation.
- Participants will also be able to see how they stack up against other manufacturing companies.
Get involved: The MLC offers resources to help manufacturers improve their operations and learn about digital manufacturing. To learn more about the sustainability group or find out about MLC membership, email [email protected].
Washington, D.C. – The Manufacturing Leadership Council (MLC), the digital transformation arm of the National Association of Manufacturers, has announced the election of six leading figures from industry and academia to the MLC’s Board of Governors. The MLC is the nation’s foremost executive leadership organization dedicated to helping manufacturing companies transition to the digital model of manufacturing by focusing on the technological, organizational, and leadership dimensions of change.
The six new MLC Board members include:
Denise DeLaune, Global Director of Operational Excellence and Leveraged Services at Dow Inc. She is also responsible for Dow’s Strategic Project “Operations 2025”, designing and driving the implementation of an updated future Operations organizational model meeting the needs of digital, sustainability, and other expected market changes.
Will Bonifant, Vice President, U.S. and Canada Supply Chain at The Hershey Company. He is responsible for leading Hershey’s supply chain planning, distribution, transportation, commercialization, packaging development, continuous improvement, and manufacturing alliance functions supporting the U.S. and Canada businesses.
Jai Sundararaman, Vice President of Business Transformation at Intertape Polymer Group. He is responsible for building capabilities to deliver strategic growth outcomes. He leads capital planning, acquisition integration, operational excellence, digital transformation & innovation. He has successfully scaled multiple Digital Transformation M4.0 initiatives across IPG which have won IndustryWeek Best Plants Awards for digital transformation.
Dr. Jill O’Sullivan, Professor and Chair of the Computer Systems Department at Farmingdale State College in Long Island, New York, where she has taught for more than 20 years. She is also a former President of APICS NYC/LI and Regional Industry Council Aerospace Manufacturing.
Dr. Thomas R. Kurfess, HUSCO Ramirez Distinguished Chair in Fluid Power and Motion Control at the George W. Woodruff School of Mechanical Engineering at the Georgia Institute of Technology. He has also recently concluded a three-year term as Chief Manufacturing Officer and Senior Distinguished Staff Member at Oak Ridge National Laboratory.
Dr. Julie Shah, Professor, Department of Aeronautics and Astronautics, and Lead, Interactive Robotics Group, Computer Science and Artificial Intelligence, at MIT. She is also Associate Dean for Social and Ethical Responsibility of Computing in the MIT Schwarzman College of Computing.
“We at MLC are proud to welcome to our Board such a notable group of industrial and academic leaders in the advancement of digital manufacturing,” said Mike Packer, chairman of the MLC Board of Governors.
“The MLC’s goal has always been to bring great minds and rich expertise to the Board to reflect the depth, scope, and diversity of the manufacturing industry,” added David R. Brousell, MLC Co-Founder and Board member. “These six new Board members advance those goals immeasurably.”
As an advisory body, the MLC Board of Governors provides guidance to the MLC on its “Critical Issues” agenda, research studies and its programs and services for the MLC membership.
With these appointments, the MLC Board of Governors now consists of 21 industry thought leaders who represent the full ecosystem of the manufacturing industry, including large global enterprises, small and medium-sized manufacturers, leading academic institutions and influential industry analysts.
(Photos available on request)
Founded in 2008, and now the digital transformation arm of the National Association of Manufacturers, the Manufacturing Leadership Council’s mission is to help manufacturing companies transition to the digital model of manufacturing by focusing on the technological, organizational, and leadership dimensions of change. With more than 3,300 senior-level members from many of the world’s leading manufacturing companies, the MLC focuses on the intersection of advanced digital technologies and the business, identifying growth and improvement opportunities in the operation, organization, and leadership of manufacturing enterprises as they pursue their journeys to Manufacturing 4.0.
-MLC Board of Governors-
The Manufacturing Leadership Board of Governors comprises senior executives and industry experts at leading manufacturing, academic and research organizations around the world, including Lockheed Martin, Procter & Gamble, Dow Chemical, 3M, IBM, Hershey, IPG, Europe’s SmartFactory EU Technology Initiative, Lexmark International, Premio Foods, Virtex Enterprises, Graphicast, the Cooley Group, UCLA, MIT, Georgia Institute of Technology, the University of Cincinnati, Farmingdale State College, the U.S. Manufacturing Technology Deployment Group, consultants Frost & Sullivan, and the MLC.
For more information and MLC membership details, please visit www.manufacturingleadershipcouncil.com
The National Association of Manufacturers (NAM) is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12 million men and women, contributes $2.25 trillion to the U.S. economy annually, has the largest economic impact of any major sector and accounts for more than three-quarters of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the Manufacturers or to follow us on Shopfloor, Twitter and Facebook, please visit www.nam.org.
There’s nothing quite like a real-world test run to determine whether a new technology is right for your business. That’s where Rethink, the annual summit of the NAM’s Manufacturing Leadership Council, comes in.
The world’s leading event on Manufacturing 4.0, Rethink boasts an agenda packed with case studies to help manufacturing leaders see exactly how various digital technologies might help them improve their operational quality and efficiency.
The featured case studies coming to Rethink include the following:
- The Expanding Reach of Collaborative Robots: Examine practical applications for collaborative robots in manufacturing. Discover the benefits already being realized from the use of robots and identify ways to maximize the benefits.
- Extracting Insights from Plant Floor Data: See firsthand how to use data to monitor equipment performance, predict conditions and take preemptive action to avoid downtime. Gain practical takeaways on how to leverage data for bottom-line benefits.
- How AR/VR Can Empower Frontline Workers: Take a deep dive into one company’s advanced deployment of augmented and virtual reality technologies. Explore how these technologies helped transform operational activities and empower frontline workers.
- Fostering Data Literacy: The What, Why and How: Learn how to manage and analyze data from all aspects of your operations and use it effectively to improve decision making. Gain an understanding of the emerging discipline of data literacy as a way to overcome business culture hurdles.
How to participate: The Rethink summit takes place June 27–29 in Marco Island, Florida.
- In addition to case studies, the agenda will include inspirational keynote speeches, thought-provoking panel discussions and hands-on think tanks.
- More than 300 top-level executives and their teams attend each year.
- Participants include professionals in operations, IT, supply chain, engineering, C-level management, HR and more.
Click here to browse the agenda and to register.
For Intertape Polymer Group, a manufacturer of paper- and film-based packaging products, the last six years have been a time of significant growth – and change.
Revenue during that period doubled from $750 million to $1.5 billion at the end of 2021. With 10 companies brought into the fold through acquisition, as well as through greenfield plant expansion, IPG more than doubled its worldwide factory footprint. The company, with dual headquarters in Montreal, Canada, and Sarasota, Florida, now has operations in 34 locations, including 22 manufacturing facilities in North America, and approximately 4,000 employees.
But one of the most significant changes along the way, and one that will most certainly shape its future, is a digital transformation that began in 2018 that is now being rolled out in 10 of the facilities.
To see how IPG’s digital journey has played out in one of those facilities, approximately 70 members of the Manufacturing Leadership Council toured IPG’s Tremonton, Utah plant in April. Built in 1997, the plant makes shrink films such as StretchFLEX. MLC members saw how IPG uses data from plant floor equipment such as extruders to more rapidly identify and remediate problems; how it more effectively manages parts with an automated storage system called VIDIR; how it uses so-called “hackathons” and a digital-first mindset to problem-solve; and how it uses 3D printing to speed parts making.
In a briefing before the tour, Jai Sundararaman, IPG’s Vice President of Business Transformation, described why and how IPG undertook its digital transformation journey.
He said IPG was facing a set of issues as it contemplated its digital strategy – gains from lean manufacturing were plateauing, the workforce was ageing and retirements were underway, and the potential of new technologies was looming but not yet embraced. Moreover, digital was seen as a way to “homogenize” the company’s operating culture, an important requirement as a result of the acquisitions.
To prepare for the development of its digital transformation strategy, IPG undertook a series of explorations and activities, including studying 20 different technologies, attending more than 10 industry conferences, holding multiple technology summit with vendors, and engaging in more than 25 networking sessions with fellow MLC members, Sundararaman said.
The company then adopted a phased approach to digital transformation anchored on delivering business value.
Phase one of the digital transformation was designed to reinvent operational excellence for the digital era by, in particular, using its foundational Intertape Performance System (IPS) to closely align strategy and execution and “homogenize” the company’s operating culture.
“We have cracked the code in delivering bottom line results,” said Sundararaman, who is also a member of the MLC’s Board of Governors. “And we have uncovered three to five years of opportunities for driving sustained competitive advantage with operational excellence leveraging digital technologies and processes.
“So it was about raising the game to a higher level. I would characterize it as a ‘breaking the four-minute barrier’ moment. It was truly a watershed moment when the Tremonton team broke the yield numbers and sustained it for several months. Now, the records are starting to tumble down for other lines.”
Phase one also includes systematically up-skilling and retaining talent with digital and process knowledge. Phase two will be about driving revenue and margin growth by applying digital technologies at scale in other functions such as customer engagement, he said. And Phase three, which is probably a year away, will be about business model invention leveraging digital technologies.
One of the most significant changes had to do with how IPG thought about the process of problem-solving. Before its digital transformation, as it was explained during one of the tour stops, problem-solving was undertaken using a traditional sequence – hypothesis, questions, data, and answers.
The digital sequence, though, is different. It begins with big data, followed by exploration, correlations, and, finally, insights.
During an hour-long panel discussion following the tour, IPG plant officials answered questions from MLC members concerning data standards and analysis, measuring the return from M4.0, and how to get buy-in from employees and leadership teams for M4.0 initiatives, among others.
The panelists were also asked about the future possibility of achieving so-called light’s out status in a plant and the role of artificial intelligence in operations and continuous improvement.
“We have different camps with our own groups,” one panelist said. “However, we are very surprised at the tangible results we’ve seen in the initial stages of writing these algorithms and what’s possible with AI and how self-correction could become much more common.”
During the COVID-19 pandemic, many manufacturers raced to adopt advanced manufacturing technologies as a way to mitigate related disruptions. But there are signs the implementation is falling short of expectations, according to a new survey from the Manufacturing Leadership Council.
Is M4.0 adoption increasing? Respondents to the most recent survey were nearly evenly divided as to whether they were increasing digital-tool adoption in the wake of the pandemic: 30% said adoption had accelerated, 32% said it decelerated and 35% said it had not changed. Prior surveys overwhelmingly revealed that manufacturers were accelerating their digital investments.
Key findings: Other data points of note include the following:
- Most manufacturers gave themselves a low- to mid-level grade on their M4.0 maturity—somewhere between a 3 and a 7 on a scale of 1 to 10. When it comes to M4.0 roadmaps, the largest percentage of respondents (33%) said that formal roadmaps were still under development.
- Nonetheless, progress is being made in some areas. Customer support made the most strides in M4.0 adoption, with 12% of respondents rating themselves as advanced in this area compared to only 4% last year. Additionally, 20% of manufacturers surveyed said their plant floors are extensively networked and IP enabled, and 52% said they have digitization for production and assembly processes.
- More manufacturers are keen to take advantage of M4.0 technologies: 43% of respondents said they use machine learning, and another 27% said they plan to bring it online in the next two years.
- The biggest jump for planned usage is for digital twins: 32% of respondents said they plan to implement this technology in the next two years, on top of the 25% who are using it now.
Major risk: Many manufacturers find themselves in a perilous cybersecurity position, according to the survey. Just 19% have a fully formed cybersecurity program that includes workforce preparedness plans, employee training and routine drills that simulate a cyberattack.
- This is likely why 57% of respondents say that their company’s plant floor systems and assets are only partially secure against cyberattacks. The need to upgrade legacy equipment tops the list of potential challenges, with 59% of manufacturers reporting that they should do so.
Other struggles: Not surprisingly, 53% of respondents cited a lack of skilled employees as their top challenge. Some 39% said access to an adequate budget for M4.0 investments was their chief problem.
The takeaway: Despite these issues, manufacturers still see tremendous potential in embracing M4.0, according to the survey’s findings.
- Sixty-seven percent of respondents cited better operational efficiency as a top benefit of M4.0; 49% cited better decision-making, 47% cited greater speed and flexibility and 42% cited cost reduction.
- Disruptions of the past two years have made manufacturers want to move toward becoming factories of the future, but the realities of the ambitious undertaking are proving daunting. Those who persist, however, are likely to find great rewards.
Last year ransomware gangs turned up the heat against all industrial sectors, but manufacturers have the most to worry about amid this distressing rash of cyber extortion. The statistics show that in 2021 adversaries targeted manufacturing with industrial ransomware nearly twice as often as all the other industrial sectors combined.
It’s a trend that shows no sign of slowing down as adversaries increasingly recognize manufacturers as extremely profitable targets for ransomware schemes that encrypt and disable operational technology (OT) systems on the factory floor and beyond, requiring victims to pay for the keys to decrypt their files and restore functionality to their systems. Savvy ransomware groups recognize the value of uptime in the manufacturing industry and they’re ruthlessly profiting on the fact that manufacturers are often the least mature in their OT defenses compared to other industrial verticals.
Manufacturing Ransomware Statistics
Dragos identified the intensification of manufacturing ransomware through data compiled for its 2021 ICS/OT Cybersecurity Year in Review (YiR) report, an annual compendium of OT security statistics and observations.
YiR findings showed 2021 as a pivotal year for ransomware groups targeting OT systems, with ransomware becoming the number one driver for compromises in industrial environments. Weak boundaries and poorly understood interactions between OT and IT systems, coupled with the rise in remote access—especially as more organizations rely on their work-from-home staff—contributed to industrial ransomware’s rising trend lines.
Broken down by industrial sector, manufacturing accounted for 65% of all the industrial ransomware incidents last year. Manufacturers suffered six times as many industrial ransomware incidents as the second leading sector, food and beverage, which suffered about 11% of last year’s attacks. Transportation came in third, accounting for about 8% of industrial ransomware attacks in 2021.
Digging deeper into the category of manufacturing ransomware incidents, the top three most common subsectors impacted by these attacks were Metal Components (17%), Automotive (8%), and Plastics/Technology (6%).
Rise in Ransomware Attacks
While ransomware still mainly targets enterprise IT systems, Dragos intelligence shows there are growing instances of these attacks that impact OT directly and in integrated IT and OT environments. Often ransomware adversaries indirectly attack OT systems as targets of opportunity after gaining initial access in adjacent and integrated IT systems. They use the compromise of critical enterprise IT systems to move laterally into OT. Some ransomware groups specifically target OT systems.
For example, EKANS is a specific ICS targeted ransomware that has gone after companies across electric, oil and gas, medical and pharmaceutical manufacturing, and automotive sectors. Dragos analyzed multiple variants of EKANS malware and discovered that the EKANS variant has the ability to stop ICS-related Windows processes before initiating encryption.
In 2021 the most prolific ransomware groups to attack OT systems were Conti and Lockbit 2.0, which caused 51 percent of total ransomware attacks, with 70 percent of their malicious activity targeting manufacturing. A lot of the success that groups like these have achieved in cyber extortion can be attributed to malicious business models like ransomware-as-a-service (RaaS) and sophisticated underground marketplaces where ransomware developers outsource operations to affiliates who execute the attacks. Affiliates do not require high-level technical expertise because the ransomware software has been developed and they can purchase access to systems and hackers for hire, which significantly lowers barriers to entry.
The DarkSide gang (now rebranded as REvil) offered customer service with real-time chat support andbrought in at least $60 million before it announced it was closing its operations. Investing in their business, ransomware groups are also funding research and development, which is fueling their industry as their extortion methods become more extreme. These are criminals, but they’re also savvy businesspeople, so manufacturers should expect them to continue to knock over vulnerable factory systems if they stand to make a handsome profit through ransoms readily paid by manufacturers who can’t afford to have their production ground to a halt.
What to Expect in 2022
Unfortunately, many manufacturers are still ill prepared to buffet these ransomware attacks before the adversaries have already stopped production. Dragos YiR analysis based on professional services engagements last year shows that 90% of manufacturers have limited visibility into their OT systems and the same percentage have set up poor network perimeters. Meantime, 80% of manufacturers have external connectivity exposed in OT systems and 60% utilize shared credentials that can easily be leveraged by ransomware groups to compromise systems.
Ransomware trends are likely to continue shifting as groups reform, reprioritize, and as law enforcement pursues them and takes them offline. As this evolution continues to evolve, Dragos analysts believe with a high degree of certainty that ransomware will continue to disrupt all industrial operations and OT environments through 2022, in manufacturing and beyond. Manufacturers should prepare now because ransomware actors’ extortion techniques will continue to grow in severity and intensity as adversaries deploy any means available to maximize their ransom profits.
To read more on OT cybersecurity trends, see the full Year in Review (YiR) report: https://www.dragos.com/year-in-review/
Peter Vescuso is Vice President of Marketing at industrial cybersecurity provider Dragos and a member of the Manufacturing Leadership Council.
Transformative technologies can take years to develop, and widespread adoption, especially among manufacturers accustomed to hardwired factories, can take even longer. Think artificial intelligence. Introduced as a concept in the mid-1950s, AI underwent a growth spurt in the 1980s, but still is in a relatively early stage of adoption by manufacturers 40 years later, though it is gaining ground rapidly.
Cellular communications technology is following a similar path, said David R. Brousell, Co-Founder, Vice President and Executive Director of the MLC, a division of the National Association of Manufacturers, in a recent Master Class Series session titled “Transforming the Factories of the Future: 5G and Data”. After first surfacing about 50 years ago, cellular technology has undergone multiple generations of development and maturity. These range from 2G in 1991, which brought digital voice text messaging and dial-up capabilities, to 3G-supported email photos and web applications, to 4G, which began supporting streaming video in 2009.
And now we have 5G. According to the MLC’s latest Transformative Technologies survey, results of which were published in October of last year, 26% of respondents had already invested in the technology. But more than half expect to either invest or are considering investing in the technology over the next two years to take advantage of 5G’s speed and capacity advantages. 5G networks can send data round trip in milliseconds, and they can capture data from hundreds of thousands of sensors per square mile.
5G and the Digital-First Revolution
Research from IDC’s Manufacturing Insights Group explored some of the drivers behind this push toward 5G adoption in the industry. The constant disruptions caused by the COVID-19 pandemic have helped to accelerate change. But the need for greater operational resiliency to meet increasing customer expectations for more personalized products and services was clear even before the pandemic, said Reid Paquin, Research Director, Manufacturing Insights, IDC.
“It’s clear that the importance of having a digital-first strategy is now being embraced across the industry,” he said.
Manufacturers know that data is essential to becoming more efficient, resilient, and competitive. While IDC research shows that AI tops the list of current technology investment priorities over the next five years, manufacturers’ two main areas of focus now are connectivity, leading to investments in IoT, edge computing, and wireless, and maximizing the value of data, which means investing in analytics-related technology such as AI and machine learning.
But while creating, gathering, and analyzing critical data throughout operations can improve the decision-making process, the explosion in the amount of data now available makes turning data into actionable insights more challenging than ever.
That’s where 5G comes in, because to remain competitive, manufactures need the bandwidth speed and low latency 5G offers to fully realize the benefits of new technology such as IoT. “That’s why you see so many manufacturers realize that the wireless connectivity piece is so critical to achieving the operational excellence and resiliency (needed to future-proof the factory of the future),” said Paquin.
According to one of IDG’s IoT studies,16% said they have already started to use 5G, while 35% said they are considering it. Among the top considerations for adoption is 5G’s ability to enable new use cases, as well as maximize current use cases for mobile robotics, augmented reality, and other applications that place a high demand on manufacturing networks, Paquin said.
However, a manufacturer’s goals for adopting 5G differ depending on the type of manufacturer. For example, discrete manufacturers such as automobile makers tend to concentrate on how 5G can help enable new capabilities for products and for customers. Discrete manufacturers’ goals for 5G tend more toward enabling new capabilities for the organization itself, complying with regulations, and replacing older 2G to 4G technology.
For all types of manufacturers, it’s important to remember that 5G is not simply a technical upgrade from 4G, said Sameer Joshi, Senior Director, Manufacturing, Industry Solutions and Strategy, NTT DATA, one of the webinar’s panelists. “5G represents a massive leap forward.”
What’s Driving 5G Adoption?
“Businesses need to focus on how to monetize 5G as a technology that is now available on the market,” said panelist Anisha Biggers, Managing Director, Intelligent Automation Advisory, NTT DATA. The main business drivers she identified were leveraging 5G to grow revenue, optimize the cost of doing business, and reduce stresses in the system. “We can’t simply identify random 5G use cases and implement point solutions without thinking through how that impacts the business strategy and objectives. We need to start with understanding: why do we need to invest in 5G? What is the value we will get out of it?”
Some priorities where 5G can play a part include:
- Automation. While automation has been a focus in manufacturing for a long time, 5G can help provide faster data transmission, allowing for better optimization of production and operations.
- Visual-based inspection. This area is seeing a sharp increase in interest from a use case standpoint when it comes to improving product quality and scrap waste rework.
- Robotics/AGVs/Cobots. Is 5G essential in realizing the potential for investments manufacturers are already making in these technologies? It’s important to set a goal first, then align the technology investments needed to achieve that goal. 5G enables manufacturers to offload data to the cloud and network edge. And as the complexity of tasks that robots can do increases, it will allow manufacturers to increase their use of cobots and AGVs.
- Remote monitoring/diagnostics of assets and processes. “Asset monitoring and maintenance are clearly the low-hanging fruits that show the ROI and production efficiencies” that can be gained by using 5G technology, Joshi said.
- Workplace safety and lone worker protection. This is another low-hanging-fruit area of clear ROI that’s ripe for picking, the panelists said.
- Talent recruitment and retention. COVID accelerated an already significant challenge in recruiting and retaining staff. 5G is one of the technologies that younger workers are already accustomed to in daily life and could be important to attracting qualified applicants. “The younger workforce is more comfortable with changes in technology because they are born into a world where technology is changing all the time,” said Biggers.
Keep in mind that while there are benefits to adopting 5G technology, it is still emerging, as are ancillary technologies such as AI, augmented reality, edge computing, and robotics. Some may wonder if they should hold off on investing in a rapidly evolving technology — will it become obsolete before they reap the benefits of their investment? And if they do decide to invest now, will it create a sufficient value to prove a significant ROI? To answer those questions, manufacturers should determine how they can incorporate 5G in specific use cases that show it can drive tangible outcomes.
Also, as the technology continues to mature it will become more plug-and-play. However, there still will be the need for more bespoke 5G deployments for niche areas that require additional customization or configuration. And while 5G promises a high level of reliability, the open connectivity to cloud can cause significant security concerns. Manufacturers — and their vendors and service providers — will have to undergo a cybersecurity paradigm shift along with the paradigm shift that 5G represents, the panelists said.
Because manufacturers tend to be risk averse — as NTT DATA’s Joshi said, “they would prefer to be fast followers rather than leaders when it comes to adopting a lot of this new technology” —it’s important to balance the short- and long-term benefits by developing use cases that can deliver value now, while also building out longer-term use cases that identify opportunities for this technology that manufacturers may not yet have.
But they are getting there. While autonomous operations, where the decision-making process is intensely data-driven, may not be realized yet in many factories, this is where the industry is headed. 5G technology could very well be one of the transformative keys to help make the M4.0 vision a reality.