Thought Leadership

Thought Leadership

NAM Webinar Tackles Vaccine Questions

As COVID-19 vaccines such as those from Pfizer/BioNTech and Moderna begin to become available, manufacturers have a lot of questions about vaccination in relation to their workforces.

Moderator David R. Brousell, MLC

To provide as many answers as possible at this point in the vaccination journey, the National Association of Manufacturers and its Manufacturing Leadership Council held an informational webinar on December 18. Webinar panelists included Robyn Boerstling, Vice President, Infrastructure, Innovation and Human Resources Policy with the NAM; RJ Corning, Global HR Executive with Whirlpool; Patrick Hedren, Vice President of Litigation and Deputy General Counsel at the NAM; and James Paretti, an experienced management-side employment and labor relations attorney with employment and labor law firm Littler. MLC Co-founder David R. Brousell moderated the session.

Like everything else to do with the pandemic, the vaccination rollout will be complex and evolve over time, the panelists stressed. It will entail local, state, and federal governments.  It will involve agencies such as the U.S. Centers for Disease Control and Prevention and the Equal Employment Opportunity Commission, as well as federal laws such as the Americans with Disabilities Act. It also gets tricky because many people may have personal or religious objections to vaccination.

Here are some of the questions addressed by the panel:

When will vaccines become available?

The Department of Health and Human Services including the CDC and its Advisory Committee on Immunization Practices (ACIP) and all 50 governors are among those developing plans for the deployment and distribution of the vaccines as they become available. To date, the number of vaccines being delivered is limited and distribution will focus on health care workers and residents in long-term care facilities.

Robyn Boerstling, NAM

There are issues involved in supply chain and distribution logistics, such as the ultra-low temperature needed to keep the Pfizer vaccine viable. Pfizer is relying on its own logistics and supply chain to distribute the vaccine, whereas Moderna will use the supply chain developed by the federal government’s Operation Warp Speed program. Both vaccines require a second dose several weeks after the first for full protection. A Johnson & Johnson vaccine, which hopefully will become available at some point in early 2021, “could be a game changer,” said Boerstling, because it only requires one dose and does not need to be shipped at ultra-low temperatures.

When will the vaccine be available for manufacturers?

The hope is that there will be enough vaccine available by Q2 to move to the next tier of recipients, those over the age of 75 and front-line workers. Manufacturing workers were recommended by ACIP to be vaccinated in its 1b prioritization but, as discussed, much is left to the states to determine specific populations to be vaccinated upon arrival of the vaccines.

The NAM sent a letter to the National Governors Association urging the nation’s governors to follow the DHS and Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) guidance to determine what constitutes “critical” and “essential” infrastructure workers. The definitions are well understood by manufacturers and would provide a clear and consistent basis on which to make vaccine allocation decisions, said Boerstling.

How will manufacturers acquire and distribute vaccines once they become available?

Do manufacturers purchase the vaccines themselves, work in partnership with government, or rely on other internal or external partners? All of the above is possible. But first, manufacturers should decide whether they want to be proactive or defer to local governments and health institutions when it comes to administering the vaccines, they said. And know your local laws. Some states have sites where organizations can register to determine their level of prioritization, which could come into play for distribution support as well.

Patrick Hedren, NAM

Costs for the vaccine also are a concern. In the U.S., Operation Warp Speed has purchased enough supply to vaccinate every American who wants to be vaccinated, and it should be available at no cost to recipients. However, administrative costs associated with implementing the vaccine are likely, panelists said. Companies are urged to harness a variety of health care partnerships to prepare and plan for accessing the vaccine for the manufacturing workforce. It’s not too soon to start having conversations with local hospitals, plan administrators, and other third parties such as Walgreens and CVS.

While we’re still in the initial vaccine rollout phase, the supply chain issues are still unclear, said Paretti. His advice is to start formulating your strategy now, but keep in mind that the situation is still evolving.

How will state, local, and federal policies likely evolve?

Policies will be left to the leaders of the 50 U.S. states, U.S. territories, tribal nations, and the District of Columbia, each of which has developed a plan and shared it with HHS and the federal Operation Warp Speed program. The EEOC recently released an update to its COVID-19 guidance that includes information about how employee vaccination interacts with legal requirements of the ADA, the Civil Rights Act of 1964, and the Genetic Information Nondiscrimination Act, and has provided resources on its website specific to COVID-19 and EEO laws.

Watch for how individual states handle the vaccination rollout, panelists said. Some states do require flu vaccines for certain populations, which could be an indication of how they may treat a mandate for essential workers for the COVID vaccine. But don’t expect the state to make it easy for you — every manufacturer needs to develop a strategy and policy that fits with its corporate culture and circumstances, panelists agreed.

How should manufacturers approach developing vaccination policies for employees?

R.J. Corning, Whirlpool

Corning said Whirlpool feels it’s important to be fact-based, globally consistent, and locally relevant — and to keep employees at the forefront of decision-making while also having strong leadership from the top — when developing a vaccination policy. Whirlpool has already had success using that approach in developing a flu vaccination campaign, which resulted in a much higher level of flu vaccination rates across the globe than it had previously. One key his company has found is to work with cross-functional partners within communications, government affairs, HR, manufacturing, supply chain — all those who not just can make decisions, but also do the work on the ground.

Again, the most important thing is to align your policies both with local regulations and your overall company culture.

Should a policy be mandatory or voluntary?

While nothing in the EEOC guidance or the ADA explicitly prohibits a manufacturer from instituting a mandatory vaccination program, Paretti said that the decision to make a policy mandatory or voluntary is an individual decision each manufacturer has to make depending on their specific circumstances. The EEOC and ACIP will continue to develop additional guidance, so it is likely that more will be known as the vaccine rollouts happen.

While the CDC has rolled out its recommendations for Phase 1a, b and c vaccination priorities, state governments also will play a leading role moving forward. While you don’t necessarily need to have a full-blown policy at this stage, Paretti advised manufacturers to start formulating a strategy on how to handle the stickier issues, including employees with disabilities, pregnant workers, workers with religious objections, and those who may need special accommodation.

James Paretti, Littler

Manufacturers should also consider how the policy will handle essential workers on the factory floor, as opposed to office workers who may face a different level of risk, and how you plan to approach those who don’t want to get vaccinated, which the EEOC is already beginning to address in its latest guidance. Another consideration: How do you plan to approach compensating people for their time in getting the vaccination? And if you plan to vaccinate on site, how will that work? How will you handle privacy concerns related to subjects such as certification of vaccination and potential allergies to the vaccine?

Paretti strongly advises that you work closely with counsel to determine how to address these and other issues.

Whirlpool is centering its approach on educating, developing, training, and encouraging employees to participate in its COVID-19 measures, which likely also will include vaccination. It’s important to take into consideration both those deemed essential by the state, and also which workers might be most at risk due to co-morbidities or who are immune-compromised. Then layer in how to adjust the messaging due to overall levels of vaccine acceptance.

At this point in time, it likely makes more sense to incentivize employees to participate in vaccination programs rather than mandate them, Corning said, adding that this approach has proven successful with his company’s flu vaccination campaign.

Below is a list of resources already available for reference. In addition, NAM and MLC will be providing more information sessions in 2021.  Paretti’s firm, Littler, also is holding free, open-to-all webinars on legal issues surrounding vaccination on January 13 and January 20, 2021, and is regularly updating guidance on legal issues on its website.


Three Steps Toward Manufacturing Resiliency

Three Steps Toward Manufacturing Resiliency

The manufacturing business environment can be unpredictable. Supply chain disruptions occur, demand for products fluctuates, and game-changing innovations quickly appear on the horizon. To stay in business and remain competitive, manufacturers must anticipate and respond to both foreseen and unforeseen changes.
What’s the key to this responsiveness? Manufacturing resiliency. And the driver behind this resiliency is data-driven production execution supported by digital technologies.
Hard Lessons
Hard lessons have been learned in the wake of the novel coronavirus pandemic. Manufacturing has been particularly hard hit. Companies that were able to react quickly, retool their factories, redirect their supply chains, and take advantage of digital technologies quickly switched gears to meet crucial needs and create new opportunities

For example, clothing designers and manufacturers such as H&M, Brooks Brothers, and Hanesbrands retooled their factories to produce face masks, medical gowns, and protective aprons for hospitals. Spirits manufacturers Bacardi and Brown-Forman shifted their distillery operations to manufacture hand sanitizers for first responders. And production lines at Fiat Chrysler Automobiles, Ford, and GM are now turning out ventilator parts, respirators, and other much-needed medical equipment.[i] In addition to meeting urgent worldwide needs, these companies have created a culture of resiliency in their operations that will be valuable to them and the communities they support in both the short and long term.
Three Steps to Resilient Manufacturing 
By taking the following three steps, you can transform your manufacturing environment to become more resilient and improve operations. You can more effectively meet the needs of your customers under any circumstances while creating new opportunities for your business.
1/ Increase flexible automation to create resilient operations.
The manufacturing industry has come full circle, from the days of hyper-customized craft production before the first Industrial Age, through mass production in the early 1900s, to manufacturing as it is today. With the trend toward personalization that we’re now seeing in the marketplace, the manufacturing industry is moving back to hyper-customization, or a lot size of one.
However, in this Industry 4.0 iteration, hyper-personalization is being done at scale. Flexible automation is at the forefront of this evolving story. Robotics and artificial intelligence (AI) are the key technologies that make flexible automation at scale possible, enabled by 5G, Time-Sensitive Networking (TSN) and Open Platform Communications (OPC).

On the road to full automation, we can also expect to see more scenarios where humans work collaboratively with robots. This collaboration could take many forms. For example, workers could adapt their tasks to preconfigured robotic operations. However, with rapid advancements in robotics and AI, future production lines could also be staffed with robots that have the intelligence and situational awareness to easily work alongside humans, adjusting their behavior according to each worker’s style and speed.
The technologies that will drive this digital transformation include robotics and mixed reality, with 5G, IoT and AI serving as the digital backbone and application enablers.
2/ Introduce remote operations to ensure business continuity in adverse situations. 
Prior to the pandemic, there was a lot of industry buzz and some solid proof points for deploying augmented reality (AR) and virtual reality (VR) in manufacturing, particularly within the maintenance function. However, not everyone believed this technology would be quickly and widely adopted.
Now, as companies have been forced into embracing remote working, we’re seeing a renewed enthusiasm among executives for these technologies. There’s a heightened urgency to incorporate remote operations as an integral means of supporting manufacturing operations, whether for product quality inspection, equipment maintenance tasks, or even collaborative tasks involving product design and production planning.
Technologies that can be seamlessly integrated into work environments will quickly evolve to include key enablers such as digital twins, 3D visualization, and private 5G.
3/ Adopt a digital infrastructure that connects all parts of the supply chain. 
One of the serious manufacturing-related impacts of the pandemic and subsequent shutdowns was the significant disruption to the supply chain. Many enterprises were scrambling to source needed materials and components, and distributors were scrambling to deliver them. This situation brought home how essential digital technologies are for managing the complexity and variability of today’s sophisticated and vulnerable manufacturing supply chains.
Industrial data lakes play a key role in transforming traditional production software stacks into digital production platforms. In the manufacturing environment, data lakes enable real-time connectivity to various information layers involved in manufacturing operations, from programmable logic controllers (PLCs), to manufacturing execution systems (MES), to enterprise resource planning (ERP) systems. This end-to-end connectivity will enable a seamless information flow across the entire supply chain. In addition, it will help scale any application deployed in one plant, to any other plant anywhere in the world, improving overall return on investment (ROI).
Together, with several other emerging technologies, industrial data lakes will eventually help shape the vision of distributed manufacturing and personalized manufacturing. Additionally, industrial data lakes will play a critical role in scaling digitized accumulated know-how as we transition toward the vision of the digital worker.
Lessons Learned 
Though the manufacturing industry doesn’t always operate in crisis mode, there are valuable lessons about resiliency to be learned from the pandemic. Any manufacturer can take these lessons to heart and transform their factory into an agile, responsive environment resilient enough to weather whatever changes may come.


Building a Digital Return-to-Work Strategy

Countering disruption with resilience and agility

COVID-19 has caused unprecedented disruption and pushed organizations to find new ways of staying competitive and relevant. Business leaders have realized the need to build resilience for the long haul as they come to terms with never-seen-before challenges every day. The domino effect has not spared any function within the organization. The focus has rapidly shifted to building business resilience across multiple areas, including employee and workplace safety.
While some industries have figured out ways to continue their operations by activating work-from-home (WFH) programs, for sectors like manufacturing, hospitality, retail, and construction, WFH is not a viable option. 65% of the CXO executives believe that no field employees will be able to WFH indefinitely, reports a recent McKinsey survey1. The same study states that the executives expect 80% of their employees to be back in the office by this month, September.
The long and short of it is that organizations need to go back to the drawing board and work on building and executing safe return-to-work programs. However, any such return-to-work strategy must be based on the following principles at the core:

  1. Containing the spread: Nations continue to struggle with controlling this contagion; some nations are now seeing a second wave of the spread. While social distancing is becoming the new normal, many field personnel across multiple industries work close to each other, which raises the risk of spread. This is a concern for the environment, health & safety (EHS), and facility managers. What furthers adds to the problem is that 40% of COVID-19 spread happens before a person develops symptoms, according to the U.S. CDCThe threat of proliferation from asymptomatic patients is massive. Hence, manufacturing companies need to continue to activate all programs that help them stop the spread.
  2. An assurance on safety and revving up employee confidence: As organizations resume their business, they need to assure their stakeholders of the importance of vital safety measures to boost their confidence and morale. This requires them to develop processes and systems that ensure prevention of the spread, building safety protocols for early detection, monitoring and enforcing social distancing, and responding faster and effectively.
  3. Adhering to regulations and compliance standards: In response to COVID-19, governments are continuing to lay out health & safety laws to define business operations. For instance, the UK government has passed The Health Protection (Coronavirus) Regulations 2020, which mandates concrete measures for employee safety2. In the US, OSHA has issued guidancefor preparing workplaces for COVID-193. All of this must factor into an organization’s compliance and risk management blueprint in the COVID world.

Need for Speed and Digital Adoption

Adopting and adhering to these principles will require organizations to be open and agile and embrace technology with a heightened sense of urgency. The good news is that some have already taken swift actions on building strategic digital programs for resuming operations. Organizations have adopted and executed digital programs at an alarming rate: compressing what would have been a five-year cycle into just eight weeks, says McKinsey.4 That’s the level of paradigm shift the marketplace has witnessed in recent months.
While there are numerous ways in which digital technologies such as image analytics, artificial intelligence, internet of things, etc. are helping enhance the health and safety quotient of a workplace, particularly with regards to COVID-19, a return-to-work plan must cater to the following four tenets and organizations must ensure they are technologically equipped to address each of them:

  1. Prevent: This is the first line of defense for any organization, and it worked well during the initial phase of the pandemic. The adoption of remote collaboration platforms such as Microsoft Teams helped organizations mitigate potential in-person interactions, as they managed business continuity. While returning to work at some level is now inevitable, organizations should not rush into it. Having fewer people in a space lowers the risk significantly, saysan epidemiologist at the University of California, San Francisco.5 Moreover, office real estate, especially in the subcontinent, are structurally not designed to support social distancing. Therefore, in addition to adopting a staggered approach to opening offices, organizations must accelerate investments in digital workplace infrastructures and smart buildings to balance safety with productivity.
  2. Avoid: Any organization planning to reopen its offices must necessarily invest in technologies to facilitate contactless operations. There are multiple options available to choose from, such as facial recognition, voice sensing, and gesture sensing (some of which even come bundled with advanced thermal screening cameras). Additionally, compliance with the occupancy-levels in facilities and enforcing social distancing norms as per local government regulations is paramount to avoid the risk of spread. Several proximity control technologies can be leveraged to implement these norms and to block access to non-compliant or at-risk personnel.
  3. Detect: When prevention and avoidance fail, the next best thing to target is early detection. Organizations must, therefore, put processes and systems in place to implement thermal screening across the facility to monitor employees, workers and visitors alike, and track individuals’ temperatures for multiple days to detect any anomalies early. It is equally important to trust the employees and include them in the process by extending to them mediums that can be as simple as a mobile application to allow them to self-declare about their travel history, contacts made with high-risk individuals and/or any symptoms they encountered. These simple measures will help identify early warning signs and leading indicators to reduce the chances of proliferation.
  4. Respond: We have already seen numerous false starts globally wherein some enterprises reopened their offices, plants, etc. but had to shut them down shortly after as some suspect cases were reported. While such shutdowns led to significant financial losses, they also caused a massive dent on the confidence and morale of the workforce due to the organization’s inability to quickly identify personnel who came in contact with the suspected individuals during their pre-symptomatic stage and/or the premises that needed to be sanitized. As important as detecting the coronavirus symptoms in an individual early, it’s equally helpful to respond fast and surgically to avoid panic. Organizations should explore implementing track & trace technologies to supplement their efforts on prevention, avoidance, and detection.

Digital Drives Faster Recovery
To summarize, this crisis has created several challenges that have pushed organizations to embrace digital. It’s now a matter of sustenance, not just about staying competitive. Digital will be the cornerstone of any business resilience program that an organization executes now. Any return-to-work strategy program must have digital at the core. We are already seeing that the organizations that had invested proactively on digital infrastructure are showing a faster recovery. This pandemic is a tipping point in the evolution cycle of the modern-day workplaces. As we all navigate these tough times, organizations will need to stay open, agile, communicative, and be receptive to embracing digital technologies for some time to come.

Thought Leadership

The Connected Enterprise Shouldn’t be Next for Manufacturers – It Should be Now

The Connected Enterprise has been a priority for manufacturing companies in recent years but has experienced unprecedented acceleration due to COVID-19 in 2020.

Manufacturing leaders from Lockheed Martin, VirTex Enterprises, and IBM discussed major drivers of this acceleration, including enablement of the virtual workplace and data-driven decision making, in “Learning for the Future,” the fourth and final installment of the Manufacturing Leadership Council’s What’s Next for Manufacturing? virtual meeting series, which took place July 28. Based on the theme of the June Manufacturing Leadership Journal, this meeting was focused on how manufacturers are planning for the new normal.

Enabling the Virtual Workplace

Having a Connected Enterprise doesn’t just mean systems that talk to each other and share data; in the era of COVID-19, it enables employees to work and communicate from anywhere, with minimal disruption.
Panelist Brad Heath, President and CEO of VirTex Enterprises, a provider of electronic manufacturing services, shared that many customers declared VirTex to be a critical business, requiring it to remain operational throughout the pandemic.

To minimize disruption, VirTex enhanced its customer product lifecycle approach with virtual collaboration and data sharing, meetings, and product prototyping. For new customers, VirTex began offering virtual sales calls and factory tours. To facilitate all of this, the company utilized technologies like Microsoft Teams and Zoom for product and site metrics meetings, as well as Microsoft Government Cloud and Egnyte as a secure server.

Heath added that tools like Zoom and Microsoft Teams need to continue to evolve. “[They] don’t fit the bill yet as one solution for collaborative communication and planning, said Heath, a member of the MLC’s Board of Governors. “They do a good job of replacing meetings, but we need to find a way to fully integrate our data analysis, whiteboarding, planning with integrated meetings.”

However, more broadly, virtual approaches with suppliers and customers have been successful; VirTex has maintained 94% on-time delivery with suppliers and 96% on-time delivery for customers. Heath said they will use their internal collaboration tools with suppliers and vendors. For example, VirTex recently conducted a full MES implementation remotely with its software vendors, which resulted in a $10,000 savings on travel costs for vendors and a 20% decrease in implementation costs.

Similarly, panelist Dr. Don Kinard, Senior Fellow, Aeronautics Production Operations at Lockheed Martin, said with the help of technology, 80,000 Lockheed employees have been able to work effectively from home, conducting virtual meetings with suppliers and hosting virtual industry and customer events. The company has continued hiring but has shifted new hire onboarding to a virtual orientation.

Connecting the Enterprise with Cutting Edge Technologies

The Connected Enterprise is built upon cutting edge technologies like IoT, AR, blockchain, and more. But to get the most out of those technologies, especially during a pandemic, companies need those systems to collect and analyze data to empower workers to make rapid, intelligent decisions.

Panelist Ron Castro, Vice President and Chief Supply Chain Officer at IBM, said the company had previously invested in digital platforms, allowing it to take quick action during the pandemic. He emphasized the importance of real time, saying that cracks in the global supply chain often happen because of three main reasons – lack of real-time information, lack of ability to respond to rapid changes, and lack of real-time collaboration.

Castro, also a member of MLC’s Board of Governors, shared that IBM has moved to agile development for digital transformation and is now delivering new capabilities every two weeks. They’re also doing both collaborative planning and intelligent workflows in real time and rely on digital twins to enable training and remote work.

For example, with much of its supply coming from China and other locations around the world, IBM uses  VR to meet with suppliers and manufacturing teams, and digital twins have helped minimize the number of people required to go onsite at plants.

Toward the end of the session, all panelists agreed that the Connected Enterprise has never been more important, but there is still more work to do.

“We believe that connecting our enterprise is a fundamental thing… we’ve been on a journey to connect our equipment, to get all that data collected,” said Kinard. “COVID has slowed us down a bit because the factories have been occupied with [it], but I don’t see that it’s changed our approach.”

Recordings of all four What’s Next for Manufacturing? virtual meetings are now available on demand at:

5 Ways the Cloud is Transforming Manufacturing

The manufacturing sector faces a slew of challenges due to the pandemic. A recent survey by the U.S. National Association of Manufacturers (NAM) found that nearly four out of five manufacturing companies expect a financial hit from COVID-19. More than half (53.1%) anticipate a change in operations primarily due to the injection of new technologies and reimagined business processes.
Writing for Forbes magazine, Anna-Katrina Shedletsky, CEO of Instrumental, said: “Between solutions that leverage the power of the cloud for visibility and automation that optimizes work, necessity will drive invention: manufacturers will do five years of innovation in the next 18 months.”
Indeed, the cloud will be a staple for every manufacturer’s technology stack in these challenging times. Even before the pandemic, the cloud was poised to bring undeniable benefits for manufacturers. It includes a 22% rise in profitability and a 23% decrease in operational costs, on average. And spurred by the pandemic, manufacturers are likely to ramp up their investments in the cloud. In IDC’s wave 3 of its COVID-19 Impact on IT Spending Survey, analysts predicted, “a significant increase in demand for cloud software”.
Five Drivers of Change
There are five clear drivers for this trend. Across industries, the demand for cloud infrastructure has seen a sharp uptick, growing a record 34% YoY in Q1 of 2020. This surge is because the cloud dramatically shrinks their dependence on physical, on-premise infrastructure, and consequently, physical proximity. This facet has immediate benefits for companies that are following social distancing measures. In the long-term, the cloud could unlock better connectivity and more seamless supply chains, overcoming supply chain disruptions arising from COVID-19 as expected by 35.5% of companies in the IDC survey.
These benefits span short, near, and long-term impact areas for manufacturers:

  1. In the short-term, the cloud enables business continuity. 

Several of the critical activities on the manufacturing value chain, from product design to marketing and customer service, rely on in-person contact. The cloud eliminates this dependence by providing an “anytime, anywhere” platform for communication. This has immense implications for new product development (NPD) as companies no longer need to press pause on innovation. Still, they can stick to their planned go-to-market (GTM) strategies by leveraging the cloud. Similarly, on the operational side, the cloud can help maintain business continuity across people processes, production, and even marketing/sales via online platforms.

  1. The cloud simplifies compliance with EHS regulations

Employee health and safety (EHS) regulations are a key focus area for manufacturers even in the best of times. With the onset of the pandemic, this demands even more attention for manufacturing companies. Business continuity and growth cannot compromise on employee health in any way. The cloud allows manufacturers to operate near-lights-out production, assembly, and shipping, thanks to cloud-based automation. Employees can work from the safety of their homes, cementing their trust in the employer and strengthening long-term relationships.

  1. In the near-term, the cloud extends the manufacturing ecosystem

The pandemic has compelled business leaders to rethink their existing procurement and distribution networks, lying stress on localized availability and supply chains. When it comes to global pathways, the cloud helps to overcome curbs on international travel and stay connected. It is possible to monitor and manage this entire landscape on a cloud-based platform from the safety of one’s home. The convergence of information technology (IT) and operational technology (OT) via cloud-solutions makes it easier to orchestrate the manufacturing ecosystem remotely.

  1. In the long-term, the cloud will accelerate process modernization

Business leaders were discussing the importance of the fourth industrial revolution even before the pandemic. Now, it is no longer a mere possibility. COVID-19 has pushed manufacturers to reduce dependence on hands-on processes, physical infrastructure, and physical workspaces. A modernized manufacturing enterprise, where cloud-based artificial intelligence/machine learning (AI and ML) scans EHS data to spot non-compliance; where a cloud-based contact center replaces hundreds of employees working within a confined campus; and where cloud-based project management platforms ensure on-time delivery, will soon be the new normal.

  1. Cost optimization is a recurring benefit of migrating to the cloud

It’s no secret that traditional, on-premise infrastructure is prone to severe inefficiencies. Companies cannot dynamically allocate resources, leading to resource waste and challenges in scaling up at peak demand periods. The cloud could help manufacturers improve their bottom line by maximizing technology investments. It could also drive topline revenues by enabling innovation and business growth when the competition stutters.
Beyond the Pandemic
Enterprise migration to the cloud shouldn’t be reactive. After all, it has far-reaching benefits extending well into a manufacturer’s long-term roadmap. It will help business leaders get a step ahead of the competition, leapfrogging into the industry 4.0 era, and ready to take on fresh opportunities post-COVID-19. This requires well-articulated cloud adoption strategies encompassing every sphere of business, starting today.

COVID-19 Recovery: A Rocky Road Ahead?

Can leveraging digital technologies help manufacturers along the potentially long and difficult road to recovery over the next two years?
Despite welcome upticks in manufacturing performance over the last few weeks, the road to industrial recovery from the devastation of this year’s COVID pandemic is going to be long and difficult for the industry.
For the next two years at least, it seems, manufacturers are going to need patience, agility, determination, and a fresh openness to the adoption of new digital approaches to survive.

Chad Moutray, NAM

“I don’t expect to get back to normal production levels until 2022,” warns Chad Moutray, Chief Economist at the National Association of Manufacturers (NAM) and Director of the Center for Manufacturing Research at the Manufacturing Institute.
Moutray was speaking to a virtual gathering of senior level manufacturing executives on the second What’s Next for Manufacturing? meeting hosted by the NAM’s Manufacturing Leadership Council. He was joined by Doug Carson, Assistant President of Strategic Planning, Business and Product Development at tier 1 auto supplier the BWI Group.
“We’re still wondering if we’re bouncing back, or just bouncing along?” admits BWI’s Carson. “At this point, we are just trying to stay safe, stay focused and flexible, and focus on what we do well.”
Worst Downturn Since the Great Recession
Manufacturing performance figures for the last few months are certainly sobering. “This is the worst downturn since the Great Recession,” noted Moutray, “but the good news is that we seem to be over the worst of the slump.”
The NAM’s latest quarterly Manufacturer’s Outlook survey, for example, revealed a steep collapse in positive expectation for the future, from a high of 95% two years ago, to a mere 34% in May this year, the lowest level since Q1 2009.
It’s the same story wherever you look. Q2 12-month growth forecasts for sales are down by 4.3% compared to the previous quarter, capital investments are down by 2.5%, full-time employment down by 2.2%, and export growth expectations down by 1.4%.
Signs of Recovery
Nevertheless, compared to the record lows of earlier months this year when industrial lockdown was at its height, the ISM’s Manufacturing Purchasing Manager’s Index (PMI) for June saw a welcome return to expansion and growth. The latest Federal Reserve figures also show industrial production rebounding for the second straight month rising by 3.8% and 7.2% in May and June, respectively.
But while all major manufacturing sectors showed some welcome production gains in May and June, almost all sectors are still showing significant declines year-on-year, with primary metals down 27.3%, motor vehicles and parts down 24.6%, and aerospace and transportation down 23.7% over 2019.
The only exception is computer and electronic products which was up by 2% since June last year, no doubt reflecting the massive surge in demand for virtual and remote tools for both  industrial and domestic markets during the COVID crisis.
Uncertainty Ahead
But perhaps most importantly for the longer term as manufacturers continue to strive to recover from the pandemic and resume some semblance of normality in their production activities, Moutray suggests that the industry will still see a an 8.5% drop in production for this year before regaining some of that lost ground with a predicted 3.5% increase in 2021.
“We haven’t controlled the virus yet,” he points out, “so the worry in the worst case scenario is that the fear of another bout of COVID in the Fall, along with the political uncertainty of the U.S. elections, may hold back capital spending until perhaps late next year.”
BWI Group’s Front-Line Response

Doug Carson, BWI

It’s precisely that level of uncertainty about the future that concerns front line manufacturers like BWI Group as they struggle to adjust to the devastation of the last few months and put in place strategies that will help them to stabilize and recover the business.
“In April we didn’t sell one auto part anywhere except China,” recalled BWI’s Carson. But while China began to bounce back, the company still struggled in other areas around the world like India and Mexico. “It left us wondering, ’Is this the new normal?”.
Extensive Process Restructuring
BWI took a lot of cost cutting steps early on and then focused on four key areas: safety, by introducing extensive on-site safety procedures; keeping it local, by following state guidelines and local site-specific cultures; keeping it simple, by cancelling standing meetings, reducing agendas, and suspending normal reporting cycles; and cranking up communications both internally and with customers and suppliers. He also noted that one of the biggest supplier issues in automotive manufacturing right now is the absenteeism after a workplace COVID incident. That potential issue is making it more important than ever for BWI’s management and human resources teams to stay busy ensuring worker safety across all areas of the company.
“The crisis initiated the largest business process restructuring for the last 10 years,” reflects Carson. “We are trying to make things more efficient for the future, to make faster decisions, and to adopt a strategy of higher frequency, lower content communications to ensure we continue to stay more open and transparent.”
Leveraging Digital
One of the key outcomes of the last few months, note both speakers, is an increasing recognition and reliance among manufacturers on new digital technologies to help them survive and recover from the crisis.
“In a dynamic situation, access to information and validating that information as quickly as possible is most important,” adds Carson, “and for BWI, that’s the number one asset of M4.0 and digital transformation, the ability to know what is going on in your operation in great detail.”
Moutray also believes that harnessing digital tools is likely to be fundamental to how the recovery journey develops. He notes that around three quarters of manufacturers in a recent NAM survey said, where possible, they were going to have remote working as an option, and two thirds said that they see production processes being reengineered with social distancing in mind.
“It will be an interesting time for increased investment in automation on the shop floor,” he added, “and I think we will soon start to see how far technology and reengineering will change manufacturing in the longer term as we emerge from the crisis.”
Dancing in the Rain
Like many manufacturers facing future uncertainty on the road to recovery, the way forward will be about learning to thrive in the new normal, concludes BWI’s Carson. “For us that means focusing on safety, flexibility, and recognizing for sure, that virtual is here to stay.”
And to underpin his view of where the company is going, Carson cited a telling quote from writer, Vivian Greene: “Life isn’t about waiting for the storm to pass. It’s about learning to dance in the rain.”
Upcoming Virtual Meeting on What’s Next for Manufacturing?
The Manufacturing Leadership Council will be hosting its fourth virtual meeting, Learning for the Future, featuring speakers from Lockheed Martin, IBM, and VirTex Enterprises, on Tuesday, July 28 at 11 am ET.  Contact: [email protected] for an invitation.

POV: Sustainnovation

The manufacturing industry is not going to meet today’s global sustainability challenge by reduction strategies alone. Proactive, disruptive, sustainable innovation is now critical to both the future growth of the industry and solving some of the world’s most urgent environmental problems. Reductions in energy, materials, water, waste, CO2 emissions, and carbon footprints are essential. So, too, are improved materials, product, and component reclamation, recycling, refurbishment and remanufacturing strategies. But these are primarily focused on redressing the environmental impact of traditional production approaches that overwhelming scientific consensus suggests have contributed to what many are now calling a climate crisis.

The real challenge for manufacturing in the future is to harness its remarkable tradition of ground-breaking innovation that has built modern society to radically and rapidly change the environmental dynamic towards the creation of more sustainable platforms and products for future industrial progress.

First, innovate the existing value chain. Enlightened innovation strategies must ensure that sustainability considerations –– environmental, social, and economic –– are integrated into every company process from idea generation, to R&D, sourcing, production, commercialization, delivery, usage, and product recovery.

Second, urgently pursue disruptive innovation strategies that have the potential to change the rules of industrial engagement for the better.

Impressive disruptive sustainable innovations are happening every day. This year’s recent James Dyson International Award, for example, went to Marinatex, a rapidly biodegrading bioplastic alternative to short-life single-use plastic packaging made from fish waste and marine algae. It is one of many innovations now using various forms of waste stream rather than virgin materials for their production.

Or consider the recently announced Heliogen clean energy start up, backed by Bill Gates, which is combining artificial intelligence systems and a field of focused mirrors to generate carbon-free heat intensities above 1,830 degrees Fahrenheit (1000C), almost a fifth of the temperatures found on the surface of the sun. That’s the level of extreme heat needed for the production of cement, steel, glass, and other heavy industrial processes, currently dependant almost entirely on fossil fuels.

Whatever sector you operate in, whatever products you make, whatever ambitions you have for the future of your company, the opportunities to contribute to a better future are endless. That’s manufacturing’s new mandate: relentless innovation to create a more sustainable world for both today’s and tomorrow’s generations. M

In the Vanguard of Sustainability

Manufacturers continue to lead the charge in protecting the environment. And the NAM’s partnership programs with the Department of Energy and the Environmental Protection Agency are helping to advance the cause. By Laura Berkey-Ames

Over the course of the United States’ storied history, there have been many landmark moments that impacted our nation’s progress and the well-being of its citizens. The Industrial Revolution, which began over two centuries ago, was one such defining moment when American productivity and manufacturing ingenuity flourished at a breakneck pace. This exponential growth continued well into the twenty-first century, and manufacturing remains the backbone of our country’s economic prosperity and financial security. Times may have changed, but it is still an exciting time to be a manufacturer – perhaps more so than ever before.

Today’s manufacturers are boldly leading the charge to protect the environment while simultaneously changing the face of modern manufacturing in America.1 Manufacturers continue to be faced by ever-present challenges such as the difficulty in finding and retaining skilled workers and managing through international trade uncertainties. Despite these hurdles, in recent years strong economic optimism has spurred manufacturers to raise employee compensation, invest in new plants and equipment, and scale up their already-impressive record of environmental stewardship.

American industry has established a strong record in environmental protection, as manufacturers want to ensure that the next generation that inherits the Earth has a bright future. “Everyone wants clean water and clean air. Everyone needs a good job and an economy that delivers new opportunities and a better life. Manufacturers are proving we can deliver both,” said Jay Timmons, President and CEO of the National Association of Manufacturers.2

As the foundation of communities, manufacturers have made substantial investments over time to minimize their environmental footprint by increasing energy efficiency, saving and recycling water, and implementing initiatives to reduce pollution and waste. They have reduced the carbon footprint of their products by 21% over the past decade, while increasing their value to the economy by 18% . Continued investment in and commitment to innovation will ensure further progress toward reducing environmental impacts and increasing sustainable operations.

The NAM’s Sustainability Partnerships 

The NAM is the voice of 12.8 million men and women who make things in America. We represent 14,000 small, medium, and large companies across all industrial sectors in all 50 states. Every one of these manufacturers works tirelessly to serve the communities in which they and their workers reside, as well as the customers that rely on their goods and services.

Our members remain steadfast in support of protecting the environment. The NAM continues to aid these efforts through its recently launched Sustainability in Manufacturing Partnerships with the Department of Energy’s (DOE) Better Plants Program and the Environmental Protection Agency’s (EPA) Smart Sectors Program.

The NAM’s partnership with DOE helps manufacturers explore emerging technologies, evaluate future energy problems, and encourages the adoption of energy-efficient and sustainable practices.3 Joining forces with the EPA fosters greater collaboration across industrial sectors and creates unique opportunities for NAM members to highlight how their sustainable practices are improving the manufacturing process and changing the way products are made in America.4 By sharing their stories, companies learn from the best practices of their industry peers. Importantly, the Sustainability in Manufacturing Partnerships bring more awareness to the resources offered by DOE and EPA and provides a national platform where manufacturers can showcase their deep commitment to sustainable growth, which, in turn, will continue to strengthen American manufacturing competitiveness.



Ingersoll Rand has extended
its climate commitment
with initiatives in wind power and solar energy.

Modern manufacturing is more green, high-tech, and innovative than ever before. When the NAM surveyed its member companies about their sustainability attitudes, the results were overwhelmingly positive. The responses revealed that manufacturers remain committed to safeguarding the health and longevity of our plants and its people, as 72% of manufacturers reported having a sustainability policy in place, while another 8% are currently developing one. 5

Notably, 94% of those surveyed are tracking energy usage and 81% are monitoring water consumption. These impressive majorities also report how they are taking action.6

For example, Ingersoll Rand recently extended its climate commitment by signing a purchasing agreement for wind power that will account for 32% of its U.S. electricity use and started a solar energy initiative that will soon cover 15% of its energy load. Union Pacific reduced its energy consumption by 3.8 million kilowatt hours in 2017.7

Manufacturers are also taking bold steps to reduce waste and increase recycling, with 82.5% monitoring waste generation and 76.3% administering a recycling program. 8

When wallboard waste comes back to USG Corporation’s Rainier, Oregon plant, a machine separates the gypsum core from the paper. The paper is then sent to a local dairy farm where it is used for bedding, while the recovered gypsum goes back into the manufacturing process to be recycled into new wallboard. According to USG Corporation, this new system enables them to meet increased customer demand for products higher in post-consumer recycled content. 9

Construction and materials manufacturer Saint-Gobain started using a cooling tower to save water at its Riverport, Kentucky facility in 2012. Within three years, it had eliminated water withdrawal from a well it had used for years (at 131 million gallons in 2012). The company finished the job by sealing up the well. 10

Embracing Environmental Stewardship 

As leaders of American industry, it is evident that NAM members are committed to reducing their environmental footprint. Moreover, many companies are making the decision to embrace environmental stewardship, the responsible use and the protection of the natural environment through conservation and sustainable practices.

As evidence of this, 62% of manufacturers reported, in the NAM survey, that they prefer to incorporate sustainability into their business model, while 50.7% are propelled by market/consumer demands. While NAM members reported that these are the leading reasons why they are going green, the survey also revealed that 49.3% of manufacturers are driven by customer demands, 46.5% are motivated by government regulations, and 39.4% are influenced by investor demands. However, 36.6% of survey participants checked “all of the above”, as they felt that no single element listed in the survey question dominated their decision to implement sustainable practices. 11

“From our point of view, emphasizing environmental sustainability is the right thing to do, but we also think it is good business,” said Tom Linebarger, Chairman and CEO of Cummins, a survey. respondent. “There’s no question that our focus on environmental innovation and leadership has caused our company to grow, to become more profitable and to increase our appeal with big companies that would like to partner with us because of our leading technologies. At our facilities, we’ve installed environmentally sustainable technologies that offer a win-win: less environmental impact and cost-reduction benefits.” 12

From the start of the Industrial Revolution to the present day, one thing is clear: American manufacturers are pioneers that make modern, everyday life possible. As inherent problem solvers, industry recognizes that manufacturing in the twenty-first century means working to minimize natural resource impacts, increasing efficiencies and conservation, optimizing raw material input, and reducing waste output.

As a nation, we have entered a new era where manufacturing and environmental stewardship go hand-in-hand. There is no going back. A high standard of living depends on environmental conservation and continued economic development. Through innovation and advanced technology, manufacturers strive to enhance the industry’s contributions to environmental protection, economic performance, and the social well-being of their employees and customers. NAM members have an eye toward the future and are mindful that the environmentally conscientious steps they take today will have a profound impact on communities nationwide in the months and years to come. M

1 Moutray, Chad and Berkey-Ames, Laura. “Manufacturers are Leaders in the Green Revolution.” The Hill. 9 October 2019.

2 National Association of Manufacturers. May 2019. Manufacturing’s Commitment to Sustainability: Supplemental Survey Report on Manufacturers’ Goals, Achievements and Investments in Sustainable Practices.

3 Berkey-Ames, Laura. “The NAM and DOE Join Forces to Champion Sustainability in Manufacturing.” Web blog post. National Association of Manufacturers. 20 April 2018.

4 Berkey-Ames, Laura. “The NAM and EPA Announce a New Partnership to Highlight Sustainability in Manufacturing.” Web blog post. National Association of Manufacturers. 19 October 2018.

5 National Association of Manufacturers. May 2019. “Manufacturing’s Commitment to Sustainability.”

6 Ibid.

7 Ibid.

8 Ibid.

9 Ibid.

10 Ibid.

11 Ibid.

12 Counsel, Laurie. “How Cummins Is Emphasizing Environmental Sustainability in Its Manufacturing Sites.” Web blog post. National Association of Manufacturers. 17 May 2018.

Digital Twins

Transition from atoms to bits in manufacturing reduces waste in time, energy, and materials By Dr. Michael Grieves

As a 21st-century concept, the Digital Twin captures the idea that we are moving work from the physical world into the virtual one. It moves toward using bits, which are getting cheaper all the time, in place of atoms, which are getting more expensive. We are replacing expensive physical time, energy, and material with much cheaper digital information.

The Digital Twin is the concept driver behind Manufacturing 4.0. It moves us from a functional-centric approach to a product-centric one. It integrates manufacturing as a critical aspect of product creation, so that how to manufacture products is not an after-thought once a product is designed and engineered.

With the Digital Twin approach, our ideal is to design the product virtually, test the product virtually, manufacture the product virtually, and support the product virtually. We want to do this in an integrative, holistic fashion across functional disciplines. Only when we get the product to its desired functionality do we physically manufacture it.

This approach will increase both efficiency, which is reducing cost and resources, and effectiveness, which is producing quality products that will perform the functions their users require.

Components of the Digital Twin 

The conceptual model of the Digital Twin is shown in Figure 1. The Digital Twin model consists of three components: a) physical space and products that we have historically worked with; b) the new virtual, digital space and products; and c) the connection between the physical and virtual. This connection is commonly referred to as the “Digital Thread.”

Because the Digital Twin concept spans the entire lifecycle of products consisting of create, build, operate/sustain, and dispose, there are different Digital Twin types. The three types of Digital Twins are the Digital Twin Prototype (DTP), the Digital Twin Instance (DTI), and the Digital Twin Aggregate (DTA) (Figure 2).

The Digital Twin Prototype is all the information we need to build physical products. The DTP originates first. In its ideal form, it is the information needed for all the products that we can build.

Second, the Digital Twin Instance is the representation of an actual physical product instance that we have built. The DTI remains connected to its physical form and behavior throughout the entire physical product instance’s life. Products that are of high value and operational complexity required DTIs. We need Digital Twins for airplanes, oil rigs, and pacemakers. We don’t need DTIs for paper clips.

Finally, the DTA is a representation of all the products that were already built. By collecting this information and aggregating it, we can do such things as failure prognostication and machine learning.

The manufacturing process of building products requires the DTP, the information necessary to produce a specific product, and produces the DTI, the information of what and how a product was actually manufactured. The manufacturing process itself consumes the DTP in order to improve product quality and supplies the DTI that can then be used for the life of that particular product.

When it comes to managing factories and their production processes, manufacturers use the DTIs of their machines to gain visibility into factory operations at every tick of the clock. It uses the DTA of those machines to not only reduce downtime, but to predict machine failures so that potential problems can be remedied before failure ever occurs. The Digital Twin is a concept that enables Manufacturing 4.0.



The Digital Twin supports three of the most powerful tools in the human knowledge tool kit: conceptualization, comparison, and collaboration.

Information as Replacement for Physical Resources 

The value of the Digital Twin relies on a premise that is implicitly well known but often not articulated well: The premise is that information is a replacement for wasted physical resources, i.e., time, energy and material. As the left side of Figure 3 shows, we can take any task and divide it into two categories. The lower category in green represents the minimal use of resources in performing this task. If we were omniscient and omnipotent, this is the amount of resources that we would expend in completing our task. The upper part in red represents resources over and above the minimum amount of resources that we should expend.

Since we are neither omniscient nor omnipotent, we generally spend a substantial amount of resources more than necessary. In today’s vernacular, the lower green area would be referred to as “lean manufacturing.” The intent of all lean manufacturing methodologies is to eliminate waste and produce products with the minimal amount of resources. Since we live in a capitalist society, we translate the physical resources of time, energy, and material into monetary cost. We can calculate the costs to do the specific task, especially manufacturing tasks.

The right side shows the impacts of utilizing information in the performance of our task. Information is a substitute or replacement for the physical resources of time, energy, and material. However, it is only a replacement for those resources that are wasted. As the figure shows, the amount of physical resources that we need to expend in performing the task in the most efficient and effective manner stays the same. What changes is that an increasing amount of wasted physical resources are replaced by information.

This is the ideal. In reality there will always be some wasted physical resources. As on the left side, we can calculate the cost of performing the task by replacing wasted physical resources with information. Unfortunately, it is a little more difficult since by its very nature information does not have a unit of measurement. There is no ability to say we have used X units of information in performing the task. However, we can get at a proxy of the cost of information by analyzing the costs involved in producing, storing, and retrieving information. The proxy costs for these are such things as hardware, software, IT resources, and similar costs. If we are buying software as a service, the cost of information is more readily available.

So in order for us to use information as a replacement for wasted resources, we need to keep this in mind: The cost of information needs to be less than the cost of wasted resources over all the times that we perform the task. This means for simple one-time tasks, it makes no sense to create an information system to replace using trial and error and, therefore, likely wasting resources. However, when there are repeatable tasks on a continuous basis, using information as a replacement for wasting resources makes great sense. This is the essence behind smart manufacturing, or Manufacturing 4.0: using Digital Twins as a replacement for wasted resources.

Conceptualization, Comparison, and Collaboration 

The Digital Twin capability supports three of the most powerful tools in the human knowledge tool kit: conceptualization, comparison, and collaboration. These capabilities are a major enabler of sustainability. This is especially true in manufacturing where consistency and repeatability are critically important.
Conceptualization: Computers process differently than humans. Computers perform step-by-step

processing that builds information structures from the bottom up. People try to build conceptual, visual models that they change and modify as they collect data.

Prior to the advancement of Digital Twins, people have struggled with building their conceptual model from fragmented data and reports. Especially in the manufacturing environment, people have built conceptual models of what is happening from report data. Even more problematic, because the data is so fragmented and siloed, different people can and do easily build different conceptual models that conflict with each other. This leads to not building consensus on problems and/or working at cross purposes.

The Digital Twin is a conceptual model, so that its visualization can now be a shared visualization. Instead of trying to build up individual conceptual models, the Digital Twin allows a shared understanding and for drilling down into the data. Shared conceptualizations lead to increased efficiencies on the factory floor (see figure 4).

The Digital Twin, with its inherent emphasis on conceptual visualization, allows all manufacturing participants to see the same conceptualization. All participants can see the factory operations and anomalies. System alerts can draw participants to the issues that need attention.

Comparison: Comparisons are one of the most fundamental decision tools humans possess. We spend almost all waking moments assessing our situation, comparing it to what we want our situation to be, and then taking action to close the gap between where we are and where we want to be. For manufacturing, it’s critical to perform this process continuously in order to keep that gap as small as possible.

With the Digital Twin of our factory updated in real time, we have all the information we need so that, instantaneously and simultaneously, factory personnel can have a holistic view of their operations.

While much attention in Manufacturing 4.0 is given to reducing the time from an adverse event to remediation, correlating past failures with leading sensor indicators using DTAs should allow us to predict equipment failures and remediate them before they occur.

Collaboration: One of the key aspects of Manufacturing 4.0 is collaboration. In order to produce products more effectively and efficiently, functional information silos with duplicative and inconsistent information need to be eliminated. This needs to occur not only within the organization but across the organization’s supply network.

The Digital Twin enables this by providing a product-centric view that everyone in the organization populates and/or consumes information from. Because information is highly granular, meaning that we do not need to share all or nothing like we do with physical things, we can share specific pieces of information with suppliers so that they can do their tasks more efficiently and effectively.

As importantly, suppliers can transmit back the information from their own Digital Twins, allowing manufacturing customers to see those products as they are taking form. This can be done well in advance of the actual physical product arriving at the loading dock. This would allow manufacturers to react early to supplier problems well before defective products arrive and potentially lead to a crisis.

Within the organization, the Digital Twin enables functional areas to collaborate to produce better products at reduced costs. With exponential increases in computing technology, collaborating in virtual space with a Digital Twin will allow for the different functional areas to have input into product creation. Fast cycle times of design, engineer, build, and test of Digital Twins will provide visibility and continuity of design intent.

The Value of the Digital Twin 

This leads back to the underlying premise of the Digital Twin: information as a replacement for wasted physical resources. Moving work from the physical world to the digital one can improve sustainability by reducing waste and identifying potential efficiency improvements. We can be more effective in developing products that perform to user expectations.

The capabilities of conceptualization, comparison, and collaboration enabled by the Digital Twin make an integrated, holistic approach to product development a reality. Manufacturing 4.0 moves within reach. The 21st century promises to be very different for the manufacturing industry compared to the 20th century. The Digital Twin will drive that difference. M

Five Steps Toward Building an Ethical Supply Chain

Consumer buying decisions more increasingly hinge on where goods come from and how they are made By Mark Morley

In addition to the economic, competitive, and regulatory pressures they have already faced for years, procurement and purchasing managers around the world have a new one on their list: the drive for responsible or ethical sourcing. With consumers increasingly conscious and informed about how the goods they buy are sourced, manufactured, and distributed, manufacturing companies more often find that their brand reputation and perhaps even profitability hang in the balance based off of their sustainability practices.

Consumer consciousness about environmental practices has grown since the first Earth Day celebration in 1970. This has brought green working practices to the forefront of how companies operate today and includes such initiatives as deploying paperless operations, reducing CO2 emissions, and improving energy efficiency. They have also developed additional corporate social responsibility initiatives. A recent OpenText survey in partnership with TechValidate found that 92% of companies said that their CSR reputation was important for their overall reputation in their respective markets.

Here is one great example from a well-known electric vehicle manufacturer. When they aspired to build the world’s best electric vehicle, they knew they had to ensure that all parts, especially those visually exposed to the driver and passengers, were ethically sourced. So even though they are positioning their vehicles in the premium sector, they decided to use a synthetic material to cover their seats vs. leather, which is found in every other premium vehicle.

Many businesses and retailers are making consumer-facing changes to how they operate, from charging for plastic bags or replacing them with paper bags, changing from plastic food packaging to recyclable packaging, replacing plastic straws with paper alternatives, and reducing single-use plastic bottles. While these are relatively small steps to developing sustainable working practices, their public visibility could influence consumer buying decisions.

Similar initiatives are being rolled out across the industrial sector with a clear focus on how manufacturers can reduce their carbon footprint, ensure that suppliers are ethically selected, and work with partners such as third-party logistics carriers that embrace similar ways of working when it comes to distributing manufactured products.



The IoT in combination with other technologies like blockchain can capture source information and retain the provenance of goods.

As with many industry sectors, technology can have a major role in developing more ethical or responsible sourcing of parts or raw materials. For example, companies have been digitizing supply chains since the early 1970s, converting paper-based information flows into electronic flows. Electronic Data Interchange or EDI has helped digitize information flows and is now part of the DNA that makes up most supply chain operations around the world. However, many companies still see it as a challenge to digitize 100% of their supply chain operations.

So how does a company establish a more digital and ethical supply chain? The first step in this journey is to identify trustworthy suppliers to work with.

Identify trustworthy suppliers  

Before embarking on an ethical supply chain strategy, it is important to ensure that you can find potential trading partners who have the same ethical working practices as you have within your own business. One such solution is provided by OpenText. Their Global Partner Directory is a centralized repository of over 550,000 trading partner profiles. This allows companies to search for potential trading partners based on specific search criteria, such as whether they use sustainable working practices, if they are using conflict free minerals in their products, if they operate with fair labor practices, etc. Being able to trust who you are working with helps to embrace ethical working practices across the end-to-end supply chain.

Secure trading partner relationships  

Once a supplier has been selected then it is important to secure their interaction with your company. Identity and access management platforms can assign a digital identity to trading partners across your business ecosystem. You can ensure that outside business partners such as 3PL carriers have secure access into your internal logistics and warehouse management systems.

Suppliers may need secure access to inventory systems if they are operating within a vendor managed inventory system and other external contractors may need secure access to enterprise systems and information based on their role within your digital ecosystem. Securing the supply chain helps to increase trust and minimize risks across trading partner relationships.

Digitize your supply chain  

Once you have selected and secured the trading partners that you wish to work with, then they need to be connected electronically to your business operations so that you can establish an end-to-end digital supply chain across your business. Ideally this would be through a cloud-based data integration environment so that your supply chain platform can scale according to consumer demand or market conditions. In the same OpenText/TechValidate survey referenced earlier in this article, 50% of respondents said they were implementing digital supply chains today to help remove manual, paper-based information flows from their business. Embracing a digital supply chain also helps prevent the falsification of manual, paper-based supply chain documents and is hence an indirect way to reduce the amount of counterfeit parts entering the supply chain operation, especially in the aftermarket sector.

Monitor shipment provenance  

Knowing the source of all parts that make up a product is key to building trust and protecting the reputation of a business. A company now can track both the movement and monitor the condition of goods as they move through the supply chain. The Internet of Things (IoT) in combination with other technologies such as blockchain can help capture source information and retain the provenance of goods as they move through the supply chain.

For example, to ensure that it was ethically sourced and adherent to conflict-free sourcing agreements, a GPS sensor was applied to a container of gold that was mined in Africa, shipped by sea to the UK, and then used to manufacture gold connectors. These connectors were then used in automotive wire harnesses and fitted to vehicles.

If later on a fire breaks out in a vehicle and the source of the fire is found to be the wire harness, a potential government recall may ask to identify all suppliers who were involved with the manufacture of the wire harness. Evidence in the blockchain can immediately identify where the gold came from (and other materials) and even the mine from which it was obtained. Blockchain stands to transform ethical sourcing practices and many companies are just beginning to understand blockchain technology and how it can be applied across their business.

Gather ethical insights 

Obtaining insights into trading partner performance and knowing the ethical pulse of supply chain operations is a key challenge today. But leveraging advanced analytics, AI and machine learning tools can help derive the insights required by today’s manufacturing executives. AI stands to transform future supply chain operations and provide a way to ensure supply chains are meeting ethical standards and goals by applying measurable KPIs that can be applied to every trading partner across a supply chain operation. Company executives will be able to use advanced AI dashboards to monitor the ethical performance of trading partners and use this information to renew supply contracts with well performing suppliers and terminate contracts with under-performing suppliers.

Manufacturers today are clearly facing some key market and operational related business challenges. Those that can navigate through these challenges and establish more ethical supply chain operations will be the ones that win market share and increased trust from today’s consumers.   M

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