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Smart Building Trends in 2021: Making a Sustainable Future Possible

Cities take a huge toll on our planet, consuming 78% of the world’s energy and producing more than 60% of greenhouse gas emissions. These statistics have led the EU to invest €100bn into the European Green Deal, which aims to make Europe the first climate-neutral continent in the world by 2050. As the infrastructure and real estate sectors play a major part in city development, the construction of smart buildings is the most viable solution for long-term sustainability.   

What is the link between smart buildings and sustainability? The answer lies in the emerging smart building trends we are about to discuss.

 

Drivers for Smart Buildings  

 

According to the study, The Future of the European Built Environment, urban planning in Europe will be shaped by the following drivers:  

  • Urbanization – Rising urbanization will result in rurban (rural/urban) areas and the relocation of cities  
  • Climate change – A strong focus on climate-neutral buildings to slow down the negative impact of climate change  
  • Resource scarcity – From design to deconstruction, there will be a need for biobased alternatives and circular resources  
  • Changes in population – A growing aged population may decrease the availability of labor 
  • Focus on health and wellbeing – Buildings will integrate more green spaces and preventive health measures such as the removal of toxic components 

The study also predicts that buildings will embody these eight characteristics by 2050: 

  • Climate-resilient structures to withstand natural disasters 
  • Flexible buildings that are scaled to facilitate multiple functions 
  • Cognitive buildings that have automated internal climate management  
  • Focus on performance in terms of sustainability and energy use will determine the building’s value 
  • Enabling working and living in a 24-hour economy with combined working and living spaces as well as 24-hour connectivity 
  • Circular buildings consisting of reusable and biobased materials   
  • Energy-positive buildings that are efficient and free from fossil fuels  
  • Support a healthy lifestyle through healthy noise management, optimal temperature and clean air 

Several cities in Europe are already making strides to become greener and smarter. For example, Copenhagen is on the way to becoming carbon neutral by 2025 with business clusters powered by renewable energy and high R&D investments in sustainable sectors. In addition, Lahti was named the European Green Capital 2021 by the European Commission. The city aims to be carbon neutral in four years’ time, setting an example for the rest of Europe and bringing Finland closer to its target of achieving carbon neutrality by 2035.   

 

Smart buildings and COVID-19

 

As the world slowly recovers from the pandemic, we will see people returning to public and shared spaces to restart their professional and social lives. Therefore, living and working spaces need to be upgraded to safeguard our health and well-being. Facilities managers must equip their buildings with effective ventilation and air quality to minimize the spread of the virus.  

Besides that, touchless technology such as voice-activated elevators, hands-free doors, and phone-controlled door locks will lower the risk of touching contaminated surfaces. Smart buildings will also enable data collection on tenants, allowing building managers to easily identify and inform occupants if an individual has been infected with the virus.  

 

Trend #1: Predictive Maintenance in Smart Buildings

 

One way for buildings to become smarter and more sustainable is with the integration of predictive maintenance. It allows full cost optimization by recognizing equipment that needs fixing before it fails – reducing the amount of expensive last-minute repairs and renovations.  

Predictive maintenance also plays an integral role in running a building’s heating, ventilation, air conditioning, and refrigeration (HVACR) systems efficiently. This is especially important for buildings where continual and correct operations are critical, such as airports and hospitals.  

In addition to making buildings smarter, predictive maintenance also makes them more intuitive. These buildings have systems in place to automatically turn the lights on when people are detected in a room, adjust an area’s ventilation depending on its CO₂ levels, and regulate heating and air conditioning. Predictive maintenance allows for optimal energy efficiency, reliability, and comfort.  

In this IBM case study, the 24/7 Connected Services offering on IBM Cloud has helped KONE embed predictive maintenance in their elevators. With 24/7 Connected Services, elevator safety has improved with the reduction of equipment downtime, detailed information about equipment performance, and fewer faults.  

 

Trend #2: Smart Building Data Management 

 

IoT is an irreplaceable component in smart buildings to power data-driven digital services. These services are not only useful for building management but also for the overall tenant experience. Nowadays, tenants can download and utilize apps with features that maximize convenience and safety. Examples of features include navigating available parking spots, booking shared facilities, and receiving notifications on building updates.  

The complexity of the real estate landscape today with large numbers of stakeholders, growing portfolios, and siloed systems demands for a streamlined data-driven platform. That is exactly what Fabriq created to manage Google’s European real estate assets which include offices and data centers. The IoT platform not only tracks the consumption of energy and resources but also flaws in building operations. This resulted in fewer carbon emissions, lower costs, and efficient use of resources.   

The surge of smart technology in buildings will give rise to challenges such as data overload, difficulty in selecting the right data source, and issues with data verification. Therefore, it is imperative for building managers and owners to address these challenges to ensure the chosen smart technology works seamlessly and brings about attractive ROI over time. They must conduct thorough reviews of the building and its facilities, carry out interviews with potential occupants, identify data points and filter out important information, and streamline data verification techniques.

 

Trend #3: Cybersecurity for Smart Buildings 

 

As buildings become smarter, they naturally are at a higher risk of cyberattacks. Common vulnerabilities with smart building systems are minimal password protection, multiple connected devices and systems, maintenance from third-party companies, and security limitations with old buildings.  

Physical security is no longer enough to protect a building’s occupants. Building owners and managers must ensure effective cybersecurity measures are in place to steer away from cybercriminals. Products like the Desigo PXC4 and PXC5 controllers by Siemens are designed to help smart building managers prevent security breaches by having a strong protection policy, signed firmware, and encrypted communication with the embedded web interface.  

Fortinet also recommends the following steps for creating a robust security-first strategy – develop an overarching security plan, increase the visibility of smart building devices, and form strategic relationships with security technology suppliers.  

 

Trend #4: Smart Materials in Construction

 

The contribution of smart buildings to sustainability begins in the construction phase. Emission levels can be greatly reduced in the following areas: 

  • Materials: The use of fewer materials, more climate-friendly production of materials, and finding more sustainable alternatives.  
  • Transport: Introduce modes of transportation with less climate impact and increased electrification. 
  • Energy and heating: Increased energy efficiency through renovation, higher sustainable energy requirements, and fewer fossil fuels for district heating production. 
  • Waste: Buildings designed with increased flexibility, rebuilding, and material recycling in mind. 

Several technologies are already in the works to enhance and create smarter materials to withstand external changes. The materials used to construct a building plays a big role in how energy efficient and sustainable it will be in its lifetime. A good example is Helsinki’s Wood City – a sustainable urban hub with wood as its main construction material. The multi-story buildings of Wood City are made from fire-resistant Laminated Veneer Lumber (LVL) and timber, which is reusable, cost-effective, and low carbon.  

The demand for climate-resilient and sustainable projects in the form of smart buildings is expected to grow exponentially. Buildings in the future will continue to leverage smart technology to maximize their lifespans and mitigate the effects of climate change.

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Towards Supply Chain Resilience: Highlights from Nordic StrategyForum Supply Chain and Procurement

At the recent Nordic StrategyForum Supply Chain and Procurement virtual event by Management Events, supply chain decision makers gathered together for interactive discussions on rising trends and concerns.

Covering issues from business adaptation and remote working to management styles, in-depth insights were abound throughout the discussions.

 

TAKING ADVANTAGE OF CHANGES

 

As one of the largest disruptions that the supply chains have ever experienced, the COVID-19 pandemic took many companies by surprise with challenges such as the availability of materials, pricing, and delays in new vendor development.

A Chief Supply Chain Officer (CSCO) observed that every 5 to 7 years, there’s some kind of event that affects the global supply chain, like the 2010 Icelandic volcano eruption and the 2011 tsunami and Japanese nuclear reactor disaster.

But the disruptions caused by those events lasted for about a month, whereas with the coronavirus outbreak, the disruption has lasted more than 7 months so far with no near end in sight. Many supply chain leaders expressed that the ensuing supply chain upheavals were unexpected and unprecedented.


Management Events’ Nordic StrategyForum Supply Chain and Procurement

 

For instance, there was suddenly a drop in the availability of pallets, containers and packaging. As one attendee mentioned, “There were premiums on getting containers, leaving our goods stranded in production countries.”

“Then there was the increase in demand for toilet papers, consumer goods, home office equipment and medical goods while demand for cars and machinery suddenly halted. These were very volatile times.”

In regards to that, a participant shared that being closer to the end market is vital at the moment.

 

“We have to understand the demand picture and be more involved in how supply is working. We also have to understand the customers’ needs and be even more service-minded about fulfilling the needs.”

 

The disruptions that emerged from the pandemic were also concerning for supply chain executives as countries experienced waves of the virus and lockdowns at different times.

“The crises you are working on keep changing,” voiced a supply chain leader. “From March, you try to stay ahead and stock up on the right products in the right location. Spring was quite good, but then suppliers were forced to close down so even if you have the chain open, production has stopped.”

 

Others expressed the same sentiment:

  • “There are always new things coming up, always a new hurdle to go over.”
  • “There have always been hurdles in the supply chain, but now they are coming at a faster pace.”

 

However, some have taken the changes in stride, learning from the first COVID-19 wave and preparing for growth and agility opportunities:

  • “These changes have forced us to make faster decisions, but this is also better decision-making.”
  • “We have become more sustainable as a company, going from supply chain via air to sea.”

 

As commented by a top supply chain manager, “It is volatile now, but in the long term, this will stabilize,” and while the pandemic was a shock back in March, the shifts undertaken were “mostly minor permanent changes”.

 

Join us: Don’t miss the next Nordic StrategyForum Supply Chain and Procurement coming in October 2021 for the latest trending supply chain issues and topics.

 

RISKS AND RESILIENCE

 

“This is a ‘new normal’. Will this affect the way we think about risk?” one of the leaders questioned. “Will this lead us to be more resilient in the future?”

According to a participant, COVID-19 offered a chance to reconsider risk strategies and situations, such as the risk of no delivery from a cheaper, offshore delivery versus a more expensive but guaranteed, nearshore delivery.

Another risk assessment includes planning supply chains amid local lockdowns of regions, countries and hubs. As a decision maker probed, “If a hub is locked down, how do you ensure supply chain from other locations?”

This is a particular concern with the participants because the lockdowns affect various parts of the supply chain at different times and in different countries.

 

“There are lockdowns that stop delivery of raw materials, lockdowns of factories, and lockdowns that stop shipments, so it’s not a lockdown that happens all at the same time, but in random order.”

 

A supply chain manager commented the challenge was bigger for those who source products from European suppliers while another specified that, “Electronic products were the most difficult to obtain as they all come from Asia.”

Others related that Tier 2 suppliers were the actual challenge with the participants encouraging end-to-end talks to better connect the supply chains and searching for source alternatives to ensure sustainable supply chains for the future.

There were other topics brought up during the discussion on risks. One of which was the leverage and advantage of having a decentralized supply chain model, and the other was on the issue of Brexit, which a top-level executive stated is a big risk within the supply chain.

 

 

REMOTE WORKING

 

Many of the participants mentioned positive factors about their current work situation, citing efficiency, savings on time and costs, and faster decision-making as some of the upsides of remote working.

“Remote work is surprisingly good,” exclaimed a CSCO. “For global supply chain, you were already used to working remotely with global teams, but this change has intensified the investment in tools and processes for better remote working.”

“People working from home meant quicker implementation of digital solutions, and employees are more willing to use these new tools.”

Another reported that, “From the HR perspective, it turns out that remote work is a competitive advantage for white-collared workers. Alot of employees enjoy working from home due to the balance of work and family.”

However, there are concerns with remote working.

“In Europe and the USA, there’s an issue with ergonomic working spaces at home,” an attendee shared. “While in other parts of the world, such as Africa and Asia, there’s an issue with local internet connections and connectivity.”

Others shared that it’s hard to conduct remote team building, and that some employees are still unused to virtual working. Furthermore, even with the benefits of remote communication, there is still the need to have real meetings and contact with colleagues and customers in the future.

 

Upcoming events: Network with decision makers and solution providers for more in-depth insights in our supply chain events in Germany, The Netherlands, Sweden, and Finland.

 

DIGITALIZATION IMPORTANCE

 

As can be seen in many industries, the implications of COVID-19 drove huge advances in digital progress, and decision makers in the supply chains agreed that digitalization is one of their most important projects and investments.

“The crisis led to rapid developments in virtual inspections through camera, with video meetings allowing us to record what is seen and said during the inspections,” a C-level executive revealed.

“It saves a lot of time compared to sending people around the world. Of course, we still need to go there, but first checks can be done virtually even if final checks are done in-person.”

Nevertheless, supply chain organizations have to step up with the digital processes and routines to ensure they are continuously updated with all the markets and functions in their company.

 

 

CHANGE IN MANAGEMENT STYLE

 

While many of the participants mentioned that their companies have taken the opportunity to develop their workforce and invest in educational and university courses for their staff, they have also made changes to their leadership style.

A senior executive commented that calm management is the key in handling this large and demanding crisis. Others agreed with the statement, claiming that leadership in general is vital – not just with the team but with suppliers as well.

Some explained that their management approach has changed into a more coaching style whereas others were focused on promoting better team spirit and culture by having daily meetings to produce more efficient employees.

However, similar to the discussion findings in Sweden 600Minutes Executive IT, the biggest management challenge is with new employees, from remotely onboarding them to building team rapport from a distance.

 

 

THE FUTURE

 

As the world moves into 2021 with the coronavirus still affecting businesses around the world, supply chain leaders need to make preparations for multiple case scenarios coming in the future months.

From new waves of the virus and the facilitation of the COVID-19 vaccine to implications from loosening lockdowns and repeated changes in customer demands, sustainable and resilient supply chain solutions will undoubtedly be foremost in the minds of Chief Supply Chain Officers.

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Supply Chain Visibility: Building Resilience Beyond COVID-19

Supply chains have always been vulnerable to disruptions, from natural disasters to geopolitical issues. But supply chains of the modern era have never faced the level of upheaval as the one brought by the COVID-19 pandemic.

“Events like coronavirus are rare,” commented Samuel Mathew, Global Head of Documentary Trade at Standard Chartered, “but the impact of them are so much greater because the world is so interconnected.”

In these past months, the outbreak exposed the vulnerabilities of the decades-old globalization strategy of interdependent and multiple-tier sourcing, driving organizations to take a long hard look at their supply chain strategy for business continuity and growth.

 

RETHINKING SUPPLY CHAIN VISIBILITY

 

An often cited example of supply chain disruption is the shortages faced by automotive factories due to the devastating earthquake and tsunami that hit Japan in 2011.

The impact of the natural disasters was not only felt by local manufacturers. International assembly facilities and automotive brands were also forced to stop or slow production due to parts shortages by lower-tier suppliers located in the affected area.

The multi-tiering supply network combined with lack of data and information created a domino effect that spanned across the world. And 9 years later, organizations are facing the same issues brought by a new threat, COVID-19, prompting business leaders to emphasize further on end-to-end supply chain visibility.

 

  • Big Data and Analytics

 

Management Events’ recent Executive Trend Survey found that 64% of supply chain executives named data science and analytics as their top investment priority for 2021.

The finding corroborates with Oxford Economics’ research study, where 86% of executives believe that supply chain visibility and flexibility can be increased by the use of big data, which some organizations have been investing heavily in.

For example, Georgia-Pacific, a manufacturer of tissue, packaging, paper and other products, is working on a data consolidation project to merge all their data while using a data analytics logistics service to estimate delivery times.

Milind Balaji, Senior Supply Chain Manager at Georgia-Pacific, disclosed that the biggest problem is knowing where the products are, and that real-time insights could help with decision-making on rerouting or storing the shipments differently in the case of unexpected events.

 

“Supply chains are increasingly becoming data-driven, and businesses that lack visibility into core supply chain functions fall behind when it comes to making informed business decisions.”

– Why End to End Supply Chain Visibility Matters in the New Normal

Quantzig

 

Data analytics also play a key part in mapping and monitoring global suppliers, allowing firms to keep track of the locations and abilities of tier suppliers and preventing single-sourcing.

General Motors has spent years mapping their supply chains, investing in analytic tools that geocode their suppliers and analyze risks associated with their multi-tier supply chain and impending crises.

This analytics approach enables General Motors to determine, within hours, the impact of a disruption to their supply chain for the days and weeks to come, giving them “lead time to execute avoidance and mitigation strategies.”

mapping the supply chain

McKinsey Global Institute seconded the strategy of mapping suppliers in their recent global supply chain report, mentioning that, “Creating a comprehensive view of the supply chain through detailed subtier mapping is a critical step to identifying hidden relationships that invite vulnerability.”

According to Fred Baumann, the Group Vice President of Global Industry Strategy at Blue Yonder, “[Big data and analytics within the supply chain] give the ability to navigate disruptions months in advance, rather than responding once they have happened. By identifying patterns in what can initially seem unrelated factors, businesses are in a better position to make immediate and effective decisions than ever before.”

 

  • Internet of Things (IoT)

 

The Internet of Things (IoT) is a game-changer in improving the visibility of every aspect of the supply chain, from shipment tracking to inventory management.

Although the primary use of IoT is still mainly on asset supervision, the emergence of the coronavirus has led business leaders to see the crucial role of IoT in real-time tracking and emergency planning.

 

  • Delivery optimization – While tracking of goods helps companies to determine the arrival and location of the products, the data collected by IoT sensors also enables businesses to identify delays and weak links in their supply chain and optimize their transportation routes for faster delivery.

 

  • Alternative routes – Additionally, IoT allows companies to make fast and data-driven route changes in case of unexpected circumstances, allowing flexible contingency planning and preventing lengthy delays.

 

  • Product monitoring – When faced with logistics disruptions, companies of old had no way to monitor the state of their products. But with IoT devices providing real-time data, companies are able to constantly monitor the conditions of their goods, especially perishable items, in their warehouses and transportation storages.

 

A prime example of IoT supply chain usage is DHL, which implemented IoT to predict market demand for cost saving and to track their trucks for increased visibility. Back in 2018, DHL launched DHL SmarTrucking in India, which leverages IoT technology for route optimization, predictive analyses, consignment tracking, and container temperature monitoring.

 

“Using a range of IoT sensor-equipped machinery throughout the supply chain means that potential problems or stumbling blocks can be flagged in real-time. Previously this would cause severe disruptive downtime. Instead, we’re seeing a systemic change in supply chain transparency and functionality.”

– Shio Muriyama, supply chain expert,

 The New Age Of IoT And The Supply Chain

 

Although global IoT spending has dropped due to the pandemic, IDC predicts that the technology will “achieve a compound annual growth rate (CAGR) of 11.3% over the 2020-2024 forecast period.”

The transportation industry is also expected to achieve double-digit CAGR in IoT spending over the period while the warehouse management market is anticipated to spend more than $19 billion on IoT by 2025.

 

  • Machine Learning

 

Based on the 2020 MHI Annual Industry Report, only 12% of supply chain executives currently employ AI in their organizations, with 60% expecting to implement the technology in the next five years.

Among the AI subsets, machine learning is often mentioned as a high-benefit technology for efficient supply chain management (SCM), and is also a top focus area for CIOs.

 

“Machine learning techniques, including a combination of deep analytics, IoT, and real-time monitoring, can be used to improve supply chain visibility substantially, thus helping businesses transform customer experience and achieve faster delivery commitments.”

– Maruti Techlabs

 

Amazon, for instance, has been using machine learning for automated warehousing and drone delivery while giving its supply chain direct control over areas such as packaging, order processing, support and logistics.

Another giant with a massive product portfolio, Microsoft, employs machine learning techniques to develop a fully integrated supply chain system that captures and analyzes real-time data, and assists in risk mitigation and quick query resolutions.

Artificial intelligence

During the pandemic, customers and businesses alike were faced with uncertainties on order shipments. But companies that modeled their operations with AI handled the disruption better than their counterparts.

“When you’re dealing with a situation like this, where information is changing constantly, machine learning models are very useful,” Bill Waid, the General Manager of Decision Management with FICO, explained in an interview on AI and supply chain. “It can very quickly crunch those numbers and make very informed estimates of what the forecast patterns are looking like.”

In fact, management consulting company, West Monroe, believes that machine learning tools “may eventually make better decisions than even the best supply chain managers.”

 

  • Control Tower Technology

 

Another rising AI solution for end-to-end supply chain visibility is the control tower – a centralized hub that Gartner describes as comprising data, processes, people, organization and technology for transparency and smart decision-making.

According to IBM, the concept has been around for more than a decade, but is getting increased attention from business leaders looking to effectively manage complex and siloed supply chain systems.

 

“In these volatile times, supply chain visibility and control have never been more important. Control tower concepts and data analytics capabilities must be upgraded to meet new demand patterns, support growth opportunities, and manage greater external risks.”

– Alexander Gunde, President of Global Technology Sector at DHL,

Post-Coronavirus Supply Chain Recovery

 

While control towers help to achieve greater efficiency and agility, there are many control tower options with distinctive capabilities and key differentiators, such as uncovering hidden costs, order optimization, and logistics management.

Hence, businesses seeking to implement control tower solutions need to have a clear purpose and defined function for the technology, whether it’s supply-chain visibility, scenario planning or alerting.

Supply chain management information resource, SupplyChainBrain, stated that, “Too often organizations aren’t clear on the scope of the control tower solution, the key functions that are included, and the span of control for the particular solution. That’s why control towers often fall short of expectations and benefits realization.”

The IBM Sterling Inventory Control Tower, for example, focuses on inventory management and provides a single almost real-time view of an organization’s inventory, including product availability, shortages, supply-demand imbalances, and supplier orders. The solution enables inventory visibility across the supply chain while identifying external impacts for faster response and better customer experience.

 

visibility into the supply chain

 

As control towers vary in definition and capability, supply chain leaders need to ascertain the right time for them to invest in the technology.

Christian Titze, the Research Vice President at Gartner, advises that, “A control tower only makes sense when the supply chain organization already has a certain degree of cross-functional integration in place — internally and with business partners. Otherwise, the tower won’t be able to observe enough signals to support accurate decision-making.”

 

ACHIEVING SUPPLY CHAIN GOALS

 

The development of data, IoT, machine learning and control tower in supply chain management substantially enhances an organization’s visibility into each stage of their product journey, enabling them to make adjustments to routes and inventories when necessary.

However, advanced technologies can only do so much. To achieve an effective and responsive supply chain, companies need to start with the problem statement.

“Ask yourself,” Anne Johnston Weaver, Global Supply Chain Intelligence Platform Leader at EY, said in an article on real-time supply chain visibility, “What problems are you trying to solve, and how does solving this problem help achieve your business goals?”

At the moment, there’s a significant gap between the need for visibility and the actual visibility of supply chains. But companies that take the effort to address and gain transparency will not just see cost savings, risk reductions and overall efficiency in their supply chain management – they will also be in an advantageous position to thrive in the markets of today and tomorrow.

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After COVID-19: The New Manufacturing Normals

sparks from manufacturing process

It’s a well-known fact that many organizations outsource their industrial and manufacturing operations to countries across the globe for lower labor and production costs.

The era of hyper-globalization brought about the creation of global value chains and high interdependencies between businesses and suppliers, interconnecting the world’s economies and supply chains.

However, the emergence of the coronavirus exposed the vulnerabilities of such interconnectivity, with lockdowns, closed borders and slowed productions causing worldwide supply shortages.

The unprecedented disruption has caused manufacturers to rethink their strategy for post-COVID-19 business continuity and growth, from the near-term actions of accelerating adoptions of digital technologies to shifting their operations for a longer-term solution.

 

INDUSTRY REINVENTION

 

Over 75% of the world’s global manufacturing outputs were impacted by the pandemic, and throughout the past months, it was evident that digitally-matured organizations have greater resilience in enduring such crises.

Unfortunately, not all manufacturers were technologically prepared for the effects of the outbreak, but many took the chance to quickly ‘adapt and adopt’.

 

  • Enhancing Data Infrastructure

 

From additive manufacturing to extended realities, Industrial Digital Technologies (IDT) were used in full force during the pandemic, proving how these smart technologies can bring resilient productivity to manufacturers in times of crisis. Among the IDTs, data infrastructure in particular is seen as a strategic asset.

 

“The COVID-19 crisis has made having access to reliable, real-time data an absolute necessity for coordinating the right medical response. In the near future, data will become an even more strategic resource across multiple facets of business and society.”

– What Will Manufacturing’s New Normal Be After COVID-19?

IndustryWeek

 

In fact, in a recent survey, Management Events discovered that over 50% of manufacturers have placed data science and analytics as their topmost technology adoption for 2021 while almost all the surveyed manufacturing executives agreed that data-driven digital business models are imperative for long-term survival.

The greater emphasis on data also means a higher adoption of data connectivity, which include the deployments and accelerations of 5G networks, Industrial IoT, cloud platforms, and cybersecurity.

 

  • Intelligent Automation & Robotics

 

Manufacturing robot armWith physical-distancing measures still ongoing for the foreseeable future, automation and robotics are key necessities in the post-coronavirus manufacturing industry. However, the machines of the future are expected to be highly adaptable and reprogrammable through artificial intelligence (AI) and software.

“Rather than having a very complex hardware manufacturing,” Maurizo Cremonini, head of marketing at COMAU, commented in an interview, “the trend is going to very lean factories where the robotized and automatized cells are managed by software, loading different recipes as needed so they can easily modify the production process.”

Suppliers such as Bright Machines, a software and robotics company, offer highly roboticized machinery, combining software, machine learning, and adaptive robotics for a more responsive production line.

“[The] key to unlocking the promise of intelligent automation,” Amar Hanspal, CEO of Bright Machines explained in an article, “is the connection of individual machines to an AI-powered software layer that configures, monitors and manages machines and operations, creating programmable and autonomous factories. We call this approach Software-Defined Manufacturing.”

According to Research and Market’s report on COVID-19’s impact on the smart manufacturing market, a positive growth in collaborative robots is still forecasted for 2020 albeit lesser than the pre-virus prediction while Fortune Business Insights expects the global industrial robots market to reach an estimate of $66.5 billion by 2027.

 

  • Improving Digital Capabilities

 

Over the past months, under-resourced manufacturing teams faced great challenges in solving COVID-19-related issues.

With necessity driving determination and innovation, the manufacturing industry found itself rapidly changing, adopting technology and enhancing digital capabilities to solve issues of distance, remote visibility and labor shortage.

There is no doubt that the industry will see five years of innovation in the next 18 months as manufacturers move to boost efficiency, cost-effectiveness, optimization and competitiveness, or risk falling behind their counterparts.

 

SHIFTING OUT OF CHINA

 

 

According to an article by the Oxford Business Group, representatives of the world’s largest economies are “publicly encouraging companies to shift their manufacturing operations out of China as part of plans to diversify global industry.”

But it’s important to note that the relocation is not wholly dependent on the pandemic.

Even before the outbreak, businesses were contemplating relocating or expanding their factories and manufacturing operations due to reasons that included trade wars, high tariffs, rising costs, and other pressures. COVID-19 only hastened the move.

However, experts relate that shifting out of China may not be as easy as it seems.

“Most companies cannot afford to consider a wholesale relocation of their factories out of China or replace their Chinese sourcing vendors,” as mentioned by multidisciplinary professional services firm, Dezan Shira & Associates.

“This is because supply chain infrastructure takes time to establish and China is at the heart of most of the world’s production, sourcing, and procurement needs.”

Instead, it seems that businesses are adopting a ‘China+1” strategy, where China remains as the main source of operations with diversification in other countries.

 

“Ultimately where we’re heading to is more fragmented manufacturing — many small factories of the world.”

– Gerry Mattios, expert vice president of Bain & Company, Singapore,

China May Become One Of Many Hubs As Companies Diversify Manufacturing After Coronavirus Shock

 

  • Spreading Throughout Southeast Asia

 

Based on Kearney’s annual Reshoring Index, the report shows that U.S. manufacturing imports are shifting away from China to other Asian low-cost countries (LCCs), with Vietnam taking the lead.

Out of the $31 billion in U.S. imports from Asian LCCs, Vietnam absorbed 46% of the imports due to the multiple benefits the country offers to manufacturers, such as:

 

  • Access to the ASEAN free trade area,
  • International trade pacts with Asia, EU and U.S.,
  • Major developments in industrial infrastructure, and
  • Lower labor costs than China.

 

Apple has already stated that the organization is seeking to relocate 30% of their AirPods productions to Vietnam, while Google and Microsoft are shifting parts of their manufacturing lines to Vietnam and Thailand.

In spite of the increased relocation to Vietnam, Kearney’s report noted that “not all of Vietnam’s gains represent a true relocation of production from China to Vietnam” as part of the shifts may be “temporary tactics to avoid tariffs.”

Other Asian countries that are benefiting from the diversification or actively courting manufacturers include the Philippines, India, Thailand, Indonesia and Malaysia.

India, for instance, is enticing global smartphone manufacturers to set up factories with its new incentive program and a 462,000-hectare land pool for 10 sectors. Meanwhile, in the Philippines, a defence industrial complex has been created to encourage manufacturing plants from defence firms.

 

  • Moving Closer To Home

 

Countries such as Japan, the U.S. and U.K. as well as in the Europe continent are already underway with their plans for a local or regional manufacturing network.

In April of 2020, Japanese Prime Minister, Shinzo Abe, unveiled a massive $992 billion stimulus package, whereby $2.2 billion have been allocated to help local organizations shift their manufacturing plants back to Japan.

The U.S., on the other hand, had previously shown increasing manufacturing shifts to Mexico in 2019, according to the Kearney report. The finding is further strengthened by the 2020 International Trade and Trends in Mexico Survey Report by Foley & Lardner LLP, whereby respondents from the manufacturing, automotive and technology industries plan to move their business to Mexico within the next one to five years. 

 

“80% of those considering or planning a move to Mexico from another international location intend to do so within the next two years [while] two-thirds of respondents [not doing business internationally] are planning to begin operating in Mexico within the next year.”

– U.S. Executives Enthusiastic About Expanding Business in Mexico,

Forbes

 

For the U.K., the head of economics at the British Chamber of Commerce, Suren Thiru, commented to CNBC in May 2020 that “some U.K. businesses were already shortening their supply chains after coronavirus-related disruptions had affected operations.”

As for Europe, the sentiment of local productions is expressed in DigitalEurope’s paper on relaunching manufacturing in a post-COVID-19 world. The paper recommended increasing additive manufacturing technologies to substitute globally sourced parts with parts that are locally produced.

Meanwhile, Morocco, Tunisia and Egypt are hailed as competitive manufacturing hubs for European businesses seeking nearshore alternatives.

 

  • Reshoring and Microfactories

 

For manufacturers seeking to reshore their facilities, the adoption of digital innovation is extremely crucial.

 

“A successful reshoring strategy must be coupled with a digital manufacturing strategy. If the current pandemic has demonstrated anything, it is the power of digital technologies to keep companies productive, even in the worst of times.”

– Paul Haimes, VP of Business Development & Technical Sales at PTC,

Manufacturers should ‘reshore’ and reinvent themselves post-COVID

As countries increase their reshoring efforts, the question that consistently arises is ‘Are there enough digitally-skilled workers?’

Factory engineersTo quote Cherie Wong, the general manager of Amazon Web Services (AWS) IoT analytics services, “There is a shortage of expertise. Skilled people in developed countries don’t think about careers in manufacturing.”

“But now there is a trend towards reshoring,” she spoke at an analyst meeting by Siemens Digital Industries, “For that, we have to be thinking about microfactories.”

Microfactories, as explained by research and analysis firm, FutureBridge, are small-to-medium factories that are highly automated and technologically advanced, capable of a wide range of processes.

Through these agile and digitized microfactories, manufacturers are able to call upon local contract facilities for cost-effective productions and for handling mass customization and ‘markets of one’.

“You can automate processes without building in rigidity,” stated Alastair Orchard, digital enterprise vice president at Siemens, in an article by The Institution of Engineering and Technology. “You can’t easily personalize products halfway around the world, you need to run those lines onshore. With local production, you can scale down to a lot size of one.”

 

  • Overcoming Challenges

 

Although onshoring, nearshoring and offshoring from China are trending topics among manufacturers, business experts predict that the shift might be easier said than done.

From the availability of specialized skills and technologies to the breaking of a highly complex network of interdependencies and ‘deep-tiering’ of supply chains, manufacturers are keeping these concerns in mind as they seek to build a more sustainable and resilient value chain.

In the meantime, it’s expected that China will remain as the main manufacturing center while companies continue with a China+1 strategy and move towards industrial diversification.

 

MANUFACTURING RESILIENCE

 

The pandemic laid bare facts to manufacturers that they cannot stand idly by the traditional models of old and be content with existing global value chains.

With a potentially volatile demand environment over the horizon, manufacturers have to make plans for agile and flexible manufacturing processes while constantly reassessing and innovating their business models for the future.

 

“The resilience of [an] industry and its ability to perform and adjust to shocks hinges on its diverse, dynamic, innovative and collaborative capacity, which emerges from its industrial commons.”

– Why Innovative Manufacturing And Circularity Are Key For A Resilient Manufacturing Industry Post-COVID-19,

United Nations Industrial Development Organization

 

There are still other areas that have yet to be covered – workforce empowerment and upskilling, circular manufacturing models, and strategic inventory reserves – but it’s obvious that the post-coronavirus manufacturing industry has to take many factors into consideration in order to start a new era in resilience, sustainability and self-sufficiency.

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Joachim Hensch: Who’s The BOSS of Smart Factory 4.0?

Equipped with automated machines, artificial intelligence (AI), and advanced analytics, the HUGO BOSS production facility in Izmir, Turkey, is just one example of smart factory advancements and digital transformations that the manufacturing sector is undergoing in the new decade.

With an increasing number of manufacturers planning or in the midst of optimizing their operations with smart factory elements, what strategies should they take to attain an Industry 4.0 factory? Management Events interviews Joachim Hensch, the Managing Director for Hugo Boss Textile Industries, on tips to successfully achieve a digital revolution.

 

The Beginning Of Change

Faced with rising consumer demands and a highly competitive global market, manufacturers are arming themselves with the latest intelligent industrial solutions to thrive and survive in the industry. Foreseeing the need for change, HUGO BOSS began re-imagining their factories into agile and flexible production facilities.

“It all started with the realization that we are operating in an ever more connected market that is becoming progressively unpredictable,” Hensch relates. “There appeared a strong need for a different setup for our factory in order to deal with ever-increasing complexity. Yearly plans became obsolete due to erratic changes in customer behavior and the market environment.”

“Therefore, to keep up with this, we needed to go through a transformation. We started from the organization, continuing with the layout of the factory, the way we deal with new employees, with technology, the way we plan with regard to digitization, the way we treat people, and so on. Basically, we changed everything!”

 

The Three-Step Plan

While mass-produced products might have satisfied the customers of old, the new generation of consumers are looking for more personalization. Manufacturers are heeding the trending change, moving towards mass customization.

For HUGO BOSS, the Izmir smart factory follows a three-step plan to adapt to today’s market conditions and customer expectations.

“The first part is digital transformation,” Hensch explains. “We connect our 4 main components, which are people, machines, processes, and products, digitally to create a digital twin of the factory.”

 

“With the help of this, we are able to manage complexity in production and realize digital initiatives in order to improve our efficiency, quality and employee satisfaction.”

 

“The second step is robotics and automation,” he continues. “In this part, our strategy is to help our people first, and then invent half-automated and completely automated machines.”

“The third step has the artificial intelligence focus. Around this, we work on algorithms that help us with the planning and management of both manufacturing and HR initiatives.”

 

Overcoming Challenges

HUGO BOSS’ digital transformation is not without its challenges, however. The luxury fashion brand faces concerns with data usability and technology integration.

“Some of the data we collected was unusable but some were extremely valuable for gaining insights into how the factory operated. We follow the scrum mentality work in two-week sprints, and then decide whether to invest more. This way, we build in flexibility and can react fast if something changes on the course.”

“Additionally, we realized that we could not just buy gadgets. We had to convince our people to use it, which meant we had to make the software easy to use. We leveraged gamification a lot when designing the UI, as UI and UX are key parts of digitalization. The systems should be as easy as WhatsApp for their users.”

 

The Human Touch

Many organizations tend to focus strongly on technology implementation, leading to neglect of workforce integration and fears of machines taking over jobs. But Hensch emphasizes that the fashion industry is probably the least threatened by automation replacing people.

“The most fundamental reason is working with a non-rigid raw material such as fabric. If you want to do something with fabric, you will not be able to find anything better than the sensors in the hands of people for a while.”

Hensch further clarifies that technology should help to support and upskill employees. “The most visible example of this is our training module with virtual reality applications, Virtual Dojo, which we launched in HUGO BOSS Izmir. This project helps us to customize our operator training processes and increases its quality, which cut down our training periods in half and brought us two international awards.”

“If you manage to prepare your human resources for these technologies and use technology in a form that supports people and brings out their skills, I believe there will be a lot of room for people in smart factories in our industry.”

 

Maintaining A Competitive Edge

As Industry 4.0 brings new innovations and ways of thinking, manufacturers have to adopt the latest emerging technologies in order to stay ahead of the competition. For HUGO BOSS, however, their focus goes beyond normal manufacturing strategies.

 

“At HUGO BOSS Tekstil Sanayi, we don’t only manufacture products, [we] also generate knowledge there.”

 

Hensch conveys that, “In Izmir, we generated a consultancy company called HUGO BOSS Solutions, which provides solutions for digital transformation and organizational development. Imagine a ready-to-wear company, that has full-time data scientists, data engineers, speech recognition and Chabot specialists, and image processing technology specialists working together, creating an IT team and a TechnoLab of around 60 people. This is rare in our industry.”

As Hensch continues to discuss HUGO BOSS’ business strategy, it becomes clear that employees are fundamental components for organizational success.

“Technologies are there and it is just a toolset to use,” Hensch expresses. “However, who will use them and how they will be used is much more significant. For the next few years to come, human intelligence will still be the main driver, and to maintain competitive advantage, companies should first focus on their people and their know-how.”

 

Embracing The Fourth Industrial Revolution

Even though we are already headlong into Industry 4.0, manufacturers are still facing challenges in implementing digitalization changes in their factories. According to Hensch, the setback could be resolved if they have the right system in place.

“In manufacturing, the success of transformation is not about digital screens and sensors, but the creation of the correct engineering ecosystem and organization at the production plant,” he advises. “Digital systems built on a proper engineering infrastructure can be those magic touches that make a true transformation possible and have a dramatic impact on profitability.”

“The good thing was that, in Izmir, we had a neat analog system to start with. What we learned fast is that if you have a messy analog factory and you start building a digital system on top of it, you basically end up with two messy systems.”

 

Strategic Leadership

However, smart solutions are not the only success factors for the fourth industrial revolution. Sound and strong leadership is also integral for effective and successful digital transformation.

“Simon Sinek has just released a new book called The Infinite Game, and this would be my advice [to leaders],” Hensch imparts. “There is no end. There are always going to be things to improve for the better. Therefore, leaders should keep themselves motivated to discover these improvement areas.”

He also advises leaders to engage their staff when creating a mission or vision. “People will hold back because they think the boss already has all the solutions. You need to give people a lot of space and trust in order to make them contribute and fill this vision, and not define everything by yourself.”