As we announced on December 2021, Solita is launching a new competence unit focusing on the needs of industrial sector companies (especially companies within discrete and process manufacturing). In this blog post, I will contextualise this launch and look at some of the major trends impacting manufacturing companies.
Mega trends: globalisation & digitalisation
On the highest level, the ongoing transformation of the industrial landscape is driven by the convergence of two megatrends – globalisation and digitalisation – and the way they conjointly restructure the industrial playing field. On the one hand, globalisation calls out the finite nature of our material circumstance. Put differently, there is only one planet and this planet has a finite amount of resources. Whether it is rare earth metals required for the production of high-performance magnets, alloys, glasses, and electronics, or fossil fuels, the inescapable limitation of their amount puts pressure on industries’ reliance and use of them.
Hence, as Earth Overshoot Day occurs earlier each year, this shapes market dynamics and prices influences geopolitics, and drives innovation. On the other hand, barring certain material infrastructure aspects, digitalisation offers a way out of the limitations of globalisation and holds out the promise of a possible forward escape out of matter and into what Terence McKenna called “hyperspace,” William Gibson called “cyberspace” and what Mark Zuckerberg, borrowing from Neal Stephenson now calls “the metaverse,” i.e. life in the imagination.
Industrial macro trends
On a slightly less lofty level, these two megatrends condense into market drivers that industrial actors cannot help but be impacted by – either in terms of forces of disruption or in terms of new exciting business opportunities.
When Deloitte earlier this year published their “2022 Manufacturing Industry Outlook”, they called out five manufacturing industry trends to watch: workforce shortage, supply chain instability, smart factory initiatives, cybersecurity and sustainability. All of these relate to the underlying mega trends of globalisation and digitalisation.
1. Workforce shortage
What seems to become more and more clear is that the impact of the digitalisation of a historically physical / hardware dominated engineering industry such as manufacturing, is transitioning faster into a software dominated one than what can be handled by the use of artificial intelligence-driven automation. Thus, the prevailing situation manufacturing companies find themselves in, is not one of labor redundancy and lay-offs caused by AI-driven automation, but rather an immediate workforce shortage caused by the digital skills required to capitalise on the disruptive nature of digitalisation – something called out by the World Economic Forum some years ago.
One clear example of this hardware-to-software shift is the fact that a company such as truck-manufacturer Scania now employs more people working with future software solutions than hardware solutions, something which Martin Lewerth, Executive Vice President and President Mobility Solutions at Scania Group called out during a recent webinar on the future of the industrial industry.
2. Supply chain instability
The fact that a global supply chain, which is put in place to enable the capitalisation of differences between markets, is inherently fragile was made abundantly clear earlier this year when the container ship Ever Given got stuck in the Suez Canal effectively grinding transportation through the canal to a full stop. The long term impact of this event is still being felt and assessed.
Another event calling out the fragility of global supply chain dynamics occurred last year when massive floods hit Thailand. As flood waters rose, companies such as the world’s largest provider of hard-disk drives Western Digital as well as their competitor Seagate Technology and other electronic supply chain companies such as chip manufacturers ON Semiconductor and Microsemi were all impacted. In addition, the automobile supply chain was also impacted and companies such as Honda, Toyota and Ford got hit.
Man-made accidents and natural disasters are not the only things impacting the global supply-chain. When China’s new Personal Information Protection Law came into effect November 1 this year, the number of Automatic Identification System (AIS) signals from ships in Chinese waters plunged 85% in under a month. These signals are used for a wide range of purposes, including the planning of shipping routes, logistical operations and congestion analysis. “Ultimately, the significant reductions we are seeing in the count of vessels signaling in China will reduce the ability to accurately monitor vessel activity, and this could have knock-on effects to already squeesed global supply chains,” VesselsValue’s head trade analyst Charlotte Cook said in an email statement to Business Insider.
Together, these three kinds of vulnerabilities (inherent vulnerabilities resulting from trade-route bottlenecks, natural disasters and political legislation) increase the appeal of reshoring – moving production and manufacturing to the market of consumption. As digital business practices increasingly drive cost efficiencies, the financial deterrents of reshoring become less of an obstacle and the domestic market more appealing.
3. Smart factory initiatives
The appeal of IT/OT convergence, of AI-infused edge autonomy, of lights-out-factories, of 5G enabled low-latency, of fully connected factories, of data-enriched contextualised production approaches such as MES-in-the-light-of-ERP, of data science practices such as machine learning, reinforcement learning models and unsupervised learning on the job robotics, and on and on, is that in theory such data-driven practices hold out the promise of fully optimised production/manufacturing.In theory, this may be the case.
In theory, if you think of a fully digital global context, you are in fact nearing a “perfect information” scenario. And in such a scenario, a fully automated reinforcement learning approach targeting a specific outcome would theoretically be possible to attain. The validity of this has been proven again, and again as digital technologies have mastered more and more difficult challenges (think IBM’s Deep Blue beating Garry Kasparov at chess, or Google’s AlphaGo beating Lee Sedol at Go).
Obviously, industrial manufacturing in a global context is not chess, nor is it Go. Still, there is something to this romantic pursuit of the perfect. And this has to do, not such much with the potential of the perfect but with the potential of the improvement of the existing actual. The obvious fact that our current way of manufacturing goods and materials is not 100% optimised is enough to legitimise the consideration of data driven practices that may outperform the current way of doing things. And thus there are all these smart factory initiatives being pursued with the hope that the ghost in the machine will be preferable to the all too human.
As we increase our reliance on digital technologies to help us off-set the limitations of globalisation and material finitude, and move into the global digital village with its single digital marketplace where everyone online is a villager, we are also faced with the challenges of villagers with agendas and motives different from our own. Whether it be geopolitically motivated actions such as the Russian government’s interference with the 2016 US elections, the NetPetya malware which caused billions of dollars in damages to the global transport and logistics giant Maersk in 2019, or the recently exposed Log4j vulnerability, there will be no reliable optimisation of manufacturing practices through the increased use of digital technologies without focused consideration of how to achieve digital resilience through cyber security best practices.
When manufacturing predominately was a non-digital, localised affair, digital resilience was not a key priority. Safety-first practices did not need to take into consideration the vast array of exploits available to those wishing to reek havoc in the global digital village. As manufacturing becomes digital-first, so its thinking around safety-first needs to expand to include the entirety of the cyber-physical domain it operates within.
Christine Evans, Sr. Communications Director at digital manufacturing ecosystem Fictiv, calls out three main drivers for the importance of sustainability for manufacturing:
- improvements in energy productivity
- reductions in greenhouse gas emissions
- favorable perception of the company from investors and consumers
The newly opened energy recovery plant at Elkem’s silicon production plant Elkem Salten located in northern Norway is a good example of how these three aspects of sustainability come together. The new energy recovery plant will recover 28% of the electrical energy used at Elkem Salten, equal to the power consumption of about 15,000 Norwegian households, approximately 240GWh per year.
Another example of how sustainability has become part and parcel of the transformation of the industrial sector is how electrification is changing the mining industry through efforts by companies such as Sandvik. As electrification based on renewable energy displaces diesel throughout the mining industry ecosystem, sustainability benefits tandem financial and health benefits across the board:
- Electricity powered equipment do not produce tail-pipe pollutants and they produce less heat, requiring less ventilation while providing a healthier air environment. They are also less noisy.
- Total cost of ownership is less for electricity powered equipment than for diesel powered equipment. (Upfront cost is higher, but operating costs such as energy and maintenance are lower.)
- GHG-emissions are lowered as energy is sourced from renewables and not fossil-fuels.
- Electricity powered equipment is stronger than diesel powered equipment (twice the horsepower) so you can get more done, travel faster, use smaller machines requiring smaller tunnels producing less waste that needs to be managed.
However, shedding the diesel-powered legacy of mining does put pressure on engineers and operators alike as they need to learn how to build, handle, maintain and repair new equipment.
Data turns disruption to opportunity
In summary, there is no question that globalisation and digitalisation disrupt, transform and even revolutionise the industrial landscape. As a red thread running through these trials and tribulations is data. Without data, no insight, no understanding, no control.
And so, in the broadest of terms, data-centricity (technology, science, strategy, business models) is the single most important success factor. I do agree with the recently published IDC analyst report “IDC – Digital Transformation in the Nordic Manufacturing Ecosystem” in which it is stated that the “Nordic manufacturing industry is entering a second stage of the digitisation journey [in which] companies are increasingly focusing on how to leverage the technology to enhance customer experiences and develop the business model to one that ensures success in tomorrow’s data driven manufacturing ecosystem.”
Acquisition of digital skills is the #1 success factor
On an ending note, a final trend that I would like to call attention to which speaks to the importance of embracing, internalising and mastering data-driven digital skill sets is the recent series of acquisitions manufacturing companies in the Nordics have executed the past year, including:
- ABB’s acquisition of ASTI Mobile Robotics Group to drive next generation of flexible automation with Autonomous Mobile Robots
- Epiroc’s acquisition of the remaining shares of Mobilaris, a Sweden-based company that provides advanced situational awareness solutions that optimise operations in mining and civil engineering
- SKF’s acquisition of Rubico Consulting AB, a Swedish industrial consultancy firm specialising in visualisation and analysis of signal data
- Sandvik’s acquisition of leading mine planning software company Deswik and the follow-on launch of a new Digital Mining Technologies division
These acquisitions all make it abundantly clear that the acquisition of digital skills (however they are acquired), is a top priority for industrial manufacturers.