On a scale that measures the resiliency of core operations from 0-100, Industrials score 55.
While I’m usually a glass half-full person, this certainly isn’t where I want to see the industry.
The number comes from a recent Accenture research report, which analyzes how geopolitical shifts, extreme weather events, technology breakthroughs and material and talent shortages affected companies’ engineering, supply and production capabilities in 2021 and 2022.
The effects of these events were harsh. Industrial equipment businesses alone missed out on $433 billion in additional annual revenues during that time. Lead times, from product order to delivery, increased 40%.
With results like these, it’s clear industrial companies must take action quickly and, to some extent, they already are.
Here’s how Accenture advises industrial companies to ramp up their resiliency capabilities:
Regionalization—Almost all sectors have reacted to the turbulences with this same quick fix. They started sourcing products from more regional suppliers and manufacturing them in the region where they sell them.
While 38% of all companies across the 11 industries we analyzed now buy most critical items from regional suppliers today, only 24% of Industrials do so—the lowest percentage of all sectors. We know that Industrials can be reactive and slower to move than other sectors. So, this finding didn’t come as a surprise. The same is true for regional production: 43% of all companies produce and sell most of their products in the same region, while only 24% of industrial equipment firms do so today.
However, industrials are planning to catch up. Asked about their goals for regional sourcing and production by 2026, they are on par with all other sectors, at 66% and 84%, respectively—signifying the above-average efforts industrials are willing to take.
Adding production and supply options provides more opportunities to be agile and, thus, more resilient to unforeseen events. However, as the complexity of these systems grow, more silos can appear. When industrials redesign their supply and production networks for multi-sourcing and multi-production, they must be careful to avoid creating new bottlenecks.
While regional sourcing and production are important to becoming less vulnerable to disruption, they aren’t enough to reach sustained resiliency.
Visibility and predictability—Being more agile and avoiding choke points requires immediately recognizing the causes of specific issues. Here, companies across industry have their work cut out for them, as only 8% of industrials are alerted in near-real time when a disruptive event hits their supply chain, engineering or production, as compared to 11% of all companies. In addition, 86% of industrial need a week or more to fully understand a disruptive event’s impact (compared to 78% of all companies).
Data and digital solutions are key to shortening recovery times. Companies should consider building demand foresight capabilities that provide structured analytics and customer trend insights to help arbitrate demand during shortages. Smart end-to-end control towers can provide scenario analysis and real-time end-to-end visibility to provide early detection and correction of operational risks and issues.
One multinational company producing heavy and high-value equipment increased its resiliency by making its production more transparent and thus, adaptable. Via an industrial IoT technology platform, it linked physical assets in the factory to the digital world. This gave it real-time visibility into its production processes. Within six months, efficiency and operational continuity soared.
Industrials’ ultimate goal should be reconfigurable supply chain networks and autonomous production so companies can dynamically change operations at a site or shift from one site to another to maintain production when faced with unforeseen events and volatility.
Apply shift-left engineering—Resiliency isn’t just a matter of agile supply and production; it’s also about getting products right from the start. A proven method to achieve this is adopting a shift-left approach to engineering wherein companies move activities to earlier in the development process to assess the potential impacts of disruption on the product at the time of design and reduce lead times.
Digital twins and simulations are vital enablers of this approach. The digital replicas allow product designers and engineers to identify and troubleshoot potential prototype issues or defects and iterate the design before production begins. They also democratize access to valuable product data and insights, fostering improved collaboration during research and design phases.
For example, a pharmaceutical company wanted to be able to identify and address potential design issues early in the development process. It applied the shift-left approach to the collaboration between its R&D department and production. As a result, it reduced the tech transfer cycle time from 12 months to just eight. Also, it ensured its supply chains were equipped to manage a more complex product portfolio.
Building a digitally literate, multi-skilled workforce—What technicians, line managers and other workers do or don’t do at the front lines of operations can make all the difference. Companies must push decision rights to the right place in the organization to speed up decision-making and be more responsive.
For this more agile organizational model to work, workers need access to predictive and data-driven tools. More than that, they need the skills to work with them effectively, which means the onus is on companies to help their people acquire these skills as AI and other digital technologies are redesigning the (future) industrial workforce, a development I touched upon in a previous column.
A national oil and gas company approached developing such a workforce through a gamified learning platform that promoted baseline digital fluency across the organization. The platform encouraged continuous learning and empowerment from the CEO down to frontline teams, eliminated managerial bias and allowed employees to proactively assess and close skill gaps. Additionally, by analyzing 10 years of performance data, it identified workers suited for new digital roles in procurement and IT functions.
Today, only 8% of Industrials said they had a multi-skilled, digitally literate workforce, compared to 17% of all companies. It’s encouraging to see that, by 2026, 60% of Industrials plan to have upskilled their workforce accordingly.
Investing in the process of making engineering, supply chains and production less susceptible to disruption is good business sense. Our analysis identified the most resilient organizations achieved 3.6% higher annual revenues. It shows that driving resiliency is more than a strategy for survival—it’s an opportunity for growth. The time to invest in resilience is now, fast, before the next disruptive event comes knocking.
