HFS is exploring how different aspects of manufacturing react and can respond in a crisis like COVID-19. Recently, HFS published an article in which we recommend ways for manufacturers to realign their supply chain for future disruption events. We believe that the business continuity plan’s role is very crucial during disruptions; it can keep a business and its supply running. Technology plays a critical part in executing continuity plans; as manufacturers often rely on technology service providers for their technical support, service providers need to be prepared to execute the continuity plan and manage this emergency. In this PoV, we explore the current state of manufacturing and identify what the new disruption-ready continuity plan looks like for the manufacturing industry. We also discuss the critical technology levers that manufacturers should prioritize for this new continuity plan and how service providers can support and execute the same. This PoV provides guidelines for both manufacturers and service providers to use for formulating a continuity plan.
The manufacturing industry demands a modernized continuity plan
A manufacturing continuity plan typically outlines the next steps needed to respond to any failure in production, supply chain, or technology infrastructure. In manufacturing, the disruption often comes from major machinery failure, a power outage, malfunctions in technology areas (servers, applications, etc.), and natural disasters. The effect of these failures is often limited to a particular geography or plant, and other production facilities and the supply chain typically keep running; the duration is relatively short (days or weeks). But with COVID-19, almost all the key manufacturing locations are shut down indefinitely, so the scope of the existing continuity plans is insignificant. The requirement to support current manufacturing operations is minimal to none. As routine manufacturing activities around the globe have stopped with no firm date to restart normal production, manufacturers have taken a “humanity-first” approach by developing items that are needed to fight the pandemic. There is no recent precedent (since WWII) for the situation COVID-19 has created in the global level: manufacturers ceasing production of their core products and developing and producing non-commercial items that are not relevant to their existing business. So, the new item to include in your manufacturing continuity plan is a provision for flexible manufacturing that includes product development for something completely new to your manufacturing process that’s not related to any customized version of your existing product portfolio.
Manufacturers are building products that are outside of their core capability
Manufacturers around the globe are developing essential healthcare items that are unrelated to their industry. Automakers are manufacturing ventilators, beverage companies and personal care companies are developing hand sanitizers, and apparel companies are developing masks. There are many examples:
- Nike is developing face shields and other equipment for medical workers.
- AB InBev is manufacturing hand sanitizer to fight against coronavirus.
- Ford Motor and GE Healthcare collaborate to produce 50,000 ventilators within the next 100 days to fight the coronavirus pandemic.
- SpaceX and Tesla are developing ventilators.
- LVMH is utilizing its factories to produce hand sanitizer.
Leverage Industry 4.0 principles to facilitate manufacturing of new type of products
In our Industry 4.0 value chain, we identified the technologies that are essential for smart manufacturing. Some of these technologies are critical enablers for flexible manufacturing (for new types of product manufacturing), as described in Exhibit 1. Traditional manufacturing automation and IT support systems, such as MES (manufacturing execution systems), ERP (enterprise resource planning), and HMI (human-machine interfaces), are also necessary for manufacturing scheduling, production, and supply chain management.
Exhibit 1: Digital technologies are the critical success factors for new product development
Source: HFS Research 2020
Service providers must prepare for this version of new normal
Service providers are well prepared for with continuity plans for disaster recovery and disruptions with limited scope, such as a specific plant or geography. For an event like COVID-19, when almost all of their service delivery centers are affected, they need a more meticulous and far-reaching plan for business continuity, as described in Exhibit 2.
Exhibit 2: Employees and technology infrastructure are the critical success factors for the continuity plan
Source: HFS Research 2020
The Bottom Line: COVID-19 has changed the definition of mission-critical functionality—develop your continuity plan around it.
COVID-19 has accelerated the need to implement Industry 4.0 principles, not only to diversify the manufacturing base (e.g., distributed manufacturing with competitive cost) but also accelerate the development of new non-core products. In the future, manufacturers and service providers need to keep in mind the implications of events like COVID-19 and develop continuity plans considering the present scope of manufacturing operations and factoring in the unknown.