Agility and innovation across the industrial Value Chain

The COVID-19 global pandemic exposed the fragility of manufacturing supply chains, causing substantial shortages of essential products such as medical supplies, critical minerals, and semiconductors. Nevertheless, the industrial sector, in general, has shown incredible resiliency and has been building back fast despite significant headwinds.

Current geopolitical forces are keeping supply chain risks in focus, resulting in increased public awareness, government interventions, and actions by individual companies. Industry and market trends will likely further accelerate organizational changes in 2023, particularly in this uncertain economic scenario with war and persistent inflation.

Making products closer to customers obviously removes some supply chain-related uncertainties and risks, but relocating the production of high-value products back to the US market is a challenging task and will only work with agility and innovation across the industrial value chain. According to the "2022 State of Manufacturing Report", 93% of industrial companies are looking to technology solutions to increase operational efficiency for new product development.

Domestic and offshore companies committing foreign direct investment to their US-based operations expect to directly create a significant number of new jobs bringing work back to the US. At the same time, the CHIPS for America program is expected to invest $50 billion over the next five years to revitalize the domestic semiconductor industry and spur innovation while creating good-paying jobs in communities across the country.

Many automakers with US operations plan to significantly ramp up production of electric vehicles (EVs) this decade and, in the process, commit colossal capital investments. As a result, there is a wave of new investment in gigafactories, large facilities devoted to producing lithium-ion batteries. Planned investment exceeds $40 billion, targeting parts of the US to build out a crucial part of the domestic supply chain for batteries and EVs.

These “winds of change” present a unique opportunity to create financial, strategic, and social value by moving from an economy where competitiveness is based solely on cost minimization to an economy based on value and innovation.

Innovation Business Outcomes

According to Forrester's latest research, companies that met customers' needs by being future fit, even in uncertain times, grew revenue 1.8 times faster than their peers.

Digital transformations are notoriously difficult to scale up across networks of factories. The historical divide between siloed IT (information technology) and OT (operations technology) has aggravated two significant barriers of change: technology debt and vendor lock-in.

A significant portion of the industrial sector currently works with an aging legacy infrastructure and applications running on a complex mix of on/off-premises technologies. Most of these legacy technologies expose businesses to security and vendor lock-in risks since they are based on proprietary standards that demand substantial switching costs.

That’s the unseen technology debt, the off-balance-sheet accumulation of all the necessary technical updates a company needs to perform to modernize its systems. It’s a complexity tax that every new project pays, inhibiting companies’ long-term velocity and productivity and harming budgets and returns on investment. Mounting tech debt risks can eventually materialize in severe financial consequences like Southwest's recent $825 Million loss.

In this situation, business decision-makers face a balancing act: how to innovate and deliver critical business outcomes with such a significant tech debt and many proprietary legacy systems? In other words, how to lead the “winds of change” and stay ahead of competitors?

 Figure 1: Leading the “winds of change” focusing on critical business outcomes.

Energized by the “Winds of Change”

Future-ready companies have been adapting and thinking differently. They have embraced agile practices and distributed computing technologies like edge computing, containers, microservices, and container orchestration to optimize existing systems and drive innovation instead of rebuilding them entirely from scratch and running into long implementation timelines, prohibitive costs, and potential productivity losses.

Modernization is the practice of updating older software and infrastructure for newer computing approaches, including newer languages, frameworks, architectures, and infrastructure platforms. Rather than retiring an existing system or replacing it wholesale, legacy modernization extends the lifespan of an organization’s software and infrastructure while also taking advantage of technological innovations. While the term “legacy” sometimes has a negative connotation in technology, these legacy systems are often among a business’s most mission-critical applications and infrastructure.

The adoption of distributed computing paradigms in industrial modernization shifts the technology stack from a tightly coupled, hierarchical, siloed, and point-to-point structure to one that is application-driven, loosely coupled, software-defined, and integrated across all layers of the architecture (Figure 2):

Figure 2: Shifting the industrial technology stack

This new converged IT/OT stack integrates automation networks for mission-critical control and sensing functions (usually based on field buses, ISA 100, or HART protocols, etc.) with less critical applications and brings compute and data storage closer to the sensors. These applications, known as edge native applications, run closer to the data and address critical industrial operating constraints such as:

● Low latency with an immediate decision and closed-loop feedback.

● Limited or very limited network bandwidth and connectivity.

● Limited computing resources.

● Limited on-site support resources.

● Confidentiality and privacy data breach risks.

Successful modernization programs have prioritized low-risk and high-yield initiatives in productivity and efficiency gains to realize benefits and quickly reallocate funding to deploy innovative edge native applications like:

● Predictive maintenance significantly reduces maintenance costs and total machine downtime by proactively analyzing and diagnosing issues without the need for human intervention. Maintenance plans and work orders are proactively created and updated based on actual equipment operating conditions.

● Smart quality inspection & control significantly increases product quality and yield by proactively detecting defects on production lines using multisensory data (e.g., cameras, ultrasound sensors, accelerometers, etc.).

● Autonomous inventory management brings greater visibility, reduces inventory losses, and ensures critical items are in stock at the right time using autonomous off-the-shelf drones.

● Advanced safety and human effectiveness increase workforce safety and compliance across the factory floor, detecting equipment anomalies in real-time, offering 3D work instructions, and overlaying them onto physical assets and environments using AR/VR glasses and technologies. It also accelerates the onboarding process of new or seasonal employees by bringing off-site classroom-style training directly into the factory for on-the-job and in-context training.

● Computational generative design accelerates and improves new product development processes generating multiple simultaneous solutions based on real-world design goals, product performance requirements, and manufacturing constraints.

● Advanced automation simplifies the product design process and enables mass production and customization at scale (e.g., additive manufacturing)

Unsurprisingly, 59% of organizations with application modernization plans in progress reported that the activity has intensified over the past 12 months, with almost 20% saying it has "significantly accelerated.”

Clear for Take Off

In the aftermath of the COVID-19 global pandemic, no certainties are left except that there will be another disruption anytime soon.

Industrial companies have a unique opportunity to take advantage of the current geopolitical dynamics and investment waves,” become future-ready, and stay ahead of competitors. It’s not an easy task and won’t work without agility and innovation across the industrial value chain.

A modernization approach based on agile practices and distributed computing technologies extends the lifespan of an organization’s software and infrastructure while also taking advantage of technological innovations. It’s the balancing act that reaps benefits from prioritizing low-risk and high-yield initiatives that provide the funding for innovative use cases.

In this age of ruptures, industrial enterprises are forged ahead by powerful “winds of change.” Those who lack the urgency to adapt and think differently, believing their margins are too thin to innovate or that “the short run is always trumping the long”, will be left behind.