Industry Outlook 2023: Digital Transformation in Supply Chain, Sustainability and Workforce Present Uncertainty and Opportunity

Industry Outlook 2023: Digital Transformation in Supply Chain, Sustainability and Workforce Present Uncertainty and Opportunity

by Alex Teo, Vice President & Managing Director for Southeast Asia, Siemens Digital Industries Software

Over the past few years, the faster-than-expected pace of digital technology adoption has seen significant changes in the industrial sector. With a looming economic headwind on the horizon, the industries of the world can navigate through these challenges by riding three major trends: supply chain disruption, sustainability, and workforce turnover. Each of these challenges is connected, and each offers an opportunity for innovation and transformation, especially considering advancements in digital technologies.

Disruptions cause supply chain uncertainty

Original Equipment Manufacturers (OEMs) in Asia continue to see strong demand for trade supply. Still, the difficulties of recent years arising from a new phase of digitisation efforts, overflow of data, and shortage of talent have illustrated the limitations of how companies try to understand and manage their supply chains. Despite the growing complexity and breadth of supply chains worldwide, many companies continue to rely on relatively simple means of tracking and managing these processes.

While working in the short term to reinforce these supply chains, companies in Southeast Asia who want to be well-positioned to reap the benefits must also keep an eye on the future, ensuring they can obtain the materials and components needed to produce the next generation of products. For example, the automotive industry has been laboring under a persistent shortage of key electrical and electronic components crucial to the advanced features and functions that today’s vehicle buyers demand. Though the scarcity of these components has eased somewhat in the waning months of 2022, the demand for advanced vehicle features is expected to continue to grow and place additional pressure on the supply of these components. For instance, sourcing of raw materials for battery manufacturing may become the next great supply problem as automakers bet big on electrification in 2023.

Emerging technologies like digital twins can model supply chains and business processes to help companies better understand the complexities of their value chains and to see through the complexity to identify problems and prescribe solutions. Hosting the digital twin of supply chains and business processes within the industrial metaverse enables companies to harness the power of large-scale computing and in-depth visualisations to analyse and interrogate these digital twins. Integrating Artificial Intelligence and Machine Learning (AI/ML) into the industrial metaverse platform will further enhance the value extracted from the digital twin models. When applied to supply chain management, AI/ML can quickly sort and organise the massive amounts of data that a modern global supply chain will produce, making it easier to focus on the most critical trends and patterns within the gathered data.

To thrive and survive, it’s more than shortening time-to-market but also time-to-value. Cloud-based Software as a Service (SaaS) adoption can equip businesses, especially small to medium-sized businesses, with the right capabilities at lower cost-of-ownership and shorter time-to-productivity. Understanding the benefits of cloud technology has helped businesses realise the importance of flexibility and agility, especially in emerging countries like Indonesia and Vietnam, where there is a growing interest in cloud adoption among manufacturers.

Technology enables new sustainability solutions

The year 2023 will also be essential for the pursuit of sustainable industries. As part of this pursuit, all companies and partners across the supply chain have the responsibility to become more efficient, more competitive, and better prepared for the future of their industry. Companies can adopt advanced digitalisation technologies that will facilitate the analysis and characterisation of current practices and improve the company’s ability to develop sustainable solutions. For example, Nemo’s Garden, a startup focused on sustainable underwater cultivation of crops, has deployed Siemens’ Xcelerator portfolio of software and services to shorten its innovation cycles and move more rapidly towards industrialisation and scale.

In many ways, the challenge of becoming a more sustainable business tie closely with those constructing and managing a global supply chain. As a result, sustainability programs can also benefit significantly from the power of AI and ML. For example, an AI/ML engine can help automate the aggregation of all the information a company needs to generate collective intelligence without over-taxing employees with tedious information retrieval. This collective intelligence will help a company make objective assessments about their sustainability performance and create solutions to address areas where it may fall short.

Additive manufacturing can also help companies reduce waste materials that traditional manufacturing processes create. Casting and machining are common processes that produce waste. Switching to additive processes can significantly reduce the material cost of parts that were previously cast or machined by eliminating the need for molds and the waste material produced in the subtractive machining process.

Digital solutions aid workforce development

While advanced technologies like AI/ML are becoming essential to industrial processes, they cannot replace humans at the end of the day. Many companies will be managing a transition in their workforce as they simultaneously work to address supply chain issues and sustainability programs. In general, 2023 will see a continuance of recent trends in the employment market.

First, the most experienced employees at many companies are retiring or moving into new roles within or outside the company. As these employees leave, they take with them valuable knowledge and experience that, unless captured, will be lost.

Second, there is a shift in the skills or core competencies companies need, particularly towards advanced software and electronics, driven by the changing nature of products in many industries. This shift is creating a skill gap between the expertise of the current workforce, and the skills demanded to create the next generation of products.

The third major workforce trend is prospective employees’ changing expectations and needs.
Addressing this dynamic workforce market will require a nuanced approach. Simply investing in the digitalisation of processes without intention or strategy risks leaving employees behind as they attempt to learn new skills or adapt to new methods of completing tasks. It will be necessary for companies to strike a balance between modernising for the sake of attracting new talent while not alienating current employees. Technology that is intuitive and easy to learn will help both new and existing employees come up to speed more quickly.

An immersive training environment is also valuable. Technicians and manufacturing employees can benefit from virtual training sessions conducted in the metaverse that offer a learning environment where mistakes are far less costly. AR and VR enable trainees to gain hands-on practice in virtual scenarios occurring in the metaverse that are safe and easy to repeat for efficient training sessions. The industrial metaverse will change the way companies work by creating a virtual space to work on real-world projects that are more collaborative, interactive, and immersive.