The global semiconductor shortage was prompted by a mixture of issues, with the Covid-19 pandemic playing a significant role. As more people began to work and study remotely the demand for electronics grew and as a result the automotive sector is now suffering the consequences. Producers of vehicles, along with their suppliers, are now faced with the task of reducing their manufacturing output, with some even forced to close their factories on a temporary basis.
As a result of this shortage, automotive OEMs and component manufacturers are facing unprecedented downtime and impact on their production operations. While detrimental to their overall business performance, it should also be seen as an opportunity to focus on shop floor digital transformation. This is rare opportunity for companies to focus on such initiatives, which have previously proved challenging due to concerns over potential production disruption, resource availability and workforce training scheduling.
Operations executives and production leaders should seize the opportunity to kickstart their planning into the innovative ways that digitalisation and legacy technology renovation can help them to greatly optimise production processes for when normal operations resume. Doing so successfully will lead to a reduction in operation costs and maximisation of resource use through increases in efficiency, productivity, and reliability. Additionally, re-evaluating legacy systems and processes which are outdated is a vital step that companies need to take, and now have that window of opportunity. This will prove to be an essential way for manufacturers to remain as competitive and resilient as possible in the future.
Making the most of the shortage
According to the Semiconductor Industry Association, worldwide semiconductor sales declined between 2018 and 2019, but by 2020, sales grew 6.5 per cent. This growth did not slow down into 2021. As a result, sales for May 2021 were 26 per cent higher than the same time last year. However, it’s important to consider that consumer demand wasn’t the lone contributing factor. In 2020 there was an increased demand for semiconductors in the automotive industry. We can trace this to the explosion of new automotive technologies such as driver assistance and autonomous driving as well as advances in vehicle management systems and electric drive trains, to name just a few. Not only do the public clearly value technological advancements in their vehicles, but government curbs on emissions, for example, is changing the way vehicles are designed and driven. It is not just the vehicles themselves that are, and need to, undergo these technology revolutions. The way in which vehicles are manufactured, their production and assembly processes, the monitoring, management and quality processes across the supply chain also needs to modernise through digitalisation.
Working on essential digital transformation initiatives will therefore provide new technological innovations that will be invaluable for the manufacturers that are trying to navigate through erratic and volatile markets. Although we’ve seen unprecedented disruption to global supply chains, manufacturers need to effectively adapt their business models and prioritise digital transformation initiatives to overcome these challenges. When the current issues subside, others will emerge in the future – economic volatility, government policies, natural disasters, terrorist events, or global pandemics.
Digitalisation for instance, is a great way for manufacturers to increase real-time visibility into their operations. This can provide important insights into each stage of the production process. These valuable insights can then be leveraged to fuel performance improvements, continue improvement efforts and to help make more informed, tactical decisions to secure long-term resilience and growth.
Hurdles faced when adopting digital transformation
Each digitalisation challenge comes with its own set of complications and overcoming them means manufacturers would need to pay particular attention to the functions, areas and processes where such technological solutions could have the maximum influence. Companies should consider deploying technological solutions swiftly in the areas with most need.
An important challenge which is often overlooked when adopting digitalisation is the impact it will have on the company culture and the difficulties of implementing such technology. This is a direct result of the changes to work practices that have become embedded over many years. Therefore, addressing the time, cultural and people-centric barriers and concerns should be a critical consideration.
Manufacturers need to effectively adapt their business models and prioritise digital transformation initiatives
The manufacturing sector requires consistency for production to flow smoothly and if this is prevented the consequences for output can be severe. This is a reason why some business leaders are nervous to give the green light to invest in digital transformation initiatives. The time it takes to implement all the new technology, then teach the employees how to effectively use it, and change the workplace culture around it takes much more time than initially realised. However, with factory output now reduced the technology can be implemented and taught to workers in the right way without it being rushed. It’s a golden opportunity that rarely comes along.
The automotive manufacturing sector needs to act now, for their future
Like all organisations, due diligence plays a major role in identifying threats that can harm a business and for manufacturers this is no different. While due diligence allows business leaders to prepare for threats and prepare for most circumstances, as seen over the past 18 months there are some disturbances that can hit us without warning. These unanticipated events have resulted in the business world moving away from a secure, safe and stable market, to one that has become uncertain, unpredictable and increasingly unique.
If we look throughout the history of manufacturing, we can see that it has been filled with periods of disturbance and innovation. We’re currently in the middle of a disruptive period. Therefore, it’s time for manufacturers large and small to make the right investments necessary now, to thrive in the future. Ultimately investments in digital transformation should come down to putting real-time data and insights into the hands of those who can leverage them for effective decision making, from wherever they are. Organisations that do so will be able to solve (and even prevent) problems, reduce costs, best utilise resources, optimise operations, and keep producing top-quality products - even during times of crisis.
Jason Chester, Director of Global Channel Programs, InfinityQS