redefining continuous manufacturing in the …...companies in the continuous manufacturing industry...
TRANSCRIPT
Redefining Continuous Manufacturing in the
TMBusiness 4.0 Era
The continuous manufacturing industry has been a laggard in
digital technology adoption. However, thanks to a dynamic
external landscape and significant advancements in technology,
the industry is now poised for business growth and new revenue TMstreams. Through TCS' Business 4.0 framework, this paper
explores how firms in continuous manufacturing can embrace
digital technologies. It also looks at examples of companies
leveraging various components of this framework and throws
light on leading industry practices for adopting technology to
create new possibilities for exponential growth and sustained
profits.
Challenges in Continuous Manufacturing The continuous manufacturing industry, in which items are produced and processed
without interruption, comprises various sub-industries, including chemicals, specialty chemicals, agriculture, industrial gases, paints and coatings, forestry, pulp and paper,
paper packaging, and cement and building materials. Currently, these industry segments are under sustained pressure to grow and improve margins globally.
Boosting industry profits is a challenge as the industries are sandwiched between
upstream petrochemical, mineral, or mining businesses and downstream consumer (for example, automobile, textile, construction, and more) and industrial application
enterprises. The industry's revenue growth is impacted by the performance of downstream businesses, upstream supply dynamics, and external socio-political
changes. For instance, the chemical industry has witnessed a slowdown through low capacity utilization fueled by low demand. In September 2019, utilization dropped to
181.9% from 83.8% in September 2018 for the chemical industry . The negative growth 2 3rate of chemicals in North America and Asia-Pacific in 2019, the flat revenue growth of
forest products and building materials, and socio-political factors such as global trade
tensions between countries has led to softened product pricing, and hence, flat or diminishing revenues.
The continuous manufacturing industry has traditionally tried to address these challenges by consolidating and restructuring its portfolio, adopting volume versus
price optimization strategies, and instituting strong cost management systems. As it grappled with these hurdles, the industry is now faced with an emerging new
landscape:
n Collaborating with end-customer industries to unlock value using a solution-
centric approach.
n Globalizing operations due to the emergence of new markets and raw material
reserves to spread out production capacities.
n Investing in the research and innovation of new alternate materials and applications. This will impact top-line growth, which is heavily driven by circular economy laws.
n Staying low on cost, achieving efficiencies through automation, and improving the
use of resources.
n Increasing focus on environment and worker health and safety standards
compliance, which are driven by regulation and end-consumer awareness.
1. American Chemistry Council; Retreat In Global Chemicals Output Accelerates In September; November 2, 2019; http://www.publicnow.com/view/EDF7CDA043972987397D10E920A68184A29A1F37?2019-11-01-21:00:11+00:00-xxx206
2. American Chemistry Council; Mid-Year Outlook: U.S. Chemical Industry Expansion Continues Despite Headwinds; June 4, 2019; https://www.americanchemistry.com/Media/PressReleasesTranscripts/ACC-news-releases/US-Chemical-Industry-Expansion-Continues-Despite-Headwinds.html
3. Borderless; Moody's cuts chemical industry outlook to negative; September 18, 2019; https://www.borderless.net/news/chemical-value-chain/moodys-cuts-chemical-industry-outlook-to-negative/
Reinventing the Continuous Manufacturing IndustryEnshrined under Business 4.0, these four business behaviors—driving mass personalization,
creating exponential value, leveraging ecosystems, and embracing risk—will help
companies digitally transform themselves. Technologies such as cloud, artificial intelligence,
analytics, robotics, and more, which businesses must leverage to move to the next level and
stay competitive, are vital to enabling transformation.
How does the continuous manufacturing industry score on the Business 4.0 paradigm?
(see Figure 1).
n Driving mass personalization: To retain customers and grow market share,
companies in the continuous manufacturing industry are adopting new innovative
strategies. One strategy that has gained popularity is personalization thanks to
growing access to customer and end-consumer needs.
Figure 1: Business 4.0in the continuous manufacturing industry
Embrace Risk
LeverageEcosystems
MassCustomize
Create Exponential
Value
CLOUD
INTELLIGENTAUTOMATED
AGILE
Adopting agile methodologies to merge operations in response to markets
Embracing risk with M&A and related business
strategies to compete effectively
Onboarding extended value chain stakeholders/
influencers to ensure speed to market
Shifting to new growth models (from B2B to B2B2C) and adopting new concepts (store fronts and e-commerce)
Gaining competitive advantage by offering personalized products and experiences
American chemical company establishes water mitigation
plans at high water risk sites as part of 2020 goal setting
German chemical company markets a device that allows customers to personalize their cosmetics
Dutch paints and coatings firm conducts open chemistry
challenge inviting the public to respond and innovate
Finnish paper manufacturer embeds RFID-based intelligent packaging solution in its products
Adopting advanced automation techniques to make operations efficient and generate
insights
Leveraging the abundance of data in operations and end-use applications to engage customers
Optimizing costs and making data available across the value chain by moving IT infrastructure to the cloud
Employing digital technologies and reinventing business models are what will help the
continuous manufacturing industry keep up with this fast-changing market scenario. To
this end, TCS’ thought leadership framework, christened Business 4.0, can help companies identify the technologies and specific behaviors required to stay afloat and
remain profitable going ahead.
Figure 2 illustrates the strategies the continuous manufacturing industry is adopting to
offer personalized products and services.
To put the above framework in perspective, consider a global paints and coatings firm:
Personalized product: The firm allows customers to use 3D visualization software to
customize their own home décor and create and share pictures before finalizing a
purchase.
Personalized customer experience: The same firm also deployed advanced web
analytics to understand online customer behavior, which enabled it to position content
based on personal preferences on its website.
Personalized offering (product and related services): The company transformed itself
from a brick-and-mortar company to a 'click-and-mortar' business by using social media
to run campaigns and help customers make product choices.
While many industry players develop customized products for customers, 4programmable materials, as primarily researched by MIT's Self-Assembly Lab , hold
promise for packaging companies. Some programmable materials expand, contract, or
change shape under different levels of temperature. Because of their malleability,
companies can use these materials to develop intelligent packaging products that can
be adapted to specific customer needs.
Some continuous manufacturing companies are turning to automation to offer
customers personalized experiences and services. A large global chemical company
recently launched a personalized AI agent to provide its top customer real-time updates
on its product, from manufacture to movement in the supply chain.
Figure 2: Key mass personalization practices and future possibilities
Personalized Product Personalized OfferingPersonalized Customer
Experience
Emerging concept/ practice
Leading industry practice
Well-established industry practice
Empowering customers to design products using offline simulations and testing suitability in a lab or on a website
Providing customers with an end-to-end product-service package instead of just the product
Making personalized proactive offers in the product consideration phase by gathering preferences from social interactions
Co-innovating with customers to develop new personalized product prototypes
Providing insights to customers by using digital technologies
Personalizing product consideration and buying experiences for customers
Mass personalization, i.e., developing product variants catering to large groups of customers
Providing add-on services along with the product
Providing expert guidance and support on product usage and bottlenecking issues in the after-sales phase
Maturity
Strategy
4. Wired; MIT lab develops programmable shape-shifting carbon fibre; October 14, 2014; https://www.wired.co.uk/article/skylar-tibbits-exclusive-interview
n Creating exponential value: Traditionally, continuous manufacturing firms have
adopted digital technologies for incremental gains and internally focused cost
efficiencies. Eventually, many industry leaders have moved focus towards a growth
agenda, which includes developing B2B2C strategies for new business models and
taking a solution-centric approach for customers, apart from improving products and
services.
n To illustrate: A global crop protection solution provider helped farmers improve
yield and avoid crop diseases by developing an AI engine that used GIS data
inputs. The engine predicted crop disease and unfavorable conditions. This
helped the company direct its agrochemical products to regions on a proactive
basis, thereby improving profits and customer experience.
In another instance, a chemical company, leveraged data to address late order
deliveries. Facing order losses and near-shutdown of operations for one of its top
customers, the company developed a multi-functional command center to
provide a 360-degree view of orders. Using AI-led predictive analytics, the center
could identify order failures ahead of time, which significantly improved on time
in full (OTIF).
Consider Avery Dennison, which manufactures adhesive materials, display
graphics, and packaging materials. It developed an intelligent labelling solution
that not only allowed customer products to be traced but also provided data on 5the product and its packaging .
Finnish firm Stora Enso developed RFID-enabled packaging for its customers, 6which monitors the food product and the surrounding environment . It also
launched a new business line—paper-based RFID tags.
Figure 3 summarizes the practices and possibilities pertaining to this Business 4.0 behavior.
Figure 3: Key exponential behavior practices and future possibilities
Differentiation through products Differentiated capabilities and services
Emerging concept/practice
Developing innovative products based on years of co-research done in new developing areas
Launching transformational services primarily for the entire industry segment using digital technology
Co-innovating new products to satisfy specific customer needs or industry challenges
Incremental services leveraging digital technologies to enable new capabilities and generate a 'wow' factor for preferred customers
Developing a product variant that covers the entire market in general (reactive approach)
Add-on services based on a company’s core competency
Leading industrypractice
Well-established industry practice
MaturityStrategy
5. Avery Dennison, Label and Packaging Materials; Intelligent Labels; https://label.averydennison.com/eu/en/home/products/intelligent-labels.html
6. Stora Enso; Intelligent packaging; https://www.storaenso.com/en/products/intelligent-packaging
n Leveraging ecosystems: To stay relevant in turbulent market conditions, companies
are adopting new business models by leveraging the expertise of stakeholders across
ecosystems.
n Concept-driven ecosystems: The shared economy concept came to life within
continuous manufacturing with AgriExchanges, an e-marketplace where farmers
(grain sellers) and buyers could interact with each other. However, these e-
marketplaces operated locally within countries and the local governments
controlled them. The shared economy concept can have broader use cases in
this industry around raw materials, talent, and so on, but the overall industry
would require major restructuring and change of vision to realize this.
Crowdsourcing, another concept of the shared economy, is popular with some
continuous manufacturing industry leaders such as Akzo Nobel, BASF, and DSM. n Value-driven ecosystems: Currently, co-innovation in continuous
manufacturing is limited to partnerships with customers, but some have gone a
step further. Akzo Nobel has formed partnerships with academia and the general
public to innovate on products. Top players in the cement industry have
launched end-to-end home building services by bringing all relevant providers
on a single platform, moving from a 'product' seller to a 'service' provider. Many
industry players collaborate with technology companies to innovate, and this
has developed into an effective ecosystem of platform vendors, app developers,
integrators, and service providers. For example, agricultural industry players have
been providing precision farming services, and packaging players such as Stora
Enso and Avery Dennison have deployed intelligent packaging services
using IoT.
Figure 4 summarizes the practices and possibilities pertaining to this Business 4.0 behavior.
New concept driven ecosystems Value driven ecosystems
Next-generation practice (theoretical)
Shared economy concepts for sharing raw materials, equipment, talent, and other use cases involving larger ecosystems
Connecting with adjacent industry ecosystems to provide an end-to-end solution to customers instead of just the product
Technology partnerships to quickly scale new capabilities and growth areas
E-marketplaces in agriculture which are limited to local countries
§ Crowdsourcing with the general public, including end consumers, academia, and non-customers to solve general industry and product problems
§ Crowdfunding for small innovative projects
§ Co-innovation centers with customers to develop specific products and services
§ APIfication to share information with third parties to unlock new revenue streams and gain competitive edge
Emerging concept/ practice
Leading industrypractice
Well-established industry practice
MaturityStrategy
Figure 4: Key ecosystem related practices and future possibilities
n Embracing risk: Continuous manufacturing companies face considerable financial risk
amidst pressures to thrive in a fluctuating demand environment. Besides this, due to
asset-intensive and remote operations, continuous manufacturing companies face
high risks of worker health and safety hazards. To transform, companies are adapting,
rather than being averse, to risk. Here's how:
n Financial risk: A building materials and packaging company experienced a
monthly variance in its spend reports of more than $50 million per month.
While the on-premise procurement system could not meet its growing data
requirements, they also had no visibility into transaction-level variance data. To
solve this, the firm deployed a cloud-based multi-device procurement analytics
solution that offered visibility on key metrics of business function performance.
The overall solution led to soft savings of $100,000 per supplier, per year.
n Health and safety risks: A large chemical company deployed an IoT-based
integrated fleet management solution for its inbound logistics drivers. It
provided visibility into fleet locations and driver response to road safety rules.
Similarly, a global agricultural player used IoT to minimize collisions between
moving vehicles and human workers, thus meeting their end objective of 'zero
fatality'.
To summarize, at the core of all the four Business 4.0 behaviors lies data, which is the
epicenter of new products, solutions, and business models (see Figure 5). While data has
always been available across a company's value chain, technology has now made it
possible to harness it in real time, allowing for better and informed decisions. Moreover,
connected ecosystems are exposing organizations to larger data sets. Data abundance
forms the basis on which an intelligent organization can combat industry challenges and
unlock immense business value through new growth levers.
Figure 5: Illustrations of how Business 4.0is adopted in continuous manufacturing
Analytics driving new insights
Partners for complimentary offerings
Transforming business models
Data cleanse (anonymized for
compliance)
Chemical company offers real-time updates on shipment parameters in cases of anomalies Paints and coating
company sets up 2-million color database
Cement manufacturer develops home building solution (retail and services)
Packaging and labeling company uses interactive packaging solution to offer content to customers
A specialty chemical company’s automotive refinish solutions division uses AI to match car colors based on customer preferences
A paper company deploys intelligent packaging using RFID tags
A chemical company’s new portal offers personalized end-user experience
A paper company develops cutting-edge technology in procurement and supply chain operations
Turning data to value: Predicting replenishment for customers by an industrial gas company
New market segment: A specialty chemicals player explores business opportunities in battery materials
Scale up
Technology Pillar 3:Agile
Technology Pillar 4:
Automated
Technology Pillar 2:
Intelligent
Technology Pillar 1:Cloud
Behavior 4:Creating Exponential Value $
Behavior 2:Embracing Risk
Behavior 1:Leveraging Ecosystem
Behavior 3:Driving Mass Personalization
The Next Paradigm ShiftOrganizations in continuous manufacturing must constantly re-invent, fail early, and fail fast
to stay ahead. The following 'must-dos' will help them achieve this:
n An overarching transformation strategy that unravels new technology-led businesses.
n A leadership that delivers strong and consistent messages.
n Agile practices that boost innovation on products and ideas.
nTMA Machine First approach to automate business processes.
With the adoption of new revenue models based on the Business 4.0 framework, TCS sees a
new 'avatar' of industry value chain emerging to keep pace with dynamic external
conditions. Referred to as the 3S value chain, it comprises the following:
n Synergetic: Multiple business functions collaborate to achieve high profitability with
automation and robotics.
n Smart: Firms derive intelligence from data using data science and AI-based analytics.
This will ensure first-mover advantage in the market.
n Self-optimizing: Companies use data to automatically optimize their functions and
operations, resulting in faster speed-to-market.
Manasi AgarwalManasi Agarwal leads the Continuous Manufacturing Industry Practice at TCS. She is
responsible for enabling growth and transformation initiatives for clients through
design thinking-led innovation, new business services, strategic initiatives, and thought
leadership. She has over 17 years of experience in the continuous manufacturing
industry encompassing digital strategy formulation, value re-engineering projects,
business analysis, energy management and sustainability services, core manufacturing
operations, and process technical services.
About the Author
All content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties. Copyright © 2020 Tata Consultancy Services Limited
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