It’s an interesting parallel: the global drive toward sustainability may directly improve carbon emissions and help slow climate change to the benefit of all. And correspondingly, manufacturing companies that successfully transform to contribute to global sustainability will positively enhance their own ability to thrive.

The reverse, of course, is also true — manufacturing companies that fail to meet global environmental, social and governance (ESG) benchmarks will likely find themselves falling behind competitors, being shunned by consumers and, ultimately, facing irrelevance.

It’s a stark reality and a daunting task. Manufacturers must successfully digitally transform in ways that enhance sustainability. But the potential benefits of that success are virtually unlimited.

The digital transformation question is no longer a question

A couple of decades ago, a discussion about digital transformation and sustainability in manufacturing might have involved a number of participants advocating both for and against the need for change — or at least how much things would really need to change. But now, driven by tightening regulations, pressures from global markets, the increased focus on ESG metrics and shifting customer preferences, digital innovation is no longer optional — and manufacturers know it.

According to a recent survey conducted by IndustryWeek and Hitachi, 99% of manufacturing executives consider their company to be committed to sustainability initiatives when compared to others in their industry.

Manufacturers are also beginning to recognize that the benefits of success in this transformation extend beyond the primary goals of operational efficiency, increased profitability, and productivity and safety improvements. Respondents to the survey also noted the potential for significant improvements in:

• Market share
• Influence on industry and society
• Ability to attract new talent
• Brand recognition and reputation
• Employee retention and morale

But knowing you need to transform and knowing how to do it are two different things. Most manufacturing companies are aware of the need to digitally transform, and they know that the changes involved will be substantial. These top three areas of focus emerged in the survey as the most important for meeting sustainability goals:

• Production processes. Streamlined processes that save energy, reduce waste and increase visibility all contribute to making factories more sustainable.
• Workforce training. Manufacturers can maintain and improve sustainability-based work practices and smart-work behaviors by using digital information-sharing tools to reduce the knowledge drain as skilled workers retire.
• Supply chain. More efficient supply chains can save energy, reduce warehouse storage needs and streamline logistics to reduce truck rolls — all of which help lower carbon footprints.

For enhanced sustainability, manufacturers must pursue ways to improve efficiency, lower their energy usage, integrate alternative sources and energy management systems, and lower their carbon footprint from end to end.

And it all starts with knowing where you are today.

Sustainability in manufacturing is built upon a foundation of data

Manufacturers that are exploring digital transformation initiatives know that data will form a large part of the answer to the sustainability challenge. In fact, the survey respondents consider data analytics the most important technology for managing sustainability, with a primary focus on machine learning and artificial intelligence (AI).

Unprecedented quantities of data are now available to organizations, but deriving insights from that data quickly and efficiently requires digitalization. Digital technologies that leverage that data into operational benefits and enhanced efficiencies are the key to enabling quantum improvements in manufacturing sustainability.

Leading manufacturing sustainability by example

Hitachi is a leader in providing sustainable solutions for manufacturing, having developed and operationalized many of the cutting-edge digital technologies that companies use to meet their ESG goals. For example, Lumada Manufacturing Insights helps manufacturers such as Logan Aluminum develop data-driven operations, increase supply chain visibility, run predictive models and enable smart factory solutions that use data to drive productivity, lower asset downtime, extend remaining useful life, and promote sustainability in manufacturing processes.

Hitachi is also one of the largest manufacturing companies on the planet. Its global presence in both manufacturing and technology uniquely positions it as a leader in sustainability solutions. Many technology companies offer recommendations for bolstering manufacturing sustainability, but Hitachi offers advisory services, hands-on guidance, domain and business process expertise, and more — all delivered and backed up with hundreds of use cases and successful delivery examples. Hitachi’s Omika Works factory, for example, was recognized by the World Economic Forum in 2020 as an advanced Fourth Industrial Revolution Lighthouse, an honor given to factories that are world leaders in the adoption and integration of groundbreaking technologies.

But the bottom line is Hitachi’s reputation for leading by example. The company is committed to achieving carbon-neutrality at its industrial facilities by 2030 and investing $13 billion over the next few years in green technologies research and development.

Transformation should be simpler.

Hitachi stands ready to help manufacturing companies achieve their sustainability goals. Recent sustainability-enhancing successes achieved by Hitachi manufacturing customers include:

• Improved operating rates achieved by consolidating multiple factories for automobile parts manufacturing companies
• Improvements in equipment operation rates and reduced manufacturing lead times for an agricultural machinery manufacturer
• Reduced productivity losses from equipment stoppages and improved preventative maintenance processes for a printed circuit board manufacturer

Learn more about how Hitachi can help you more effectively leverage your data and achieve your sustainable future.

About the authors:

David McKnight is Director of Digital Manufacturing Solutions, Hitachi Vantara. McKnight joined Hitachi in 2016 with an eye to broaden his work in industrial IoT and digital manufacturing. At Hitachi Vantara, he is driving manufacturing operations excellence solutions with clients across various industries. Prior to his tenure with Hitachi, McKnight has focused on providing industrial automation and SAP manufacturing solutions throughout the world. He is passionate about enabling manufacturers and their operators, supervisors and management to employ technology to maximize productivity, quality, safety and flexibility.

Shamik Mehta is the Director of Digital Services and Solutions Marketing for Hitachi Vantara. Mehta has around 25 years of experience in product and strategic marketing in IoT, data management and data analytics, semiconductors, renewable energy, and e-mobility solutions. He’s held roles in chip design, pre-sales, product management and marketing for technology products, including software applications and data platforms for industrial applications. His experiences include six years at SunEdison, once the world’s largest solar, wind and energy storage independent power producers, leading product management, operations, business development and marketing.

Mehta has experience managing global product marketing, GTM activities, thought leadership content creation and sales enablement activities for technology and software applications for the smart energy, electrified transportation and manufacturing verticals. Mehta is a Silicon Valley native, having lived, studied and worked there since the early 90s.

Nothing tests the resiliency of supply chains like a global pandemic — as everyone from CEOs to consumers desperately seeking toilet paper know all too well. And, as the COVID-19 pandemic so vividly demonstrated, organizations around the globe need help in monitoring and strengthening their supply chains.

But all organizations — and multinational corporations, in particular — must also be concerned about the sustainability standards of their supply chains. Issues such as climate change, fair labor practices and environmental impacts must be considered along with issues affecting supply chain resiliency. Yes, focusing on these issues is the right thing to do. But increasingly, ensuring supply chain sustainability standards is also essential to maintaining competitiveness and market share. A recent Deloitte survey¹ found that nearly a third of consumers have abandoned a brand or product because of concerns about sustainability or ethics. Nearly half of consumers want more insights into the sourcing of products and impacts to sustainability.

So, modern consumers indeed want to find toilet paper fully stocked on the store shelves. But they also expect that product, and all products, to have been produced and sourced sustainably and ethically.

The big ask

Maintaining supply chain viability, especially in recent times, can be pretty challenging. Adding the task of ensuring and demonstrating that all the many supply and labor sources that feed into that chain meet modern sustainability standards — well, that’s a big ask. But that’s the task that’s faced by enterprises that seek to remain competitive.

It’s not an easy task. And some of the biggest brand names on the planet have made some embarrassing stumbles in attempting to ensure the sustainability and ethics of their suppliers. Some suppliers were cited for violating worker safety conventions and fair labor practices. Others were found to have dumped toxic chemicals into rivers that serve as the source of drinking water for millions of people.

Enterprises need help in successfully monitoring all of the many streams and tributaries that flow into a typical modern supply chain. They need a high-level focus that provides oversight of all supply routes and suppliers — they need a control-tower view.

A control tower solution for supply chain sustainability

Hitachi has developed supply chain control tower solutions explicitly designed for monitoring and managing the complexity of modern supply chains. Powered by Hitachi’s Lumada Manufacturing Insights, these solutions integrate process monitoring, data collection from Internet of Things (IoT) sensors and satellites, historical records and predictive algorithms to provide alerts about potential disruptions.

According to the Association for Supply Chain Management, more than half of all companies lack complete visibility into their supply chains, leaving them vulnerable to disruptions.² Hitachi’s supply chain control tower solutions offer enterprises a paradigm shift in supply chain management: predicting the future of the supply chain rather than simply reacting to disruptions as they occur.

But Hitachi’s supply chain control tower solutions can go far beyond simply helping to keep a supply chain intact. These solutions can also be used for effectively monitoring, managing and demonstrating the sustainability of supply lines, from beginning to end — as the following ongoing Hitachi pilot project demonstrates.

Supply chain sustainability safeguards one of the seven natural wonders of the world

Australia’s Great Barrier Reef is the largest coral reef on the planet and is counted as one of the world’s seven natural wonders. But the majestic beauty of the Great Barrier Reef is sustained by a fragile ecosystem. And in just the past three decades, that delicate ecosystem has been pummeled by a combination of climate change fallout and damage from pollutants. Much of the pollution that affects the reef originates from agriculture.

Recently, Hitachi and Horticulture Innovation Australia teamed up on a project that utilizes Hitachi’s supply chain control tower technologies to help enhance the environmental stewardship of farmers in the Great Barrier Reef catchment area. The project encompasses four remotely monitored farms growing nursery, vegetable, macadamia and banana crops. The project’s goal is to use digital dashboards to enhance sustainability efforts by helping the farms produce more with less waste and increase their compliance with governmental directives.

This project will demonstrate the viability of both managing and monitoring even the most remote endpoints of a supply chain using Hitachi’s data-driven control tower technologies. The project is expected to enhance supply chain sustainability and resiliency while providing the product-source transparency that has become so vital to modern consumers.

Supply chain sustainability is now an imperative

Not so long ago, any enterprise efforts toward ensuring increased supply chain sustainability were worth a virtual pat on the head — and not much more. But that’s no longer true. Increasingly, maintaining goodwill in the eyes of stakeholders and consumers requires that supply chains be both resilient and sustainable. Enterprises that manage to do both enjoy a competitive edge that far transcends the ability to simply keep toilet paper on store shelves.

Discover how Hitachi’s supply chain control tower solutions can help you keep your supply chain intact while providing the sustainability that consumers demand.

About the author:

Owen Keates, Industry Executive, Manufacturing Practice, Hitachi Vantara

Keates leads the development of Hitachi Vantara’s digital supply chain solutions. With over 25 years of experience in supply chain management including global supply chain manager of a logistics company and vice president of a supply chain consultancy, he has led many digital transformation programs across a range of industries from beverages and agri-food to transformer, motor, construction, vehicle assembly as well as chemical and paper manufacturing. Qualified as a chemical engineer, Keates has production, project and executive management experience in manufacturing and is currently completing a part-time Ph.D. in process intelligence.

1 – “Shifting sands: Are consumers still embracing sustainability?” Deloitte, 2021, https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer.html

2 – “Over Half of Companies Lack Clear Picture of Their Own Supply Chain, According to New Report from ASCM and the Economist Intelligence Unit,” Association for Supply Chain Management, February 23, 2021, https://www.prnewswire.com/news-releases/over-half-of-companies-lack-clear-picture-of-their-own-supply-chain-according-to-new-report-from-ascm-and-the-economist-intelligence-unit-301233340.html

The Journey to M4.0 Value

The manufacturing industry is at a pivotal point in its history.

Driven by market forces to become more agile, innovative, resilient, cost efficient, and sustainable, companies of all sizes are pursuing a future vision for business value enabled by digital technologies that will redefine the rules of competition, how work will be performed, how companies will be organized, and how leadership must lead.

We term this future state: Manufacturing 4.0.

Such a comprehensive enterprise-wide transformation requires a three-dimensional approach: mastering the challenges and opportunities of advanced digital tools and data; improving organizational structures and cultures; and developing new workforce talent and leadership skills.

While shaped by company size, sector, and level of digital maturity, all manufacturers share the need for a common set of key M4.0 competencies.

These enable them to drive value from digital investments in critical areas of business activity – from product design and innovation, to supply chains and customer relationships, to more eco-efficient manufacturing operations.

The Manufacturing Leadership Council’s new Critical Issues agenda for 2022/2023 is a specifically designed   to help manufacturers align their thinking and best practices to deliver true business value from their journey to M4.0.

The MLC’s Critical Issues Process

The Manufacturing Leadership Council’s Critical Issues agenda, now in its 11th year, is the outcome of a unique, annual, member-driven process to identify the most urgent and important issues facing manufacturing companies in the year ahead. Refreshed every year, it is based on extensive consultation with over 3500 senior executives and associate members of the Manufacturing Leadership Council and Board of Governors.

The Critical Issues agenda establishes the Manufacturing Leadership Council’s strategic plan, and directly influences all major elements of the MLC’s research program, content focus, events, and services portfolio for the year ahead.

For more information contact: [email protected]

Two statements, from two people deeply immersed in the manufacturing sector, have been playing on loop in my head recently. The first was something said to me by Joe Chen, co-founder of one of our customers, Anduril Industries. He said that his company’s fundamental differentiator (and thus his most important KPI) is being faster to market than everybody else.

The second was an observation I read made by Paul Wellener, Vice Chairman and U.S. Industrial Products & Construction Leader at Deloitte LLP. Wellener, who also serves on the NAM Board of Directors, said, “The challenge is to really make manufacturing attractive to the next generation and to diverse populations.”

It’s hard to argue with either statement. Advances in manufacturing technology are driving dramatic acceleration in development, iteration, and production. And with supply chain problems causing drag on the entire sector, the ability to beat the competition for pace makes you far more likely to win.

Meanwhile it’s been well documented that the older part of the U.S. population is leaving work in droves. More than half of over-55s have quit the U.S. workforce, taking with them decades of knowledge and expertise and leaving a gap which must be filled by younger generations.

But those millennials, who will account for 75% of the workforce by 2025 according to some projections, have a level of choice in employment terms that we haven’t seen for decades. It’s a seller’s market and, with the U.S. manufacturing sector on track to have over two million unfilled jobs by 2030, the urgency behind Paul Wellener’s observation becomes clear.

So it is reasonable to conclude that success in manufacturing as we move forward will be heavily dependent on speed and agility, combined with the ability to attract and retain the best new talent from a pool of workers who are younger, and increasing in diversity of nationality in line with the population as a whole.

Studies suggest that technology has a crucial role to play. According to research from Comptia, 71% of millennials cite the degree to which an organization embraces technology and innovation as an influencing factor in their choice of an employer – a share of the cohort which is increasing each year. They want access to the best technology that will have the greatest impact on their skillsets.

In addition, the survey showed that 61% of millennials like to use their smartphone as part of their working life, compared to just 38% of boomers. Anecdotally, I see the same thing. They want to work as they live, with the same technology – and that means that the ways in which information is accessed, presented, and consumed must change.

Our own research into how product and process documentation is managed within the U.S. manufacturing sector revealed more generational differences in this area. We asked manufacturing professionals from middle management through to executive leadership whether they agreed that text-heavy documentation was challenging because of diverse reading skill levels and first languages. While 66% of those in the 45–54-year-old age group agreed, the number rose to 74% for those aged 35 to 44 and to 81% for those aged 25 to 34.

Where it gets interesting for me is the intersection between that need to beat competitors on time to market and the need to change how information is consumed (and to provide technology that engages and excites the workforce). The reality, of course, is that you are only as fast as your slowest process. And because effective communication of critical product and process information underpins every aspect of success, it has to be on the money.

Our survey suggests this is understood, with 75% of manufacturers reporting that they are actively trying to improve their communication processes, and 73% saying that communication is getting harder for them to manage as they grow. Most telling of all, 73% said they believe poor communication processes are undermining the investments they’ve made in other technology and process initiatives.

These issues are driving uptake of our interactive visual communication and collaboration platform, Canvas Envision because it provides that very step change in how information is delivered and consumed that chimes with the learning styles of the new generation workforce.

The challenges are not going away, but fortunately there is a solution.

About the author:

Patricia Hume is Chief Executive Officer of Canvas GFX.

When it comes to digital transformation, is there a way to ensure that all manufacturers have an equal opportunity to focus on digital initiatives – regardless of their size? A panel at Rethink: The Manufacturing Leadership Council Summit examined the different challenges faced by small and medium enterprises on the industry’s journey to Manufacturing 4.0.

The panel featured Val Zanchuk, President at Graphicast; Chuck Wetherington, President of BTE Technologies and SMM Chairman for the NAM Board of Directors; and Irene Petrick, Senior Director of Industrial Innovation at Intel Corporation.

The most obvious challenge comes from resources. As Zanchuk said, he is often limited by the three T’s: Time, Treasury, and Talent. “I try to keep up with the pace of understand what’s going on with the latest digital tools, and identify the opportunities that make sense for the business.”

“M4.0 is not a rote prescription, it’s a toolbox,” Wetherington said. “We are moving digital technology down to where the work is being done.”

Petrick said that the digital divide isn’t only because of size, but also because of investment choices. “If you weren’t doing a lot of investments in digital over time, then you are behind – it’s not a size issue, it’s an investment issue.” Petrick added that companies who have not been making those continuous investments are behind, especially after COVID.

Cybersecurity is also a concern, not just internal to a company but also as an ask from customers. “The customer base has to be able to look at us and say we’re in good shape, to be comfortable working with us,” Zanchuk said.

Wetherington added, “Every company needs to be worried about cyber and needs to make efforts to be secure. The problem isn’t how good your defense is, it’s whether or not the bad guys want to get at you.”

So how can a small company, or any company, keep from falling into the divide?

“You have to stay on top of understanding technologies,” Zanchuk said. “Lean mentality fits well with 4.0 mentality, but we don’t use every tool in the Lean toolbox. I’m always scanning the technologies to understand it and translate it down to my scale.”

It’s also a matter of people, not just technology. “Hiring and retaining talent will continue to be an enormous challenge,” Petrick said. “Investing there will yield much more value than ever before.”

Katelyn Kelsey didn’t expect to go into manufacturing, but as an engineer, the lure of digital transformation and the opportunity to solve emerging problems was too great.

Participating in a panel discussion on next-generation leaders at MLC’s Rethink 2022 Summit, the Mobility Technology Engineer for Dow, Inc., encouraged employers to go back to the drawing board and to let young people know that manufacturing is a place where they can work with the latest technologies and solve problems that bridge information technology and operational technology.

Moderated by Penelope Brown, MLC’s Senior Content Director, the panel also included Hayley Dwight, Director, Business Architecture and Change Management for Cooley Group, and Daniel Shrives, Research Engineer for Saint-Gobain North America.

The panelists agreed that Gen Z and millennials want to work for companies with interdisciplinary teams that do not operate in silos. Further, Dwight explained that her generation also wants a culture that values information sharing between organizational levels. She shared that she’s able to direct message with people like Jack Dorsey – the co-founder and former CEO of Twitter – so she should have similar access to the leaders in her our organization.

Later Kelsey added, “It costs you nothing to offer a seat at the table.”

Meanwhile, Shrives shared that one of the most important lessons he’s learned so far is to be flexible and expect that a role and responsibilities will change over time. But it is not just about his generation’s expectation to adapt. Shrives shared that leaders should give millennials an opportunity to bring change with them.

To prepare for the future, Kelsey encouraged manufacturers to come to events like Rethink in order to have candid conversations as an industry. She also reminded the audience that manufacturers aren’t just manufacturers anymore. They are also technology companies and they need to pull talent from other industries to create cross-functional teams.

And it is not just about speaking truth to power. Each of the panelists is also working to build their own leadership skills. In fact, Dwight, Kelsey and Shrives were among those honored later in the Next-Generation Leadership category at the Manufacturing Leadership Awards Gala.

Asked to share something about her personal development journey, Dwight shared that she’s working to ask more questions instead of making declarative statements. To do this, she asks herself each day if she ended more sentences with question marks or periods. That’s a lesson for leaders regardless of their generation.

Photo by David Bohrer / National Assoc. of Manufacturers

In 1914, the Ford English School fostered shared language between the company’s workers who spoke many languages and had diverse perspectives. By establishing a shared understanding and fluency in the English language, Ford’s school led to increased safety and efficiency and better citizens.

Now more than one hundred years later, data literacy is the baseline language according to Valerie Logan, CEO and Founder of The Data Lodge.

Logan and Dr. Steven Moskowitz, Director, Digital Transformation at Entegris and Chairman of Innovation Research Interchange (IRI), a division of the National Association of Manufacturers, presented a case study at MLC’s Rethink 2022 Summit titled Fostering Data Literacy: The What, Why and How.

The case study explained that data literacy is the language of data – the ability to read, write, and communicate with data in context. Logan emphasized that the context is important and differs depending on a person’s role. Further, she said, mindset, language and skills are the keys to fostering data literacy.

When Entegris kicked off its digital journey, they took time to examine the corporate culture and then aligned their digital strategy with that culture so different teams could connect to Entegris’ digital thread and move from data to insights to actions and decisions. Logan shared that fostering community and collective languages across a diversity of backgrounds opens new channels for the entire organization.

For Moskowitz, data literacy isn’t about dumping data on people. It is important to communicate the story and explain the decisions and actions that the data necessitates.

At its core, data literacy is a development tool, but it requires enablement and engagement. According to Moskowitz, the impact of shared data literacy isn’t always measurable, but if you don’t establish literacy, the cost could be significant.

Photo by David Bohrer / National Assoc. of Manufacturers

Lots of heads were nodding when Cynthia Farrer kicked off her opening comment of a fireside chat during the MLC’s Rethink 2022 Summit by noting that supply chain is something that everyone in the room is dealing with and it is top of mind.

Farrer, Senior Vice President of Global Operations and Integrated Supply Chain for Allegion, was joined by Ken Engel, Senior Vice President, Global Supply Chain North America for Schneider Electric, USA for the chat moderated by Paul Tate, MLC’s Co-Founding Executive Editor and Senior Content Director.

Throughout the discussion, Engel and Farrer shared how they’ve adapted to challenges and where they see improvement opportunities for supply chain management. To mitigate future disruption, they shared that it is important to gain visibility throughout the supply chain and line of sight into the entire ecosystem. At Schneider, for example, they have created an upstream supplier readiness plan that Engel referred to as “a plan for every part.”

Meanwhile, for those companies with limited resources or with a significant number of parts, Farrer recommends that companies identify the most important component parts and focus on gaining visibility and redundancy for those parts.

Ultimately, to create calmer supply chains and operations, Engel emphasized the need to partner closely with suppliers and acknowledge the important role employees play. People must be empowered to be agile as they navigate personal and business disruptions, according to Engel. In fact, Schneider Electric has found that by providing digital training to its workforce, there is greater engagement and excitement around the work.

Photo by David Bohrer / National Assoc. of Manufacturers

“Today, we are still only scratching the surface of the M4.0 value proposition,” noted David R. Brousell, Co-founder of the Manufacturing Leadership Council during his opening speech this morning at the MLC’s Rethink 2022 Summit in Marco Island, Florida. “But I am convinced” he added, “that a powerful case can now be made that the already significant value that has been realized with M4.0 will be significantly surpassed in the days ahead.”

Speaking to a packed auditorium of 500 senior level manufacturers, industry experts, innovators, and academics at the MLC’s 18^th Summit event, Brousell predicted that the manufacturing industry is now poised to cross a chasm with M4.0 – making the transition from initial visionaries and early adopters, to the next dimension of value from M4.0 through grounded pragmatism, focused application, and enterprise-wide deployment.

“The value that we will be able to generate from the digital model – whether that value is expressed in time, productivity, customer satisfaction, speed, or hard dollars – will be determined by our ability to master data, not only to improve what exists, but also to identify what might not yet exist – but could,” said Brousell.

Mastering data, he believes, will deliver positive change in many areas – changing the jobs people do and how they execute those jobs; changing the processes by which manufacturers make things, assure their quality, and delight customers – driving greater efficiencies, speed, cost effectiveness, and productivity; and it will change product and service portfolios, leading to the creation of new revenue streams and new customers.

In the years ahead, he continued, it will also allow companies, and the industry at large, to reimagine the art of the possible, unleashing imagination, creativity, and innovation, and ultimately, enhancing manufacturing competitiveness on the global stage.

“So set your expectations high,” concluded Brousell. “Think big about the next phase of M4.0. and embrace something that Michelangelo once said. “The greater danger for most of us lies not in setting our aim too high and failing short, but in setting our aim too low, and achieving our mark.”

Last year ransomware gangs turned up the heat against all industrial sectors, but manufacturers have the most to worry about amid this distressing rash of cyber extortion. The statistics show that in 2021 adversaries targeted manufacturing with industrial ransomware nearly twice as often as all the other industrial sectors combined.

It’s a trend that shows no sign of slowing down as adversaries increasingly recognize manufacturers as extremely profitable targets for ransomware schemes that encrypt and disable operational technology (OT) systems on the factory floor and beyond, requiring victims to pay for the keys to decrypt their files and restore functionality to their systems. Savvy ransomware groups recognize the value of uptime in the manufacturing industry and they’re ruthlessly profiting on the fact that manufacturers are often the least mature in their OT defenses compared to other industrial verticals.

Manufacturing Ransomware Statistics

Dragos identified the intensification of manufacturing ransomware through data compiled for its 2021 ICS/OT Cybersecurity Year in Review (YiR) report, an annual compendium of OT security statistics and observations.

YiR findings showed 2021 as a pivotal year for ransomware groups targeting OT systems, with ransomware becoming the number one driver for compromises in industrial environments. Weak boundaries and poorly understood interactions between OT and IT systems, coupled with the rise in remote access—especially as more organizations rely on their work-from-home staff—contributed to industrial ransomware’s rising trend lines.

Broken down by industrial sector, manufacturing accounted for 65% of all the industrial ransomware incidents last year. Manufacturers suffered six times as many industrial ransomware incidents as the second leading sector, food and beverage, which suffered about 11% of last year’s attacks. Transportation came in third, accounting for about 8% of industrial ransomware attacks in 2021.

Digging deeper into the category of manufacturing ransomware incidents, the top three most common subsectors impacted by these attacks were Metal Components (17%), Automotive (8%), and Plastics/Technology (6%).

Rise in Ransomware Attacks

While ransomware still mainly targets enterprise IT systems, Dragos intelligence shows there are growing instances of these attacks that impact OT directly and in integrated IT and OT environments. Often ransomware adversaries indirectly attack OT systems as targets of opportunity after gaining initial access in adjacent and integrated IT systems. They use the compromise of critical enterprise IT systems to move laterally into OT. Some ransomware groups specifically target OT systems.

For example, EKANS is a specific ICS targeted ransomware that has gone after companies across electric, oil and gas, medical and pharmaceutical manufacturing, and automotive sectors. Dragos analyzed multiple variants of EKANS malware and discovered that the EKANS variant has the ability to stop ICS-related Windows processes before initiating encryption.

In 2021 the most prolific ransomware groups to attack OT systems were Conti and Lockbit 2.0, which caused 51 percent of total ransomware attacks, with 70 percent of their malicious activity targeting manufacturing. A lot of the success that groups like these have achieved in cyber extortion can be attributed to malicious business models like ransomware-as-a-service (RaaS) and sophisticated underground marketplaces where ransomware developers outsource operations to affiliates who execute the attacks. Affiliates do not require high-level technical expertise because the ransomware software has been developed and they can purchase access to systems and hackers for hire, which significantly lowers barriers to entry.

The DarkSide gang (now rebranded as REvil) offered customer service with real-time chat support andbrought in at least $60 million before it announced it was closing its operations. Investing in their business, ransomware groups are also funding research and development, which is fueling their industry as their extortion methods become more extreme. These are criminals, but they’re also savvy businesspeople, so manufacturers should expect them to continue to knock over vulnerable factory systems if they stand to make a handsome profit through ransoms readily paid by manufacturers who can’t afford to have their production ground to a halt.

What to Expect in 2022

Unfortunately, many manufacturers are still ill prepared to buffet these ransomware attacks before the adversaries have already stopped production. Dragos YiR analysis based on professional services engagements last year shows that 90% of manufacturers have limited visibility into their OT systems and the same percentage have set up poor network perimeters. Meantime, 80% of manufacturers have external connectivity exposed in OT systems and 60% utilize shared credentials that can easily be leveraged by ransomware groups to compromise systems.

Ransomware trends are likely to continue shifting as groups reform, reprioritize, and as law enforcement pursues them and takes them offline. As this evolution continues to evolve, Dragos analysts believe with a high degree of certainty that ransomware will continue to disrupt all industrial operations and OT environments through 2022, in manufacturing and beyond. Manufacturers should prepare now because ransomware actors’ extortion techniques will continue to grow in severity and intensity as adversaries deploy any means available to maximize their ransom profits.

To read more on OT cybersecurity trends, see the full Year in Review (YiR) report: https://www.dragos.com/year-in-review/

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Peter Vescuso is Vice President of Marketing at industrial cybersecurity provider Dragos and a member of the Manufacturing Leadership Council.