COVID-19: An Unlikely Inspiration
Spurred by the need for agility and flexibility in a time of crisis, manufacturers appear determined to accelerate their investments in digital technologies. By David R. Brousell
As the year 2019 was drawing to a close, it appeared that momentum was building for manufacturers to adopt advanced technologies as a key part of their journey to Manufacturing 4.0, the next wave of industrial progress based on digitization. And then, in February, the unexpected occurred — COVID-19 struck like a bolt of sustained lightning, upending life as we knew it.
By the end of June, U.S. Gross Domestic Product had fallen at a 31.7% annualized rate, the deepest decline since record keeping began in 1947. Nearly 30 million Americans were receiving unemployment checks by the week ending July 11. And by mid-September, there were 6.5 million COVID-19 cases and nearly 194,000 deaths in the U.S.
Between February and April, manufacturing production plummeted 20.3% and even after four straight months of improvement, the industry was still down 6.7% at the end of August, compared to where it was in February. Capacity utilization followed a similar pattern, dropping to 59.9% in April, the lowest rate since data gathering began in 1948, from 75.2% in February, and then recovering somewhat by the end of August when it reached 70.2%. And so the big question around Manufacturing 4.0, a nearly decade-old evolution that had been moving at a slow but steady pace, was would manufacturers be forced to put their digital technology investments on hold or scale them back significantly in order to weather the crisis and, if so, what damage would a hiatus have on the trajectory of the digital model?
The answer to that question was immediate and profound. The pandemic is shaping up to be an unlikely inspiration for change. Manufacturers’ ability to quickly pivot and produce pandemic-fighting materials and equipment was clearly linked to their digital maturity. Companies that had already invested in digital technologies were in a far better position to respond to the crisis than those that did not or did not do so sufficiently.
A poll conducted by the Manufacturing Leadership Council in May showed even stronger evidence that Manufacturing 4.0 was not going to be slowed down – 53% of respondents indicated that their companies would accelerate digital investments as a result of the pandemic.
Spending Acceleration Plans Still Robust
A new MLC poll, fielded in August, shows that number slipping but still robust. In that new poll, the MLC’s annual Transformative Technologies in Manufacturing survey, 43.7% of respondents indicated that their companies will accelerate spending on information and operational technologies as a result of the pandemic. Twenty-five percent indicated that spending will be unchanged (compared with 36% in the June poll) and 30.3% said that spending would decline (compared with only 7% in June). In addition, more than 79% of respondents also said that their companies would accelerate adoption of technologies that enable virtual working and remote monitoring of operations. (Charts 1, 2). As might be expected, conducting surveys in the midst of an on-going pandemic is an exercise fraught with unpredictability. Because of unknowns such as whether new surges of infection will occur, when a vaccine will be become available, and what the long-term damage to businesses might be, it is very difficult for companies to plan and budget. Current intentions around advanced technology investments could change at any time depending on circumstances.
But the new MLC Transformative Technologies poll, while raising concerns that spending may be cut back as the damage inflected by the pandemic is more fully felt in the months ahead, does offer some encouragement that manufacturers continue to be focused on the future, and what advanced technologies can do to make that future a digital one. Moreover, the new poll has certain strains of consistency with prior MLC surveys, most significant of which is manufacturers’ longer-term view of the transformative impact of advanced technologies.
For example, across a range of 13 technologies surveyed, artificial intelligence once again this year strongly leads in respondents’ investment intentions over the next two years, a position that AI has held in MLC surveys for the past several years. This year, 38.7% of respondents indicated that their companies would invest in AI in the next 12 to 24 months. Digital twin modeling and simulation software comes in second, with 34.5% of respondents saying their companies will invest in this technology within the next two years, and supply chain management software comes in third, with 28.7% (Chart 4).
AI has apparently captured the imagination of manufacturers for what it promises to do to improve the effectiveness of automation, mine increasingly growing volumes of data from operations including factory floor equipment, and, as a result, cut costs and boost productivity. In fact, across eight application areas asked about in the survey, AI applied to preventative maintenance of plant floor equipment was clearly the stand-out, with 62% of respondents indicating it as a key application area, the highest by far in the survey. Quality and production planning came in second and third, with 56% and 35%, respectively (Chart 8).
7 One Quarter Underway With AI Projects
Q: Where does your company stand today in adopting AI in plants and factories?
8 Preventative Maintenance is Key AI Application
Q: What are the key application areas for AI and Machine Learning technologies in your plants and factories?
9 Nearly a Majority See AI/ML as Game-Changer in Future
Q: What is your current assessment of the potential of artificial intelligence and machine learning, both today and in five years’ time?
Part 3: TECHNOLOGY ASSESSMENT & IMPLEMENTATION PROCESS
10 Only One-Fifth Has Formal M4.0 Approach
Q: Which statement best describes your company’s current approach to adopting a M4.0 technology roadmap or strategy?
11 Joint IT/OT Teams Lead in M4.0 Strategy
Q: Who is responsible for devising and implementing your M4.0 technology roadmap / strategy?
12 Cost Reduction, OpEx Are Top Motivators for M4.0
Q: What are the three most important reasons your company invests in transformative M4.0 technologies?
Part 4: CHALLENGES WITH M4.0
13 Proof of Payback, Skills Are Chief Inhibitors to M4.0
Q: If your company does not invest in M4.0 technologies, what’s the primary reason?
14 A Majority Struggles to Keep Pace With Technologies
Q: Please indicate the extent to which you agree with the following statement: The accelerating pace at which new technologies are emerging is causing us to fall behind in our efforts to evaluate and understand their potential.
15 A Mixed Bag on Competitive Position on M4.0
Q: Where do you think your company stands in relation to its primary competitors’ adoption of transformative M4.0 technologies?
16 Legacy System Migration is Greatest M4.0 Challenge
Q: How would you assess the following challenges related to adopting and using transformative M4.0 technologies?
17 Few Are ‘Well Prepared’ to Deal With Data Volumes
Q: How prepared is your company to organize, evaluate, and make decisions on the volumes of data that are or will be generated from greater connectivity of devices and equipment?
Survey development was led by David R. Brousell, with input from the MLC editorial team and the MLC’s Board of Governors.
