“Rising freight rates, low production levels and the social-economic situation in Europe will keep inflation high in 2022,” predicts Ahmed bin Sulayem, chairman and CEO of DP World Group, “as companies struggle with the challenging trading environment.” Yet, despite supply chain disruptions, manufacturers face pressure to meet rising customer demand while recovering from years of reduced profits. Here, Jon Young, APAC sales director at global automation parts supplier EU Automation, explains why Industry 4.0 holds the answers.
The challenges in Europe are being felt by manufacturers across the globe. New Zealand’s annual inflation, for example, rose to a 30-year-high of 6.9 per cent in the first quarter of 2022. New Zealand and Australia freight rates from China have also tripled since early 2020. While supply chain costs have eased somewhat post-pandemic, further restrictions in China, plus the Ukraine war, are preventing near-term improvements.
Industrial manufacturers are feeling the effects, with many at risk of halting production as they struggle to maintain supplies of necessary materials, while also keeping costs at an acceptable level. As a solution, manufacturing has seen a large shift towards Just In Case (JIC) inventory management, away from the more traditional and popular Just In Time (JIT) strategy.
The JIT approach, where parts are delivered when needed to minimise inventory levels, has become unviable as supply chain disruptions create an unpredictable supply base. Instead, JIC is a risk management system that involves creating a stockpile of assets likely to experience shipping delays, to maintain demand during shortages. Advantages of JIC management for manufacturers include that it can prevent the shutting down of production lines, and prices of stock can be increased due to higher demand.
On the other hand, JIC strategy can be inefficient, expensive and wasteful if not implemented correctly. How can manufacturers get more quickly onboard with JIC? While supply chain challenges cannot be solved overnight, there are a few options to help manufacturers take better control of their supply.
Industry 4.0 offers a range of automation technologies that help manufacturers control inventory, improve warehouse visibility and forecast asset shortages — let’s look at some examples.
Greater visibility
One option to improve production is to integrate AI-driven software into production machinery. AI can gather performance data from sensors, installed at the device level, and relay this to a plant’s SCADA or manufacturing execution systems (MESs). In doing so, the software can optimise business operations by analysing current market trends to understand the changing environments, so manufacturers can plan accordingly.
For example, PwC’s Digital Factories 2020 report cites the example of Continental Automotive. The manufacturer now uses data analytics tools for machine-to-machine communication in its production line to understand current and upcoming material demands, and automatically order the components needed.
The advantage is that less time is spent sourcing products, as AI can predict when shortages may occur so manufacturers can plan ahead of time. By improving efficiency across the production line, manufacturers can gain better control of costs, increase productivity and boost margins. Many manufacturers are already integrating automated technology into production, but AI can exponentially improve speed and quality.
3D printing also offers substantial benefits by reducing supply chain complexities. For instance, businesses are 3D printing replacement components on-site to keep equipment up and running. This eliminates the time and costs of shipping spare parts, and the advantages of this approach are already being experienced in industries ranging from medical and aerospace to automotive.
According to P&S Intelligence, Asia-Pacific (APAC) was the largest contributor to 3D printing in construction in 2020. Research also predicts that more industries in the region are likely to adopt 3D printing for on-demand manufacturing. Advantages of the technology include that manufacturers wouldn’t need to worry about warehouse inventory, and can reduce consumption by only using the exact material needed.
While larger businesses already reaping the benefits of industry 4.0 technology, small and medium businesses have yet to make the jump. While investing in these technologies requires upfront costs, manufacturers can experience a fast return on investment (ROI) by saving costs on energy, material use and administrative labour. In a 2022 report by Gartner, 36 per cent of manufacturers noticed improved business value by investing in digital technologies.
For a reliable supply of components, it’s not always about sourcing new. Refurbished and remanufactured parts can keep precious metals and high-cost resources in the supply chain by reusing them. In some cases, it can be faster and cheaper to use an automation parts supplier that specializes in refurbished components. They can ensure manufacturers aren’t left without a continuous supply of parts.
While the current situation might seem bleak, supply chains are adapting to the current climate and some executives are positive about the future of trade. Added visibility to the supply chain with Industry 4.0 technologies can help manufacturers identify and address global supply issues and, to paraphrase Ahmed bin Sulayem, overcome struggles with challenging trading environments.
For more tips on improving supply chain resilience, visit the EU Automation Knowledge Hub. To discover the range of quality automation parts available from EU Automation, visit its website.
