Logistics new contender in top digitally mature sectors on the back of e-commerce

Singapore

THIS year's Manufacturing Transformation Insights Report has identified the top 5 most digitally mature sectors.

Leading the way in the digital transformation of manufacturing are semiconductor electronics, pharmaceuticals, and the energy and chemicals (downstream) sectors; the logistics sector and medical technology firms round off the list.

The report, based on findings of the Smart Industry Readiness Index initiative (SIRI), is an independent digital-maturity assessment of manufacturing companies. The electronics sector came in second; in the previous edition of the report in 2019, electronics was third, behind pharmaceuticals.

Francisco Betti, the World Economic Forum's head of shaping the future of advanced manufacturing and value chains platform and member of its executive committee, said that what is key about the top three sectors is that they are in the business of producing in large volumes, but with differing degrees of complexity.

"Because of the large volume, they are able to step further in terms of transformation to connect, automate and digitise," he said.

"When you are in mass production, you can see a return on investment a lot faster."

The medical technology sector, on the other hand, was one of numerous sectors directly impacted by the pandemic.

"The sector's priority No. 1 was to lend support with the public health crisis. The digital transformation strategy that may have been designed a few years ago would have been put on pause or gotten disrupted," said Betti.

On the flipside, logistics operations have evolved significantly, mainly due to unparalleled growth in online shopping. The emergence of e-commerce leaders also compelled traditional firms to be more efficient.

But what is clear is that the sectors that have stayed ahead of the curve have done so because their leaders have vision, he added.

"All these sectors have not only invested in technology, but also in their people - and not just in people, but in mindset changing. There is clear guidance from the top, and that then triggers investments in technology, upskilling, and reskilling," he said.

Indeed, the report noted that manufacturers should put more emphasis on refreshing and broadening their strategies for digitalisation and workforce retraining.

"Beyond reviewing learning and development programmes to incorporate broader or continuous learning components, manufacturers may also need to re-examine the way by which they organise their workforce and workspaces as remote working becomes more prevalent in the digital era."

The report, an outcome of a 18-month partnership between the World Economic Forum and the Singapore Economic Development Board (EDB), draws on data from close to 600 manufacturing companies across 30 countries to outline the current state of industrial transformation across sectors.

Another of the key findings is the need for more tailored approaches to help companies in their transformation journey.

Perhaps unsurprisingly, the sectors leading the race in transformation efforts are primarily multi-national corporation (MNC)-dominated industries.

That being said, while some sectors heavy on small and medium-sized enterprises (SMEs), such as food and beverage, rank lower in terms of their collective maturity, there is greater variance at the individual level in these sectors. It is for this reason that the "one-size-fits-all" approach has limited impact and efficacy.

The report said: "To best support transformation, governments, solutions providers and developmental organisations alike must adapt their programmes to suit the current maturity level of each industry group and specific company."

In sectors where companies have relatively similar maturity, one possible intervention is to identify shared challenges and opportunities and create supporting tools or programmes.

Conversely, sectors with high variance, such as the electronics sector, MNCs with highly digitalised facilities can work with partners in data analytics to improve operations at their highly advanced manufacturing sites.

Legacy companies which may have not kept pace can consider partnering with system integrators to design modular, turnkey, Internet of Things solutions for their machinery and systems.

Companies across the board need to focus on connectivity to enable greater integration and insights generation.

SIRI insights showed that only a small group of companies are truly focused on this. Indeed, while many manufacturers have some basic network that connects across their enterprise systems, they have yet to successfully introduce connectivity to the shop floor and facility domains of the factory/plant, said the report.

"Connectivity is a key building block, but it takes time. You first need to look at your IT infrastructure, people, upskilling and reskilling before you can reach a solid level of maturity to connect at scale," said Betti.

"We need to watch for SMEs because those are the ones that are in need of most support. But, MNCs in many sectors also have a long way to go in accomplishing connectivity at scale," he said.