MHI’s Annual Industry Report Frames COVID-19 Disruptions as Opportunities

Is now the time to invest in supply chain digitization?

The pandemic and other challenges during the past two years have caused enough disruption to make the word “unprecedented” too cliche to use with a straight face. The March 2021 blockage of the Suez Canal by the infamous Ever Given container ship, in addition to shortages and shipping delays at grocery and retail stores, has made the average layperson more familiar with the concept of supply chains than ever before.

The 2022 MHI Annual Industry Report presents supply chain leaders with the opportunities that emerging technology provides for adapting and improving in the face of these disruptions. While the supply chain landscape remains unpredictable, this report asks supply chain industry professionals what technologies they are most excited about for the future.

MHI Report: Challenges Spur Investment 

It may seem counterintuitive that the key finding of this year’s MHI report points to the need for investment and technology upgrades in such a volatile time. Common wisdom may suggest that turbulent times are suited to a more bearish, hunker-down approach. The report finds, however, that these disruptions have changed the manufacturing industry’s perspective on the strategic importance of supply chains. More than 87 percent of survey respondents stated that the pandemic has elevated the strategic importance of their supply chains.

The MHI report has noted an increase in the adoption of 11 key technologies the organization has tracked over the past eight years. The need for improvement in the lead times, reliability and performance of supply chains has spurred investment, despite the uncertain economic outlook.

In the report, MHI explores this increase in technology adoption and how these supply chain technologies are addressing other changes and challenges exacerbated by the pandemic.

The report focuses on three areas:

  • Digital twins
  • Data collection and analytics
  • The labor shortage

Supply Chain and the Digital Twin

When simulation and mathematical modeling of events are combined with a digital model of a machine or system, the result is a digital twin. For example, the CAD model of a robot can use data from the physical robot’s sensors to recreate the joint positioning, temperatures and other attributes of the robot in the digital world. In the case of the robot, this digital twin can help engineers predict maintenance, write new motion programs, manage safety and more.

In the supply chain industry, digital twins may not include 3D visual CAD models of container ships and warehouses, but they still aggregate the real-world data to simulate the system.

According to the MHI report, key advantages of digital twin technology in supply chains include:

  • Proactive identification of problems before they occur
  • Faster, cheaper development and testing of new solutions
  • Less risk to existing operations for testing new solutions
  • More efficient performance, with less failure and downtime

With a digital twin in place, engineers and leaders have a digital sandbox to iterate new ideas, such as software changes and process changes prior to implementation. By running through multiple experiments in minutes, then automatically analyzing and ranking the results, the risk of change is dramatically reduced. Digital twin technology enables rapid and well-informed, data-driven decisions, including identifying optimization opportunities across software, labor, equipment and other systems or resources.

According to the report, “Twinning a distribution center allows multiple configurations and systems to be rapidly prototyped and tested, helping to identify the type and level of automation that is optimal for an organization’s needs and that uses space most efficiently. It can also simulate unexpected and seasonal peaks in demand and then provide insight on how to handle them.”

The Value of Data

Digital transformation in the supply chain, according to the MHI report, means creating visibility into the data generated and used across the system. According to the report, an effective data strategy understands that all the stakeholders in a system and understands what data each stakeholder needs to perform effectively and address vulnerabilities.

Traditionally, the most important data for a supply chain provider was customer data, such as demand patterns and service requirements. This information can be used as a foundation for advanced analytics, but in today’s world, these data streams alone are not sufficient to guide operations and protect against disruption. Weather, public health, political shifts, tariffs, consumer behavior, traffic and geopolitical conflicts are all tracked by supply chain companies to optimize operations and prevent failures.

The Labor Shortage

Just like the term “supply chain” itself, “the labor shortage” has become a hot topic in the general discourse and around the (virtual or actual) water cooler.

The report highlights the confluence of the increasing adoption of automation technology in the manufacturing industry as well as increasing difficulties in hiring. However, contrary to the fears of the late 20th century, robots didn’t take workers’ jobs. Manufacturers and supply chain companies are adopting automation and digitization to do more with fewer workers. According to the report, industry studies predict productivity gains of up to 46 percent in distribution centers that introduce automated or robotic technology. However, introducing technology can pose internal labor challenges and require upskilling and training.

With more than half a million job openings currently available, manufacturers say it is 36 percent harder to find talent today than it was in 2018. “We have a perception problem. People don’t know the jobs are here or that these are jobs they want,” said Carolyn Lee, president of the Manufacturing Institute.

According to MHI’s analysis, the manufacturing and supply chain industries can build the U.S. manufacturing workforce of tomorrow by starting with students in high schools. Manufacturing has a long-standing perception of being dirty, dangerous and dull. But with the increasing investments in technology, as well as updated philosophies such as lean production, many manufacturing jobs today don’t even involve getting your hands dirty. Programming a machine provides a better snapshot of today’s manufacturing worker than twisting a lug nut.

Conclusion: What Action Should Supply Chain Leaders Take?

In this unpredictable time of global changes—from the pandemic to wars, climate disasters and political divides—supply chain leaders are determined to maintain quality performance. This means predicting disruptions, adapting to new information on the fly and investing in the right tools to move forward. The MHI report highlights the increasing influence of climate concerns on the behavior of consumers, including the carbon footprint of shipping. Social justice concerns also influence behavior, with consumers increasingly asking questions about the ethical and social impacts of product life cycles.

The overarching conclusion of the MHI report holds that smart investments in the right Industry 4.0 technologies can insulate supply chain companies from disruption, deliver productivity benefits (especially considering labor shortages), and drive innovation in systems, processes and objectives. Data collection and advanced analytics are particularly important tools for predicting and planning supply chain operations. These data streams can be coupled with models to create digital twins and simulations, enabling iterative innovation. Lastly, automation and robotics, such as what is used in warehouses, can close labor gaps and drive productivity, even as it remains difficult to hire workers. In addition, these new technologies provide opportunities for upskilling and increasing the value of personnel that you already have in place.

The supply chain may remain a scapegoat around the dinner table for a few years yet, but the most capable leaders in this industry are leading the way with the right investments and decisions.

The 2022 MHI Annual Industry Report contains more information that couldn’t be included in this brief summary article, such as case studies and survey results. Check it out for yourself here.