Manufacturing CEOs focus on resilient supply chains, tech transformation post pademic

• Supply chain risk seen as the greatest threat to organisation growth
• CEOs aim to ensure supply chains are resilient to future global disruptions

 The pandemic, climate change and geopolitics are driving global manufacturing executives to focus even more than before on a twin transformation: smart digitisation and a focus on environmental, social and governance (ESG) goals.

In a statement, KPMG said its Global Manufacturing Prospects 2022 report highlighted that supply chain risk is seen as the greatest threat to the organisation’s growth, with more than two thirds (68%) of chief executive officers (CEOs) saying they aim to ensure their supply chain is resilient in the event of a major global disruption at some point in the future. 

Additionally, it stated that the top way to mitigate stress on the supply chain is to extend the company's monitoring deeper into the supply chain to anticipate changes before they have a severe impact.

“The need for resilience is forcing companies to be more agile and to make better decisions faster. Digitisation plays a vital contribution to this,” says Alvin Gan (pic), head of technology consulting, KPMG in Malaysia.

The implications for manufacturers in Malaysia are clear. This includes:

Transformation 1: Smart Digitisation

Out of this pandemic and existence of ongoing geopolitical tensions, KPGM said CEOs at manufacturers have learned the need to invest in new technologies to strengthen supply chain resilience, by both avoiding business disruptions—and taking advantage of them.

Additionally, manufacturers have to adjust their operations according to the demand of the moment, and may be forced to 'shutdown, retool, resupply, restart' with little notice, the study indicated, it said.

This emphasises the importance of starting the intelligent manufacturing journey by tackling supply chain unpredictability and inflexibility in order to enhance essential factors such as safety, quality, productivity, cost, delivery, and morale, it added.

This would also require a journey to data visualisation, integration with advanced analytics (predictive and prescriptive) as well as symbiotic operations, all of which would improve overall resilience, the consulting firm said.

Investment in digitisation and digitalisation of all functional areas within a company, if properly integrated, has the potential to boost agility and accelerate innovation, EY said. 

“Choose a pilot plant or production line and digitalise completely. Then a full-scale roll-out to other factories or the entire plant can be performed once the benefits are proven and realised,” he said.

Transformation 2: ESG

Of the three letters in ESG, global CEOs say that they are focusing more on social issues than environmental and governance matters, KPMG said.

In Malaysia however, forced labor issues have affected local companies particularly in the electronics, rubber glove manufacturing and palm oil plantation sectors.

Phang Oy Cheng (pic), head of sustainability advisory services at KPMG in Malaysia said, “Companies are expected to be more proactive in conducting open discussions and take actions to improve labor welfare following this conundrum.”

KPMG’s survey also revealed more than half (55%) of global CEOs say they will invest between 1% and 5% of revenue to become more sustainable.

It said improving the efficiency of industrial energy usage and the urgent need to mitigate scope three emissions throughout the supply chain are the top two areas of focus. 

This includes all indirect emissions, other than indirect emissions that come from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company, KMPG said.

“Malaysia has a carbon neutral goal by 2050 and the 12th Malaysia Plan highlights carbon tax credits, and taxing companies burning fossil fuels by volume or weight of emissions,” said Phang.

“Manufacturing companies with high energy consumption are expected to be impacted and should leverage sustainable practices to avoid or minimize these costs.”