Following an evaluation of the impact politics, regulation, the economy, supply chain, Environmental Social and Governance (ESG), and technology are having on manufacturers of fast-moving consumer goods (FMCG), pharmaceuticals, producers of steel, chemicals, pulp and paper, as well as the mining and oil & gas sectors, ABI Research cautioned that manufacturers are under considerable pressure from multiple forces.
“Our assessment found that the FMCG sector is under pressure from all sides,” says Michael Larner, industrial & manufacturing research director at ABI Research. Securing raw materials is challenging considering lockdowns in China and limited grain supplies from Ukraine. Supply shocks are raising input costs, and operating costs are rising with higher energy costs coupled with the pressure to pay higher wages and work sustainably.
“We all hoped that with the rollout of COVID vaccines, the world would return to ‘normal’,” Larner continues. “However, events have taken a different turn, with the effects felt far and wide. Political decisions and regulations have the most impact on these firms’ operations.
“After all, governments can lock down cities and restrict transportation. At the same time, production can stop due to product recalls, as currently witnessed with Abbott Laboratories’ baby formula facility in the United States.”
Each industry is at a very different stage concerning its digital maturity. Large mining firms, such as Rio Tinto, are automating many processes, and oil & gas firms, including Saudi Aramco, are utilising data analytics to monitor operations and their immediate surroundings.
Steel, pharma, pulp and paper producers have more work to do to connect their operations digitally and utilise some of the cutting-edge technologies. Meanwhile, FMCG firms (Procter & Gamble is one such example) are working toward aligning IT and OT teams.
Manufacturers can no longer postpone investments in digital technologies. Larner believes that technology is part of the solution to alleviate the pressures. He cited the example of how data analytics can help firms understand the potential impacts of supply chain issues and optimize production to retain price points.
“Also, software can help firms engage in the circular economy and incorporate recycled materials in their products, as seen in the paper and steel industries. Digital technologies are part of the solution,” Larner concluded.
