Next generation manufacturing solutions are making supply chains smarter and more sustainable. Many businesses across the world have already started to take significant steps towards green growth, guaranteeing their progress is economically and environmentally sustainable. As the demand for green products increases, deep supply chain transparency is becoming crucial. With deep supply chain transparency, manufacturers will be able to identify suppliers far upstream in the value chains, trace back the origin of each component in their products and fully measure the product’s environmental performance. It will allow manufacturers to choose the best-performing components, not only based on the impact of the component manufacturing, but also their design suitability for greener end of life options. This will give manufacturers the opportunity to optimise product environmental performance by supplier engagement.
Digital trading platforms
With the increased number of material and product streams in a circular economy, digital blockchain-enabled platforms will be used for product and material trading. The platforms will showcase the exact composition and costs of the products and materials traded (for virgin, bio-based and recovered materials), and optimally match supply with demand. Additionally, these platforms will have the ability to track the environmental performance of the traded goods, thus providing deep supply chain transparency and revolutionising compliance in the manufacturing sector.
Supply chain network orchestrators
The heightened complexity of the material system, the push for better environmental performance of all actors in the supply chain and the emergence of digital trading platforms will highlight the need of advanced supply chain orchestration. This orchestration involves the execution and optimisation of end-to-end planning for the client. With the evolution of technology, software providers & cloud computing, real-time visibility of all supply chain steps — manufacturing, warehousing, customs and logistics — is enabled. For example, interconnected and digitalised cargo fleets will optimise load, timing, route and cost at any given time using algorithms, leading to leaner, cleaner and more cost-efficient logistics services.
Navigating the sustainable manufacturing transformation
The sustainable manufacturing transformation will create new value for consumers and have an effect on the bottom line of manufacturing businesses, affecting shareholder value. Companies that have an outlook on the transformation of their business environment and build robust, long-term strategies will be successful. In the short-term, they should execute no-regret actions to pursue opportunities. The following sections detail the specific steps Guidehouse recommends for manufacturing companies that want to navigate the sustainable manufacturing transformation successfully.
Explore scenarios to develop robust long & medium-term strategies
Unique combinations of transformational waves and how they influence a company’s business environment can be assessed with scenario analysis. The transformational waves are not mutually exclusive; a business can undergo these transformations simultaneously and at varying speeds. Furthermore, transformational waves affect companies differently depending on the sector, market demand, environmental factors and other external drivers. Therefore, a scenario consisting of a unique combination of transformational waves plays out differently for different companies.
Guidehouse applies the transformational wave framework to help manufacturing companies design long and medium-term scenario-based strategies. The transformational wave framework helps companies to understand the impacts of a transformational wave scenario in a systematic way, factoring in the transformation of their value chains and broader industrial ecosystem. In the framework, an initial explorative phase is followed by several deep dives.
In the explorative phase, companies explore the transformations that have the greatest potential for their business. During this phase, the following steps need to be taken:
Map the impact and uncertainty of the transformational waves on selected company value chains. Based on this mapping, define an extreme, ‘sky is the limit’ scenario, in which the most uncertain and impactful transformational waves occur in their most extreme form.
Describe the future industrial ecosystem in this extreme scenario by mapping the effects of the transformation on the company, its value chain and the energy system. This exercise highlights the most disruptive changes.
Determine the implications on the business and revenue models to get a sense for how the transformation might disrupt the company’s business.
After the explorative phase, a company can perform deep dives following a three-step approach:
Develop a range of feasible, internally consistent transformation scenarios building onto the outcomes of the explorative phase and the mapping of developments. These scenarios are potentially less extreme than in the explorative phase, as they are a combination of the company’s expectations about the future and the outcomes of the explorative phase.
Translate the changes to the company’s industrial ecosystem. Scenario developments are translated to the company and its surrounding industrial ecosystem. This is done on a granular level, exploring changes to the value chain and to individual assets.
Perform a gap analysis. With this, the company can assess which business models would work best in a given scenario and identifies which assets, capabilities and value chain partnerships it can leverage and which are needed.
Respond rapidly to emerging opportunities to create short-term value
Developing a robust medium and long-term strategy alone is not enough. To avoid missing short-term opportunities for value creation, companies should have a structured process for monitoring the market for opportunities and assessing when to act on them.
Transformation opportunities mature over time. The transformations in the industrial space threaten existing products, services and business models and offer opportunities for incumbents to enter. The numerous opportunities are at different stages of development and are continuously evolving.
Companies should continuously monitor a pipeline of opportunities. The given figure maps a range of industry opportunities, but relevant opportunities will differ for each sector or company. The speed at which opportunities progress along the curve differs depending on the opportunity type and can be affected by changing consumer preferences and regulatory landscapes. Companies that are successful in the transition will be those that have a good understanding of the various opportunities, where they are on the curve and how they are expected to progress along the curve in the next few years.
Companies must be agile and enter the market at the right time to gain first mover advantage. Doing so enables them to appropriate most of the value that lies in the opportunity. To gain momentum quickly and create immediate value, they should look for quick wins and build additional initiatives on top of these early successes. Some of the return should be reinvested in the transformation program. Strong governance and top executive support are required. Additionally, rapid action requires a set of organisational assets & capabilities and a network of strategic partners.
Use market intelligence to support decision-making
Market intelligence can clarify investment and expansion opportunities. This can help companies, both in short-term decision-making and long-term strategy building. Market-sizing and forecasting can be a crucial element in building plausible scenarios for the deep dives and can add support in solidifying long-term strategies. Trend-monitoring and analysis helps companies understand the size and timeline of emerging market trends as well as use this as inputs for monitoring the opportunity curves to capture short-term value.
Creating new value for customers
The sustainable manufacturing transformation is underway. It is affecting manufacturing businesses globally across industries and is changing the competitive landscape. Although the transformation is threatening companies and existing business models, it also presents an opportunity worth over $2 trillion. Companies will be forced to move towards more sustainable, circular and low carbon manufacturing and complex industrial ecosystems will emerge to make this possible. The winners will be the companies that are able to adapt and create new value for their customers and shareholders.