February 1, 2021

The global economy has been undergoing a significant shift for a while now. Boundaries between various industries were increasingly blurred with newer business models being built around the customer. Powered by emerging technologies, production has moved closer to the customer, downplaying the traditional advantage of economies of scale. Understanding this burgeoning trend of democratization, manufacturers too had started investing in digital technologies. It was in the midst of this transformative process that the pandemic struck.

While almost every company and member of the global workforce has been impacted by the pandemic, the manufacturing industry has been one of the most adversely affected. Lower demand, production shutdowns, and supply chain disruptions have profoundly altered the manufacturing landscape. Analysis of data from previous economic downturns show that whenever the manufacturing sector has been negatively impacted, recovery too has been robust. In the current crisis too, a stronger resurgence of the manufacturing sector is critical to ensure sustained global economic recovery.

TCS’ survey findings: Digital transformation in manufacturing crucial for faster recovery

The TCS COVID-19 Business Impact Survey 2020 found that nearly nine in 10 manufacturing companies have suffered revenue declines, and 40% of these expect to see recovery only in the next two to five years. However, despite these challenges and supply chain disruptions, manufacturers are adopting a long-term view and remain committed to scaling up their investments in next-gen digital capabilities. The advent of robotics and artificial intelligence (AI) in manufacturing too have further catalyzed digital transformation in manufacturing.

The survey identified six essential digital capabilities that helped industries to respond rapidly to the pandemic. Moreover, it found that among the digital capabilities prevalent across sectors, manufacturing ranked quite close to the cross-industry average. This signifies a strong opportunity to catch up with leading sectors such as insurance, high-tech, and retail. Most manufacturing firms have also indicated their commitment to increase digital transformation investments. 

Figure 1: Manufacturing industry’s current standing for six essential digital capabilities

Currently, excluding automation where manufacturers have fared better, one-fourth or fewer of all manufacturing firms have the essential digital capabilities to compete in the new environment. Companies are, therefore, aggressively developing or intending to develop these capabilities, which will result in three-fourths of manufacturing firms developing at least four of these capabilities fairly soon.

Figure 2: Current vs future digital capabilities of manufacturing firms

Below are some key highlights of the survey:

  • Robust AI-based data analytics capabilities: Though manufacturers currently lag in this area, there is a renewed focus on developing AI-based analytics. In the days to come, companies will continue to enhance their capabilities in digital customer experience and cloud technologies.

  • Automation and robotics: De-risking their global supply chains leveraging automation and robotics will be critical for manufacturers as they seek to follow post-pandemic safety measures and keep the cost base competitive.

  • Sensorization: While sensorization of manufacturing industry products have progressed at a slower pace until now, 40% of the survey respondents indicated a keen interest in developing their capabilities in this area.

  • Digital ecosystem partnerships: Manufacturing firms that have been traditionally less effective with collaborations are now taking proactive steps to leverage partnerships.

The neural imperative

The pandemic has highlighted the importance of digital capabilities in a way that leaves little room for skepticism. Fortunately, the manufacturing sector had already begun the process of digital transformation and the investments that companies make during this crisis will go a long way in shaping the neural future of the industry. As digital technologies, data, and ecosystems power the future of manufacturing, the sector is likely to emerge stronger and more resilient from this crisis.

Developing the six essential digital capabilities—digital customer experience, cloud, sensorization, automation, AI-based cognitive capabilities, and digital ecosystem partnerships—will be critical for manufacturing companies. Only by integrating these capabilities can manufacturing organizations build a responsive, adaptive, and personalized value chain, gain competitive advantage, and evolve into neural enterprises.

Ashok Antony is a Consultant for strategic research for Manufacturing at TCS. He tracks trends impacting the manufacturing industry and has a keen interest in business model innovation, the blurring of industry boundaries, and the role of technology in shaping the future. He has more than 17 years of experience in strategic research, business planning, and corporate development across multiple industries. He holds a Bachelor’s degree in Mechanical Engineering and a post graduate degree in Management with a specialization in Finance and Marketing.

Arun Ramakrishnan is an Associate Consultant for strategic research for Manufacturing at TCS. He tracks the key developments impacting the manufacturing industry and keenly follows new business areas, start-ups, mergers and acquisitions, emerging technologies, and sustainability. He has over 16 years of experience in business research, advisory, and analytics across investment banks and consulting firms. He holds a post graduate degree in Accounting and Management and a diploma in Management with specialization in Finance.