Manufacturers need to capitalise on the semiconductor shortage by investing in digital transformation
Author: Jason Chester, Director of Global Channel Programs, InfinityQS
With the global semiconductor shortage impacting the automotive sector, vehicle makers and their suppliers across the globe have had to significantly reduce production or temporarily close down factories due to the impact of the shortage. Thereby, manufacturers need to effectively capitalise on this rare downtime opportunity to focus on shop floor digital transformation initiatives which have previously proved challenging due to potential production disruption, workforce training scheduling and resource availability.
As the automotive manufacturing sector continues through this phase of caution and uncertainty, operations executives and production leaders must think innovatively about how to digital transformation can be leveraged to optimise production, reduce costs and maximise the use of available resources. Re-evaluating legacy systems and processes which are outdated is also an imperative, and a way for manufacturers to remain more competitive and resilient in the future.
Capitalising on the semiconductor shortage
The global semiconductor shortage was prompted by the Covid-19 pandemic, as more people began to work/study remotely the demand for electronics rose. According to the Semiconductor Industry Association, worldwide semiconductor sales declined between 2018 and 2019, but by 2020, sales grew 6.5%. The rapid growth continued into 2021 and sales for May 2021 were 26% higher than the same time last year. Consumer demand wasn’t the only factor. In 2020 there was an increased demand for semiconductors in the automotive industry due to the popularity of new technologies such as driver assistance and autonomous driving as well as the trends towards electric vehicles and more sophisticated vehicle management systems. This confluence of issues has ultimately resulted in the shortage that has seen manufacturers across the globe having to reduce production volume or shut down their factories.
For those automotive manufacturers and their suppliers who have had to reduce production or shut down temporarily, they will struggle to find a time better than now to seize the opportunity to work on their digital transformation initiatives. Doing so will provide new technological innovations that will be invaluable for manufacturers trying to navigate unpredictable and unstable markets. Although we have seen unprecedented disruption to global supply chains, manufacturers need to effectively adapt their operational plans and prioritise digital transformation initiatives to overcome these challenges.
Digitalisation for example, is a great way for manufacturers to increase real-time visibility into their operations as a it can provide important insights into each stage of the production process. These valuable insights can then be leveraged to fuel performance improvements, continue improvement efforts and to help make more informed and tactical decisions to secure long-term resilience and growth.
Challenges of implementing a digital transformation initiative
Each challenge comes with its own set of difficulties and overcoming them means manufacturers would need to pay particular attention to the functions, areas and processes where such technology solutions could have the greatest impact. By deploying technology solutions quickly to the areas with most need, urgency or benefit has led manufacturers to mitigate many of the avoidable impacts the crisis is having on their businesses.
However, often many challenges to digital transformation lie in the implementation and cultural changes, as well as disruption to work practices that have become embedded over many years. Therefore, addressing the time, cultural and people-centric barriers and concerns can be a critical, but often overlooked, aspect of successful digital transformation.
The manufacturing environment requires consistency for production to flow smoothly and if this is prevented the consequences for output can be severe. This is a key reason why some business leaders are nervous to give the green light to digital transformation initiatives. The time it takes to implement all the new technology, then teach the employees how to effectively use it, and change the workplace culture around it takes patience. However, with factory output now reduced because of the semiconductor shortage, the technology can be implemented and taught to workers in the right way without it being rushed. It’s a golden opportunity that rarely comes along.
Digital transformation is upon us, and the manufacturing sector shouldn’t delay
It’s the responsibility of any manufacturer to conduct their due diligence and identify any threats that could impact their business. If done correctly, they will be able to prepare for most situations, however, as recent events have shown, there are some disruptions that can hit us without warning. These unexpected events have resulted in the business world moving away from a secure, safe and stable market, to one that has become uncertain, unpredictable and increasingly volatile.
The long history of manufacturing is filled with periods of disruption and innovation. Now we’re in the midst of the latest massive shift, and it’s time for manufacturers large and small to make the investments necessary to thrive in the future. Ultimately investments in digital transformation should come down to putting real-time data and insights into the hands of those who can leverage them for effective decision making, from wherever they are. Organisations that do so will be able to solve (and even prevent) problems, reduce costs, best utilise resources, optimise operations, and keep producing top-quality products—even during times of crisis.