Industry Insights

The digital overhaul: Rethinking CPG / FMCG manufacturing for the digital age in 2015

The digital age has brought with it a new way of thinking about manufacturing and operations. Global economic changes combined with significant advances in technology are shifting the value proposition of global manufacturing

Many sourcing and manufacturing decisions made since the 1990s have been based on the notion that Asia (specifically China), Eastern Europe and Latin America are lower-cost regions, while the United States, Western Europe and Japan are higher-cost regions. However, this view is increasingly outdated. Changes in wages, transportation and distribution costs, productivity and energy availability are upsetting the traditional equation to determine where to source, where to manufacture and how to go to market.

Meanwhile, the age of digital manufacturing and operations is here. Technology advances and growth, in areas such as big data and analytics, cloud, the Internet of Things (IoT), robotics and additive manufacturing, are rapidly changing industry dynamics. These technologies are also generating a dramatic ripple effect as they change the nature of jobs in industries that supply, support and serve manufacturing as it becomes more knowledge intensive.

In the age of digital operations, information previously created by people will increasingly be generated by machines and things. Inventory will count itself. Containers will detect their contents. Manufacturing assembly will be robotic and analytically automated. The entire value chain will be connected – not just customers, suppliers and information, but also parts, products and other smart objects used to monitor the value chain. Extensive connectivity will enable worldwide networks to plan and make decisions in real time. In addition, advanced analytics and modeling will help decision makers evaluate alternatives against an incredibly complex and dynamic set of risks and constraints. Smarter systems will make some decisions automatically – increasing responsiveness and limiting the need for human intervention.

To thrive in this digital age, manufacturers need to embrace a value chain redesign based on today’s changing cost dynamics and, at the same time, exploit new-era technologies to make their value chains more instrumented and intelligent. As they do, they should be prepared to address the shifting talent needs that accompany the move to digital.

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IBM Worldwide Retail Industry Analytics Portfolio Marketing Manager

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