Sustainability in manufacturing – the hidden benefits of digital transformation

  • Posted on August 18, 2020
  • Estimated reading time 3 minutes

Rethinking manufacturing
Today sustainability, good corporate citizenship and ethical practices are differentiating companies in all sectors, especially manufacturing.

As manufacturers respond, reset and renew their way through the global COVID-19 pandemic, they’re focused on ensuring their workforce is safe, secure and collaborating in new ways. They’re also focused on ensuring operations are as cost effective and efficient as possible, and there’s a growing appetite to adopt new, innovative business models. In addition, personalization of products and services is critical to address new customer demands. To meet these priorities, technology, more than ever, is the key enabler. The following quote from manufacturing expert Indranil Sircar from Microsoft highlights how transforming digitally is more than about adding technology into existing operations…

“Manufacturers and vendors are now seeing new revenue streams coming through service-based models. New technology is enabling these companies to basically create new business models based on IoT sensing or an AI’s ability to better predict things like equipment failures to deliver proactive service or replenishment needs for consumers and commercial businesses.” - Indranil Sircar, CTO, Manufacturing Industry, Microsoft

One of the often-overlooked benefits of using technology to accelerate change is improved sustainability. We’re already seeing the spotlight on manufacturers that deliver a positive human impact and, conversely, the same spotlight on bad practice, unethical behaviors and production processes negatively impacting the environment. 

“Our judgments of organizations’ responses to it (COVID-19) ––both good and bad–– will outlast the crisis itself,” noted Fjord Trends 2020.

The evolution of sustainability – the future is now
Sustainability to deliver a positive human impact is not a new initiative within manufacturing. For years companies have been looking for ways to limit their consumption of resources and improve their core operations. In fact, many manufacturers are adopting sustainability programs to attract new talent as it ranks high on the list of priorities for millennials. What’s more, the workforce of the future will demand sustainability and corporate citizenship in the organizations they work for and do business with. A recent global sustainability report by Nielsen found that 81% of respondents feel strongly that companies should help improve the environment by implementing new technology programs. While the performance of sustainability initiatives has varied, the combination of digital technology and a focus on sustainability is a proven approach to success. 

In 2013, the UK government predicted that strategic investments in sustainability solutions would not be adopted at scale in the business world until after 2030. Clearly the speed of change toward a more sustainable future has accelerated beyond those 2013 predictions and become even more of a factor due to COVID-19. For example, IDC noted that driven by increased requirements for sustainability, and by 2025 30% of manufacturers will be utilizing blockchain and IoT to provide reliable provenance, leading to a 90% increase in audit efficiency.

The circular economy - time to be judged
With a circular business model – and in the circular economy – each product at its end of life becomes a new resource rather than waste, and the environmental benefits of less air pollution will follow from reduced energy use.  Due to considerations about turnover, cost reduction, innovation and, interestingly, sustainability, an increasing number of manufacturers are opting for a circular business model, made possible by Industry 4.0.  The effects of customers’ changing needs are also playing a role, where a circular business model can encompass elements such as product-as-service, remanufacturing, refurbishing, asset sharing and alternative organic or secondary raw materials. A key way we’re helping our manufacturing clients transform is by ensuring they can close this cycle faster.

Technology makes this process a lot easier. Increased intelligence helps decision-making on a range of topics, from planning the factory floor more efficiently and buying more energy-efficient machines, to implementing a full green initiative. 

Net result - improve reputation, differentiation, and market leadership
From our experience, delays in meeting sustainability targets often happen because manufacturers operate with out-of-date, on-premises, legacy business applications that are inefficient, costly and are often difficult to extract accurate information from. Modern cloud-based business applications are more functional, scalable and optimized to manufacturers needs. These agile and secure applications can support your business strategies by greatly reducing costs and facilitating entry into new markets, new products, and new lines of business quicker and more efficiently than ever before.

When manufacturers take positive actions to serve customers better and embrace technology to operate more efficiently, they’re committing to becoming more digital, adaptable and sustainable. Outcomes improve because of focused efforts to prioritize both digitization and sustainability. “Not only can sustainability provide value to consumers and society but the potential benefits to revenue and profit cannot be overlooked," said Reid Paquin, research director, IDC Manufacturing Insights.

At Avanade, we’re here to help you rethink your manufacturing transformation and are passionate about ensuring our client solutions have a positive human impact.

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