Why manufacturers must invest in digital transformation to capitalise on the semiconductor shortage

As the automotive manufacturing sector continues through this phase of caution and uncertainty, operations executives and production leaders must think innovatively about how 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 Re-evaluating legacy systems and processes which are outdated is also an imperative, and a way for manufacturers to remain more competitive and resilient in the future.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 production was disrupted by lockdowns, at a time when more people began to work/study remotely.

According to the Semiconductor Industry Association, worldwide semiconductor sales declined between 2018 and 2019, but by 2020, sales grew 6.5% as restrictions eased and economic activity rose sharply. The rapid growth continued into 2021 and sales for May 2021 were 26% higher than the same time last year as consumer and businesses spending started to return to normal.

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 systems, as well as the trend 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 temporarily shut down 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.

For example, digitalisation is a great way for manufacturers to increase real-time visibility into their operations as it can provide important insights into each stage of the production process. These valuable insights can then be leveraged to fuel performance improvements, drive efficiencies and help executives make more informed and tactical decisions to secure long-term resilience and growth.

Challenges of implementing a digital transformation initiative

Each initiative 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. Manufacturers can mitigate many of the avoidable impacts the crisis is having on their businesses by deploying technology solutions quickly to the areas with most need, urgency or benefit.

However, often many challenges to digital transformation lie in implementation or cultural changes, as well as disruption to work practices that have become embedded over many years. Therefore, addressing 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 disrupted 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 is a golden opportunity that rarely comes along.

Digital transformation is upon us, and the manufacturing sector shouldn’t delay

It is 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 are in the midst of the latest significant shift, and it is 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, utilise resources effectively, optimise operations, and keep producing top-quality products – even during times of crisis.

* Jason Chester is Director of Global Channel Programs at InfinityQS and is responsible for the implementation, management, and overall success of programs worldwide. Jason has more than 25 years of experience working directly within the Enterprise IT industry applying his expertise on how information technology capabilities can deliver significant and sustainable business value to end-user organisations.