Too many options on the table: How manufacturers can break free from digital inertia
What you’ll learn:
- Digital leaders invest 45% of their budget on digital transformation, driven by clear strategies and ROI-focused investments.
- Data collection and management remains the No. 1 ESG reporting challenge.
- Research found that 82% of manufacturers believe their business won’t survive more than one to three years without a stronger commitment to technology.
- Any downtime on production lines by cyberattacks can lead to a chain reaction of delays, which puts strain on organizations, costing them already limited time and resources.
This year is a critical crossroad for many businesses on their digital transformation journey. They recognize the need for digital transformation, but these manufacturers are overwhelmed by the number of choices available and are hesitant to upend their current processes.
Let’s do a bit of a pulse check on digital progress so far. According to a recent IFS report, digital leaders invest 45% of their budget on digital transformation, driven by clear strategies and ROI-focused investments.
Meanwhile, others, the “laggards,” continue to fall deeper into the digital abyss of “option paralysis,” where too many choices have led to an inability to evaluate new technologies and has stalled early stages of transformation.
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Technology has the potential to improve production optimization, energy management/waste management, and design and development but only if companies can successfully integrate technologies into their existing ecosystem.
So how can manufacturers (and let’s use food and beverage companies from the IFS report as an example) turn the tide? By meeting the challenges head on.
New regulations create sustainability uncertainty
Meeting ESG (environmental, social, governance) and sustainability demands was the second most pressing business challenge for 34.9% of food and beverage respondents in the IFS report. While it found many manufacturers are actively developing ESG initiatives, most lack a credible ESG strategy despite identifying climate change as a top concern.
Data collection and management remains the No. 1 ESG reporting challenge for manufacturers but the introduction of new regulations such as the SEC disclosure requirement is creating a new level of regulatory uncertainty that is holding up production and delivery within the food and beverage industry.
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Encouragingly, the IFS research uncovered how manufacturers are particularly hopeful about the impact of ESG on their businesses. The sentiment is shifting from ESG being just a compliance-driven activity to one that can drive significant positive changes in lead time and quality, while enabling new business models such as circularity.
In fact, the research found 27% of food and beverage companies plan to prioritize developing a sustainability strategy and team in the next two to three years, with a further 20.6% planning to embed sustainability goals in operations.
What is your company doing about cybersecurity?
Executed correctly, sustainability measures can bring new value to the manufacturing ecosystem. Take digital product passports (DPPs) as a case in point. DPPs will play a pivotal role in advancing circularity by providing detailed, blockchain-secured information about the environmental impact of products, their composition, their production, and history. DPPs will enhance transparency, streamline recycling processes, and align with consumer demands for sustainable goods.
The weak links compromising business resiliency
Going back to the example of food and beverage manufacturers, more and more they focus on improving the resilience of their operations, driven by pressure to deliver more with fewer resources.
But the clock is ticking on resilience. According to the IFS report, over a quarter of food and beverage manufacturers still identify supply chain disruptions as a business challenge.
Drilling down further, the research found that 82% of manufacturers believe their business won’t survive more than one to three years without a stronger commitment to technology.
Cost is no longer the prime driver for supply chain decisions, instead it’s a balancing act between factors such as product lead time, quality, and reduced carbon footprints. Manufacturers are now considering geographic strategies to optimize supply chain resilience, opting for closer or politically stable sourcing destinations.
The offshoring trend is coming to an end as manufacturers realize that localization strategies such as friendshoring and reshoring can provide greater quality control, reduce environmental impacts, improve speed to market, and offer better IP protection.
The IFS research found that improving agility and flexibility of operations is a top priority for 23.8% of food and beverage companies in the next few years—and technology can make this a reality.
Digital tools such as AI-driven data pattern recognition allow for more opportunities to redesign the supply chain network, implement more rigorous risk assessment tools such as what-if planning scenarios for material and operational resources, and drive better supplier relationships and collaboration.
The rising cost of cyber breaches and stronger cyber defenses
The IFS report shows cybersecurity was the top business challenge for 36.5% of food and beverage respondents—and it’s no wonder when we consider how cybersecurity attacks on manufacturers’ systems, equipment, and technology are trending up and can affect companies of all sizes. Dole, Sysco, and Mondelez are just three of the big names in the food and beverage industry that experienced cyber incidents in 2023 alone.
See also: Leading cyberattack against manufacturing sets record in Q1
Any downtime on production lines by cyberattacks can lead to a chain reaction of delays, which puts strain on organizations, costing them already limited time and resources. The ransomware attack on Dole in February 2023 for example, impacted shipments to grocery stores and had costly repercussions.
According to the IFS report, 20.6% of food and beverage companies plan to prioritize improving cybersecurity in the next two to three years and for good reason. Interconnected systems and reliance on digital tools increase vulnerability to attacks.
This is why it is important companies invest in secure technologies such as cloud computing, which most manufacturing executives are prioritizing as the cornerstone of their digital transformation efforts.
See also: Why ransomware attackers target backups—and how to ensure your data is protected
Yet it’s equally important to have security measures built into supporting software architecture to increase success in the new cyber arms race and ensure business operations can continue in a safe manner.
A single-tenant cloud architecture, for example, ensures companies can benefit from greater management control and higher levels of isolation—perks they would not be able to receive from a multi-tenant hosting architecture.
This removal of access points allows companies to dramatically reduce the risk of data inadvertently falling into unauthorized hands. In the event of a cloud neighbor becoming compromised by a cyberattack, a single-tenant architecture can ensure that the customer remains isolated from the threat and their data is left intact.
Digital transformation is firmly on the menu for 2025
The risk of falling behind only grows for companies unable to take advantage of the latest digital enhancements. However, those that embrace digital transformation will not only thrive but become more agile and resilient in the face of future market changes.
This is why ongoing success requires businesses to integrate sustainable and digital practices into their value propositions and discover new opportunities to position themselves as leaders in today’s competitive environment.
