SEP-OCT 2018

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INTECH SEPTEMBER/OCTOBER 2018 17 2. The second important global megatrend is the push toward greater sustainability. For instance, agriculture is the leading user of freshwater worldwide, and water deficits are already a reality in many areas, creating a de- mand for more intelligent use of this resource. Water treatment and other processes related to the environment must also contend with heightened regulatory compliance. 3. The third megatrend has to do with consumer expectations, with customers demanding an ever-wider variety of products tailored to their individual needs. A good example is the passenger car market, which has come a long way from Henry Ford's "any color you want as long as it's black" thinking. After identifying the global megatrends, the next step is to examine their specific effects on manufacturing. Manufacturing impacts The first impact is pressure on margins due to volatile commodity prices, labor costs, and supply-chain shifts—affecting already thin mar- gins. Sustainability affects commodity pricing, while aging populations increase labor costs, especially for those companies providing health care insurance. Supply-chain shifts are driven by changing consumer expectations. Another impact is the need for variety. It is easy to see how this will affect manufacturers. Just take a trip down the "free from" aisle at your local grocery store to see how many consumer preference and allergy subsegments are being targeted, with corresponding higher prices. Increasing regulatory obligations are driven by the sustainability trend—with safety, envi- ronmental, and labeling regulations becoming increasingly pervasive. Consumer expectations also play a role, because brands with a poor reputation for environmental stewardship or unsafe products are rapidly shunned as stories go viral and global in minutes. On the flip side, those firms seen as forward looking in this area can often charge higher pric - es, as with organic and fair-trade food offerings. The aging population plays a part in labeling reg - ulations and packaging requirements, as older consumers need clear and readable instructions, along with easy-to-open containers (figure 1). In today's "always on" world, manufacturing cycles have compressed to quickly meet chang- ing customer tastes or respond to a safety recall. This has led to the need for real-time customer engagement. Connected consumers react imme- diately to safety and quality incidents, potentially eroding brand equity. The global megatrend of changing consumer expectations directly drives this effect, as does sustainability to a lesser extent. Af- ter identifying mega- trends and the cor- responding impacts on manufacturers, the next step is to see how manufacturers can best cope with these changes. Coping with change In today's market environment, as described above, a traditional manufacturing approach no longer applies. These market dynamics dictate the need for a digital transformation. Five strategic "pillars" are essential for a man- ufacturing business to successfully achieve a digital transformation (figure 2). These pillars are to empower employees, optimize opera - tions, engage customers, transform offerings, and adopt new business models. The pillars are an idea foundation to simultaneously address the market environment, manage costs, and increase revenues while using today's technol - ogy trends to achieve transformation. Figure 3 shows just what digital transforma- tion means within a manufacturing operations context. The five pillars of digital transforma- tion are shown on the left (depicted as symbols), as well as each of the five technology enablers: the cloud, industrial IoT, business process man- agement, cybersecurity, and big data/analytics. Together, these pillars harness technology trends to achieve operational excellence, encom - PROCESS AUTOMATION FAST FORWARD l Manufacturing operations should be designed using a top-down approach, starting with a high-level look at global megatrends. l This approach can produce a future-proof software system architecture. l It will also allow organizations to incorpo- rate current and future technologies, including hybrid architectures, big data analytics, IIoT, and mobility. Figure 1. Manufacturers of packaged goods for consumers are affected by glob al megatrends, because they are required to make their packaging ma - terials more sustainable and offer a greater variety of products to meet the demands of demographic changes in their markets.

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