KPMG: Manufacturing CEOs focusing on resilient supply chains, tech transformation
08 Mar 2022
Global manufacturing executives are focusing more on a twin transformation — a smart digitisation and a focus on environmental, social and governance (ESG) goals — driven by the pandemic, climate change and geopolitics, according to KPMG.
Its Global Manufacturing Prospects 2022 report said that supply chain risk is seen as the greatest threat to the organisation’s growth and new technologies are needed to build up supply chain resilience.
“More than two thirds (68%) of chief executives officers (CEOs) say they aim to ensure their supply chain is resilient in the event of a major global disruption at some point in the future.
“The top way to mitigate stress on the supply chain is to extend their company’s monitoring deeper into the supply chain to anticipate changes before they have a severe impact,” the consulting firm said in a statement on Tuesday (March 8).
KPMG Malaysia head of technology consulting Alvin Gan said the need for resilience is forcing companies to be more agile and make better decisions faster.
“Digitisation plays a vital contribution to this,” he added.
According to the report, out of this pandemic and existence of ongoing geopolitical tensions, CEOs at manufacturing firms have learned the need to invest in new technologies to strengthen supply chain resilience, by both avoiding business disruptions and taking advantage of them.
KPMG said manufacturers have to adjust their operations according to the demand of the moment, and may be forced to “shutdown, retool, resupply, restart” with little notice.
“This emphasises the importance of starting the intelligent manufacturing journey by tackling supply chain unpredictability and inflexibility in order to enhance essential factors such as safety, quality, productivity, cost, delivery, and morale,” it said.
This would also require a journey to data visualisation, integration with advanced analytics (predictive and prescriptive) as well as symbiotic operations, all of which would improve overall resilience, it said.
“Investment in digitisation and digitalisation of all functional areas within a company, if properly integrated, has the potential to boost agility and accelerate innovation,” KPMG said.
On the ESG transformation, Gan said global CEOs are focusing more on social issues than environmental and governance matters.
Following the forced labour issues affecting Malaysian companies, companies are expected to be more proactive in conducting open discussions and take actions to improve labour welfare, said KPMG Malaysia head of sustainability advisory services Phang Oy Cheng.
KPMG’s survey also revealed that more than half (55%) of global CEOs say they will invest between 1%-5% of revenue to become more sustainable.
She said improving the efficiency of industrial energy usage and the urgent need to mitigate scope 3 emissions throughout the supply chain are the top two areas of focus, such as, all indirect emissions, other than indirect emissions that come from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company.