Executive leaders of fast-moving consumer goods (FMCG) are seeking guidance on how to apply new business technology in their manufacturing operations. CIOs and CTOs are tasked with gaining insight into the best solutions for digital transformation.
ABI Research evaluated the impact politics, regulation, the economy, supply chain, ESG, and technology are having on FMCG, pharma, producers of steel, chemicals, pulp and paper -- as well as the mining and oil & gas sectors.
Digital Transformation Market Development
"Our assessment found that the FMCG sector is under pressure from all sides," says Michael Larner, industrial & manufacturing research director at ABI Research.
Securing raw materials is challenging considering lockdowns in China and limited grain supplies from Ukraine. Supply shocks are raising input costs, and operating costs are rising with higher energy costs coupled with the pressure to pay higher wages and work sustainably.
"We all hoped that with the rollout of COVID vaccines, the world would return to normal," Larner noted. "However, events have taken a different turn, with the effects felt far and wide. Political decisions and regulations have the most impact on these firms' operations."
After all, government leaders can quickly lock down cities and restrict transportation. At the same time, production can stop due to product recalls, as currently witnessed with Abbot Laboratories' baby formula facility in the United States.
Each industry is at very different stages concerning its digital business maturity. Large mining firms, such as Rio Tinto, are automating many processes, and oil & gas firms -- including Saudi Aramco -- are utilizing data analytics to monitor operations and their immediate surroundings.
Steel, pharma, plus pulp and paper producers have more work to do to connect their operations digitally and utilize some of the new technologies. Meanwhile, FMCG firms -- such as Procter & Gamble -- are working toward aligning information technology and operations technology teams.
According to the ABI assessment, the executive leadership at manufacturers can no longer postpone investments in digital transformation technologies.
Technology is part of the solution to alleviate market-related pressures. For example, data analytics can help firms understand the potential impacts of supply chain issues and optimize production to retain price points.
Outlook for Digital Transformation Apps Growth
"Also, software can help firms engage in the circular economy and incorporate recycled materials in their products, as seen in the paper and steel industries. Digital technologies are part of the solution," Larner concludes.
That said, I anticipate IT vendors and managed service providers will continue to offer digital business process optimization solutions for these sectors of the Global Networked Economy. This was also an area where blockchain technologies were expected to have a significant impact. However, to date, the business outcome results have been mixed.