In the past few years, it’s become increasingly apparent to business leaders that digital transformation is an urgent priority for supply chains and manufacturing operations that hope to be competitive and resilient in the 2020s. The pandemic further exposed global supply chain weaknesses and industry vulnerabilities. An article in Forbes magazine reiterated this, stating “COVID-19 has shown the world something that the manufacturing industry should already know. Traditional supply chains and manufacturing ecosystems are failing and we need to shift to a more adaptable, agile solution that is fully digitally enabled.”

Consumer expectations are also contributing to the development of smart factory technologies and the factory of the future. Known as the Amazon Effect, consumer demand for next-day delivery has been rising at a steady and rapid pace. According to Entrepreneur magazine in 2019, “For better or worse, the U.S. economy and the global economy are in the throes of the Amazon Effect. […] E-commerce providers have been under ever-increasing pressure to match Amazon’s speed and efficiency, and there is no evidence consumer expectations are easing.” This trend has been a major factor in the rising demand for smart factory technology, as outdated systems prove unequal to meeting the scale of logistics and warehousing capacity that is needed to keep pace with this phenomenon.

Manufacturers and supply chain managers face further risk and operational disruption as they strive to minimize their reliance upon international partners. Smart factory solutions like on-demand manufacturing and virtual inventories can certainly minimize dependency upon overseas suppliers and manufacturers. However, as Harvard Business Review points out in a 2020 article, it is easier said than done to bring manufacturing back to the U.S. “Manufacturers have turned to specialists and subcontractors who narrowly focus on just one area – and even those specialists have to rely on many others. And just as the world has come to rely on different regions for natural resources like iron ore or lithium metal, so too has it become dependent on regions where these specialists reside.” Increasing domestic manufacturing can certainly reduce cost and supply chain risk, but it doesn’t necessarily eliminate the need for overseas partners nor reduce the total number of links in the chain. It is therefore more crucial than ever that digital factory technologies are in place to optimize efficiency and visibility.