The last two years have inflicted major disruption for Australian manufacturers. Data intelligence will be critical as businesses look to rebuild , and those that don’t put artificial intelligence (AI) at the core of their strategies will fall behind in 2022, writes Haley Glasgow.
The pandemic has upended the manufacturing sector and put the spotlight on Australia’s reliance on global supply chains. Lockdowns made it impossible for many manufacturers to access the staff, sites and equipment necessary for maintaining operations and filling orders, according to the Australian Manufacturing Growth Centre.
At the same time, the pandemic highlights the need to build a local manufacturing sector as the nation looks toward COVID-19 recovery. So much so, that one in two manufacturers intend to bring operations back to Australia within the next three years.
Following market volatility caused by COVID-19, reshoring is a step in the right direction for Australia’s manufacturing sector. However, four in five (82%) senior employees in the sector are underprepared to compete in a digital economy. Businesses need to fast-track e-commerce channels to overcome competition from imports and online sources. Leveraging technologies like artificial intelligence (AI) and digital selling is one way to achieve exactly that.
As companies look to build resilience and effectively reshore operations, here are three reasons why Australia’s manufacturing sector should harness AI in 2022:
Reduce customer exposure to market volatility
COVID-19 has resulted in a shortage of goods, and consequently higher prices. In addition, many manufacturing companies experienced logistical challenges as a result of restrictions on the movement of people.
With increased supply chain disruption comes increased market volatility, which is set to be a challenge into 2022. But customers don’t want to feel this instability. Understanding how the supply chain will impact both inflation and the end-to-end components of a company will put manufacturers in the position to solve volatility earlier, ultimately reducing customer exposure and providing a more predictable experience.
For example, COVID-19 disrupted the oil & gas industry two-fold, first due to failed agreements on production cuts, and second because of slowed demand from travel restrictions. By leveraging dynamic pricing and data-driven insights to predict how the oil & gas market might fluctuate over the course of a year, companies can set their prices accordingly to account for those fluctuations.
The same principal applies to manufacturing. By calibrating between peaks and troughs, prices – already set in the middle – will remain stable, while the company remains smart and profitable.
This will have a knock-on effect. Having less volatility to worry about means customers will have a better experience. They will feel more engaged with the company. And as a result, customers lean toward repeat engagement with a brand based on that positive experience.
Maximising opportunities around reshoring operations
During the pandemic, Australian manufacturers struggled to manage their supply chains, with full lockdowns in many countries from which materials are typically sourced, including China and the UK. This exposed Australia’s dependence on offshore supply chains. But the more positive side of this is that there has been a significant shift in confidence toward onshore capacity in Australia.
As a result, we can expect to see more companies reshore operations in the next couple of years, as manufacturers look to gain greater company agility, diversify revenue streams and risk-proof their supply chains. One in two Australian manufacturers (55%) have indicated they intend to reshore their operations to Australia by 2023, while almost one-quarter (22%) have already made the move and reshored at least part of their operations. This is according to PROS’ Australian Manufacturing Outlook Survey.
Surprisingly the biggest appetite for reshoring has been from Western Australia, the Northern Territory and South Australia, as these regions focus on creating local jobs and growing priority sectors such as downstream lithium processing, defence and space.
As Australian manufacturers look to reshore, it’s imperative they lead with a digital strategy. Now is the time to leverage technologies like AI and digital selling to support the local industry boom. This will help overcome one of the primary constraints for Australian business leaders – competition from imports and online sources – to drive company growth.
Overcome pressure of pandemic pricing
COVID-19 has driven supply chain and freight disruptions, as well as inflation, resulting in market and pricing volatility across the board. Manufacturers can no longer rely on their typical pricing structures and manual practices, which can lead to lagging, unreliable and error-prone pricing, to maximise revenue.
Beyond that, how manufacturers price a product has a knock-on effect on customer experience. While increasing prices by 10% to optimise margins might sound good in theory – especially during COVID-19 recovery – this could lose a potential customer to a competitor offering the same product at a lower price. On the other hand, manufacturers that don’t account for rising costs experience undue margin leakage.
Instead, manufacturers must embrace a digital mindset and leverage AI-based price optimisation and management to deliver profitable prices informed by market conditions and co-ordinated across all sales channels. These capabilities will allow manufacturers to deliver tailored, market-relevant prices in real time, ensuring personalised buying experiences and creating a streamlined pricing strategy in 2022 and beyond.
Manufacturing always involves an element of risk. This is especially true in the context of the pandemic where we’ve seen supply chain shortages heavily impact pricing and material availability. But with investment in innovative tools like AI, and collaboration with the government and industry, manufacturers will be one step closer to recovering operations and improving the buying experience for customers.
Haley Glasgowis Head of Strategic Consulting & Alliances, APAC at PROS.