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Three Ways Additive Manufacturing Defined 2020

Three Ways Additive Manufacturing Defined 2020

While additive manufacturing has been trending toward mass adoption for some time, the global pandemic has accelerated this momentum. Here are three ways how metal 3D printing has defined manufacturing this year. Article by Richard Elving, Markforged.

While 3D printing has been around since the 1980s, advancements in technology and the unprecedented supply chain disruption due to COVID-19 have driven more mainstream adoption throughout 2020.  While the pandemic has wreaked havoc on global business, causing shutdowns and spikes in demand, we’ve also heard positive stories of true innovation from businesses across the manufacturing sector.

Markforged’s inaugural annual COVID-19 Impact on Supply Chains: Global Additive Manufacturing Industry Report found that modern manufacturers—or, those who adopt digital manufacturing solutions such as 3D printing—were the most resilient during the pandemic, reporting that they’ve been operating “business as usual,” while other manufacturers scaled production back. 

Based on research conducted with our global customer base and the wider industry, the report notes that almost one quarter (24 percent) of our customer respondents said they had begun producing new products during the pandemic, and 45 percent stated that “nothing has changed, it’s business as usual.” With 28 percent of customer respondents noting that they are now using 3D printing more compared to pre-pandemic usage, it’s clear that 2020 has been a year that we will look back upon as an inflection point for additive technologies. 

While additive manufacturing has been trending toward mass adoption for some time, the global pandemic has accelerated this momentum. Here are three ways we’ve seen metal 3D printing define manufacturing this year.

  1. Identifying Solutions to Supply Chain Delays

In March and April of 2020, we saw supply chains across the globe break. Whether it was from unpredictable supply and demand patterns, unreliable suppliers or broken line parts that could not be traditionally replaced, the manufacturing industry was devastated. As international supply chains continue to strain while we continually battle the virus, manufacturers want more control over their supply chains. 

But, by turning to the flexible solutions offered by 3D printing, manufacturers were able to rapidly engineer robust solutions and simplify their logistics. By leveraging printers to solve their supply chain problems, manufacturers were able to remain resilient in the face of unprecedented difficulties.

One of Markforged’s customers, an orthopaedics business, was one organisation that was able to streamline its manufacturing processes with the help of an industrial 3D printer. Extended waiting times for a specific medical grade raw material casting forced this business to explore all of the options available to them–including the printer they were already using to print tooling jigs and fixtures. They printed a duplicate of the raw cast part they were waiting for and were able to perform full test runs of their manufacturing process. 

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Frost & Sullivan Reveals 9 Emerging Trends Reshaping Industries Post COVID-19

Frost & Sullivan Reveals 9 Emerging Trends Reshaping Industries Post COVID-19

Frost & Sullivan’s recent analysis, The Reshaping of Industries Caused by COVID-19, encompasses nine key trends that will emerge from industries reshaping as a response to COVID-19. With the pandemic’s negative impact on the global economy, immediate action is critical. Technology leaders must assess the emerging opportunities resulting from COVID-19 and provide technological innovations to build company, society, and consumer resilience.

“From transformative MegaTrends to geopolitical chaos, there are several factors making it increasingly difficult to grow,” said Murali Krishnan, Visionary Innovation Group Senior Industry Analyst at Frost & Sullivan. “In the near term, companies should focus on diversifying supply chains and leveraging new opportunities arising from changing customer demands. In the long term, it is important to internally adapt to new technologies that support workplace and operational continuity to have a smoother transformation during recovery.”

Chaitanya Habib, Visionary Innovation Group Research Analystadded: “The shift in focus on cost optimisation and on avoiding further production losses post-COVID-19 has accelerated the adoption of automation and industrial robots across various industries. As a result, the global industrial robotics market is expected to grow from $44.6 billion in 2020 to $73 billion in the next five years, with increasing FDA approval and patent activity.”

The nine key trends across industries that will emerge as a result of COVID-19 are:

  1. Connected Living:The increased adoption of contactless surfaces post-pandemic will power the home automation and security markets. Systems encompassing voice activation technology will become increasingly popular among consumers.
  2. Connected Work: Reformed connected work scenarios will accentuate the need for “cloud everything.” New subscription-based models will witness a growing demand for Unified Communications as a Service (UCaaS).
  3. Digital Health: Digital health driven by telemedicine and robotic care will become the new standard of care delivery. Standardisation of service across the care continuum will require more service and technology providers.
  4. Geopolitical Balance: Countries should work together to keep trade flowing and ensure the supply of essential products, sending a signal of confidence to the global economy.
  5. Human Augmentation: The behavioral analytics market is expected to reach $3 billion in revenue in 2030, up from $230 million in 2019. Post-COVID-19, behavioral data will be used to enhance healthcare systems, financial services, and cybersecurity.
  6. Lights-out Operations: Autonomous “lights-out” operations will propel the demand for remote asset management solutions, and service providers will focus on data management strategies and data-driven business models.
  7. Smart Cities: Smart cities will create significant business opportunities with a market value of $2.46 trillion by 2025. Smart cities will prioritise more digitalised services and a strong data analytics infrastructure, leading to increased spending on technology.
  8. Supply Chain Optimisation: The supply chain industry is creating radical innovations with augmented reality, virtual reality, advanced robotics, real-time inventory tracking, and exploring how 3D printing could completely disrupt the supply chain in the next 10 years.
  9. Technology Advancements: Pandemic preparedness will speed up the deployment of artificial intelligence (AI) solutions and accelerate AI innovation. Beyond specific disease management, post-pandemic economies also will rely on AI and machine learning (ML) tools to expedite digital transformation across key business initiatives.

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Why Today’s Supply Chains Are Mission-Critical

Why Today’s Supply Chains Are Mission-Critical

Starting in production, to warehousing up to the delivery process, businesses are increasingly aware of the challenges lying ahead in terms of their supply chains. Poul Lorentzen of Körber Supply Chain talks about the findings of their recent survey.

As we’ve watched retail stores struggle to keep essentials such as paper towels and toilet paper in stock during the COVID-19 pandemic, we’re getting a stark reminder of just how essential well-oiled supply chains are for our economy. But while the supply chain’s importance is more pronounced these days, greater demand and surprise peak seasons have become more common in recent years. Customers require products faster, and they want a greater variety of options. In fact, according to Körber’s global survey “What Supply Chain Complexity Looks Like in 2020”, 73 percent of industry professionals agree that their senior executives see supply chains as mission critical.

Today’s supply chains are increasingly complex. Some sources of this complexity are familiar: handling more products; partnering with more suppliers; fulfilling through more channels; and meeting customer expectations. Then there are unexpected disruptions challenging supply chains across the globe and changing how we think about crisis mitigation and risk avoidance.

These complexities exist regardless of region, industry, or business size, according to Körber’s survey of more than 600 global supply chain executives held from February to May 2020. Nonetheless, businesses need to serve their customers under these circumstances—making supply chain management mission-critical to the majority of organizations moving goods. There are many moving pieces to consider, and some organizations have more resiliency than others. This includes technology, system flexibility, agile connectivity and integrations to a growing number of solutions, and transparency up to the last mile.

The metalworking industry is no exception. Starting in production, to warehousing up to the delivery process, businesses are increasingly aware of the challenges lying ahead. Körber’s survey revealed that the supply chain is getting more complex for almost everyone, but not at the same rate. Complexity presents itself differently across businesses. The most frequently cited challenges by the manufacturing industry is meeting customer expectations, according to 65 percent.

Reducing Supply Chain Disruption and Risk

So how do we keep our heads above water when complexities arise? How do we stay ahead of the ever-changing nature of supply chain? To reduce supply disruption and risk, consider the following: 

Adaptability: A flexible technology platform is key. The ability to make changes quickly can make all the difference, especially when the unexpected becomes a reality. Voice and autonomous mobile robotics (AMR), for example, can provide solutions for scaling to quickly adapt to arising needs. But, you need infrastructure built for pivoting to add these systems without disrupting operations and further complicating difficult situations. On the software side of things, cloud infrastructures provide the system scalability and managed services that offer vital resources when they’re needed most.

Efficiency: Many warehouses struggle with labour challenges, be it shortages during peak periods or unexpected occurrences like COIVID-19. As labour shortages persist, warehouse automation is on the rise. In fact, 49 percent of supply chain professionals report that they will add automation within the next five years. Supply chains need to be prepared to do more with fewer hands. Automated high bay warehouses, besides achieving a higher storage density, will also reduce the dependency on manual labour as compared to a conventional warehouse. By integrating these systems into the WMS and other critical logistics systems, automation can be a long-term solution whether you’re an SME or a large, global organization. 

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A Look At Global Powertrain Key Technologies And Trends By Region

A Look At Global Powertrain Key Technologies And Trends by Region

Frost & Sullivan’s recent analysis, Global Powertrain Outlook, 2020, finds that global automotive sales are expected to decline by more than 14.2 percent due to COVID-19 by the end of 2020 as manufacturing facilities and supply chains are affected by worldwide lockdowns. However, this slowdown is not expected to have an impact on consumer purchase trends. Demand for diesel engines is expected to decline in Europe by 30 percent by the end of 2020 as Worldwide Harmonised Light Vehicles Test Procedure (WLPT) commences, while global electric vehicle (EV) sales are forecast to increase by about 3.4 percent, spurring demand for gasoline-hybrid and fully-electric powertrains

“OEMs will focus on hybridising existing internal combustion engine (ICE) vehicles as full hybrids have proven to help comply with stricter regulations and have also enjoyed consumer success in recent times,” said Naga Karthik Voruganti, Research Analyst, Automotive & Transportation at Frost & Sullivan.

“Engine downsizing will continue, while the highly efficient gasoline direct injection (GDI) engines will continue seeing an increase in adoption. The integration of gasoline particulate filters (GPFs) and three-way catalytic converters (3WCs) is expected to increase substantially in 2020 with more OEMs seeking to get their gasoline-powered vehicles certified under the new WLTP regulations.”

Voruganti also said mild-hybrid powertrains and the standardisation of exhaust after-treatment technologies, such as selective catalytic reduction (SCR) and coated GPF, are major technology trends that could impact the powertrain industry in 2020.

The growth opportunities in the key regional markets will vary considerably. The main trends and growth opportunities in each key region are presented below:

  • The United States: The US is expected to register about 1.13 million electric and hybrid vehicle sales in 2020, an increase of about 4.7 percent, with a majority of the growth coming from Battery Electric Vehicles (BEVs) and mild and full hybrids.
  • Europe: European Electric Vehicles of all types (xEV) sales are expected to grow by 5.3 percent, assuming a moderate COVID-19 impact, and EVs alone will have a positive growth of about 27.5 percent.
  • China: Vehicle sales are projected to decrease in 2020 due to the unpredictable impact of COVID-19, but EV share is expected to increase from 4.9% of the sales in 2019 to 5.6% in 2020.
  • India: Hybrid vehicle sales increased by 75 percent from 2018, which poses opportunities for OEMs to explore the market. Diesel vehicles will witness an increase in prices compared to gasoline due to the stringent norms of Bharath Stage – 6 (BS-VI).
  • South Korea: Despite a decline of 1.6 percent in recorded sales nation-wide and the end of the temporary tax cut in August, the Mild Hybrid Electric Vehicle (MHEV) 48V segment enjoyed 283% growth, as sales quadrupled in 2019.
  • Indonesia: Car sales improved toward the end of 2019, but due to the sudden and massive impact of COVID-19 on the global supply chain, overall sales are expected to decline by about 17.3 percent in 2020.
  • Japan: Although the sales of new passenger cars in the country in 2019 declined by 2.1 percent from 2018, Japanese brands’ sales have increased by 1.9 percent; sales of foreign brands declined by 3.3 percent. Vehicle sharing and the fading appeal of cars among the younger population are trends expected to affect the domestic market in 2020.

 

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APMEN SURVEY: COVID-19 Impact On Manufacturing Industry

APMEN SURVEY: COVID-19 Impact On Manufacturing Industry

The COVID-19 pandemic has been having an unprecedented impact on the global manufacturing supply chain. For instance, factory shutdowns have drastically impacted the metalworking supply chain around the car and auto parts manufacturing industries.

In line with our continuing coverage of the impact of COVID-19, Asia Pacific Metalworking Equipment News (APMEN) recently conducted a survey regarding the impact of the COVID-19 pandemic to the manufacturing industry, including automotive and auto parts, aerospace and aerospace parts, electronics/electrical equipment, die and mould, machine tool, and medical device/equipment sectors.

Key questions include the challenges they experienced as a result of the pandemic; expected impact on their 2020 sales compared to last year; the most likely impact on their supply chains in the next six months; and whether they are expecting a pent up demand after the pandemic.

Here are some key findings:

  • 71 percent of respondents saw a decrease in demand for their products because of the lockdowns in every market worldwide.
  • Perhaps because of the drop in demand, majority or 47 percent of the respondents expect pent-up demand after the pandemic.
  • 55 percent of manufacturers surveyed, expect a decrease of more than 10 percent in sales this year
  • In line with that, 21 percent are saying they will diversify their supply chains by working with more suppliers, and 16 percent say they will shift to a localized supply chain.

For the full survey results, keep a look out for APMEN’s upcoming Jul/Aug issue!

Staying Connected

During a crisis, a spotlight is placed on the importance of the connection between a brand and its clients. In fact, 40 percent of our respondents say staying connected with their customers are among the key challenges they’ve experienced during the pandemic.

Your clients might be panicking, but it is important to provide them with anchors from your business to act as a focal point, like a beacon of light in a dark time.

It is key to establish such a light source through various human touchpoints. You should remind them of your shared experiences and the results that were delivered—and one way to do so is through targeted branding exercises for your business. Branding opens doors and creates new avenues for clients to reach out to you while seeing the value in doing business with you.

We at Asia Pacific Metalworking Equipment News (APMEN) would be very happy to help you on this front. Reach out to us and find out more about our solutions!

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The China Exodus: Survey Shows Sourcing, Manufacturing Moving Out

The China Exodus: Survey Shows Sourcing, Manufacturing Moving Out

A Gartner Inc. survey of 260 global supply chain leaders in February and March 2020 found that 33 percent had moved sourcing and manufacturing activities out of China or plan to do so in the next two to three years. Survey results show that the COVID-19 pandemic is only one of several disruptions that have put global supply chains under pressure.

“Global supply chains were being disrupted long before COVID-19 emerged,” said Kamala Raman, senior director analyst with the Gartner Supply Chain Practice. “Already in 2018 and 2019, the U.S.-China trade war made supply chain leaders aware of the weaknesses of their globalized supply chains and question the logic of heavily outsourced, concentrated and interdependent networks. As a result, a new focus on network resilience and the idea of more regional manufacturing emerged. But this kind of change comes with a price tag.”

READ: Impact of COVID-19 On The Automotive Manufacturing Supply Chain

READ: Coronavirus Outbreak Reveals the Weakest Links In The Supply Chain

Tariff Costs are the Primary Reason to Move Supply Chains

For decades, China has been the go-to destination for high-quality, low-cost manufacturing, and it has established itself as a key source of supply for almost all major industries including retail and pharmaceutical. However, Gartner research showed that the margin between those companies planning to add jobs in China versus taking them away narrowed sharply in 2019. The primary reason is the increase in tariff costs.

“We have found that tariffs imposed by the U.S. and Chinese governments during the past years have increased supply chain costs by up to 10 percent for more than 40 percent of organizations. For just over one-quarter of respondents, the impact has been even higher,” Raman said. “Popular alternative locations are Vietnam, India, and Mexico.

The second main reason for moving sourcing and manufacturing out of China is that supply chain leaders want to make their networks more resilient.”

READ: Trade War Pushes Apple’s Manufacturing From China To Vietnam

READ: Taiwanese Companies Shift Production To Taoyuan As Trade War Heats Up

Balancing Efficiency and Resilience

Only 21 percent of survey respondents believe that they have a highly resilient network today—meaning that they have good visibility and the agility to shift sourcing, manufacturing and distribution activities around quickly. However, 55 percent expect to have a highly resilient network in the next two to three years—a reaction to disruptions such as Brexit, the trade war and COVID-19.

However, resilience has a price. Fifty-eight percent of respondents agree that more resilience also results in additional structural costs to the network.

“We are at a crossroads in the evaluation of global supply chains that pits just-in-time systems designed to improve operational efficiency against just-in-case plans that emphasize planning and preparing for a range of plausible scenarios,” Raman added. “To find balance, supply chain leaders must engage in risk management to assess their organization’s willingness to take risk onboard and decide how to quantify that risk against other network objectives such as cost effectiveness.”

Moving Closer to the Customer

One-quarter of survey respondents stated that they have already regionalised or localised manufacturing to be closer to demand. Despite the cost of adding more players to the ecosystem and increasing the overall network complexity, regional supply chains can ease delays and shortages in times of disruption—if the model is economically viable.

“Many Western organizations will have to explore new forms of automation on the factory floor to decrease the costs of near- or onshore production. Some also favour a partial option, such as manufacturing in Asia and moving only the final assembly closer to the customer,” Raman concluded.

 

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MACH 2021 Leading The Way To Recovery

MACH 2021 Leading The Way To Recovery

January 2021 is going to be a hugely important landmark for UK manufacturers. After the disruption of 2020 getting supply chains moving and investment flowing are going to be big priorities for the new year. The place to do that will be the NEC, which will not only play host to MACH, the UK’s national engineering and manufacturing exhibition between 25-28th January, but will also be packed with other events.

After a gap of nearly a decade, Subcon will return to being co-located with MACH alongside a number of other shows, including Drives & Controls, meaning it will be a huge week for UK manufacturing.

The organisers have partnered on the events before, but in the current climate the collaboration takes on added significance as the need to kickstart the manufacturing sector after the impact of the Covid-19 pandemic becomes of crucial importance to the wellbeing of the UK economy as a whole.

By pooling their resources, expertise and experience, the two organisations said they would be better able to support UK manufacturing and engineering businesses to bounce back as the economy starts to rebuild and adapt to this ‘new normal’.

The highpoint of the week will be the Manufacturing Technologies Association’s Annual Dinner which the Association, which owns and runs MACH, will be holding onsite at the Vox, on Tuesday 26th January.

James Selka, CEO of the MTA, said: “Our intention is to ensure MACH is not just a showcase for the manufacturing technologies sector, but a celebration of the manufacturing industry at its best. MACH is a content-led event and brings together the latest advanced engineering and manufacturing technologies – in operation and all under one roof.”

“Highlights for the show will include a significant focus on the digital factory, with more automation and connected manufacturing processes, power by the hour and new cost efficiency solutions that will dramatically improve production processes and help shape the industry over the next decade.

“MACH has always been the place to see real innovation come to life. Manufacturers and engineers come out in force to support the UK’s national show and see first-hand how technology is developing. As such, MACH will be the perfect way to kick start 2021 and we are delighted that other complimentary shows will be taking place alongside MACH for what should be a celebration of UK manufacturing at its very best.”

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Impact Of COVID-19 And How The Crisis Is Shaping Universal Robots

Impact of COVID-19 And How The Crisis Is Shaping Universal Robots

In this Q&A, Martin Kjærbo, Universal Robot’s (UR) VP of Operations and Supply Chain, discusses how Universal Robots as a manufacturer is handling the COVID-19 pandemic, what the new challenges are, and how the crisis will shape Universal Robots going forward.

Martin Kjærbo

What are the changes in the way UR operations are run after the pandemic?

We started to closely follow the developments in China in early January and began to prepare for the spread of the virus to possibly impact the rest of the world markets we operate in. When stay-at-home orders emerged in numerous countries, we were prepared to adapt quickly.

Right now, all of our employees not directly involved in the physical production of our robots work from home. This means all admin, sales, management and R&D groups work remotely and stay in contact during daily, online meetings—this is the case both at our headquarters in Denmark and at our 27 offices around the world.

Many of our R&D engineers have been able to set up labs in their own garages. We sent robots home with them and it’s a setup that has actually worked surprisingly well, especially since they are also able to use and collaborate through some of the UR+ simulation software tools available. It has been a great experience to see just how quickly employees have adjusted.

Engineers at Universal Robots have been able to take the UR cobots home with them to continue research and development remotely

How has your supply chain been impacted and what have you done to mitigate this?

The COVID-19 outbreak has caused a major shakeup, no doubt about it. This is a time when the robustness of our supply chain is seriously challenged. Fortunately, we already had a dual-source supply chain in place, which meant that when China started shutting down, we weren’t as vulnerable and had options to get the same parts elsewhere. With China now opening back up and much of Europe still shut down, we’re seeing that same dual-sourcing strategy work the other way around. As a result, we have not had any disruptions to operations and our production capacity remains intact. Getting to this point, redirecting the supply chain, has definitely taken an unfathomable amount of agility and due diligence.

We are constantly trying to look further ahead now, getting purchase orders out for raw material earlier, and closely examining not just our own suppliers but also taking a look at their second-, third- and fourth-tier suppliers to make sure they can deliver as well. As a result, we have not had to re-engineer any of our robot models

Did you have to restructure your production line to minimise contagion risks?

On our production lines in Denmark, where all manufacturing of our robots is carried out, we have changed from one- to two-shift operation to physically spread our workforce out more. We adhere to the recommended two-meter (six feet) distancing regulations in between people, and have added hand sanitation stations basically everywhere you look. All staff members also wear gloves on the production lines. Wearing face masks is not part of the official recommendations in Denmark at this point, but should this become necessary, we do have masks ready to dispense.

Spreading the workforce out over two shifts also means less people in the cafeteria at the same time. At headquarters, we ask production staff to break in small groups, all meals are pre-plated with disposable cutlery, the buffet is gone to avoid cross-contamination. To underscore the social distancing during breaks as well, we removed half of the chairs in the cafeteria.

How do you communicate necessary production changes to your workforce, and how are they handling it?

We have had an amazing reaction from our employees; there’s definitely a heightened sense that we’re all in this together. There’s been an incredible amount of helpfulness, they all want to see our company through this. Many of the production adjustments have come directly from employees, suggesting how we can do this work task more efficiently, how do we clean this item, new ways to meet regulations, etc.

Going to a two-shift operation went very smoothly. Many of our employees who now have their children at home during the day welcomed working at night so they are able to spend more of the daytime hours with their kids.

Are you relying more on automation now than before?

We take our own medicine, so to say. On our assembly line, we have UR cobots assembling UR cobots. In a time like this, we of course closely examine each and every production task to see where we can alleviate employees and have the cobots take over even more tasks, adding even more automation on the line. That’s an ongoing process that has been accelerated by the pandemic. I think a lot of our customers are currently going through those same progressions, as they start realising how cobots can help free up personnel

Adding cobots to a production line has long helped many UR customers address labor shortages, essentially by spreading out employees and have them collaborate with cobots as seen here at SHAD in Spain where cobots work in tandem with operators in the assembly of motorcycle accessories.

How do you make sure your products reach the end customers on time?

Before the borders started shutting down, we began shipping our finished goods stock out to warehouses in the U.S., Malaysia, China and the Netherlands, as we anticipated the shutdown to impact freight as well. This has fortunately not happened to the extent that we feared, but there’s been quite a few logistics headaches as flights canceled. We recently had a large order on a flight out of Copenhagen cancel that we transported to Stockholm by truck and then were able to get on a plane out of there instead. There are issues like this that we constantly have to maneuver, but so far, we have not had any delays in getting the robots out to customers on time.

At our Danish headquarters, we keep the robots in two different warehouses, so in case there’s a coronavirus outbreak from one warehouse, we can ship from the other. This has fortunately not happened.

How do you think this crisis will shape your company going forward? What are some of the lessons learned?

I think one of the most significant lessons is the importance of dual-sourcing your supply chain and staying in very close contact with each and every supplier. I cannot emphasise this enough. We have an availability forecast on every single part number, we know our weak parts and make sure there are always back-up plans in place to secure those.

Will the way you operate your business change in the long term as well?

I think we will emerge from this forever changed. On the bright side, this has been a big wake-up call that has spurred an amazing amount of production adaptability and increased focus on securing healthy work environments. Our new sanitation stations are not going anywhere, even when the virus subsides.

On the other hand, it saddens me that the interpersonal relations will most likely not go back to the way we used to interact: the handshake, the friendly hug. I’m not sure when we will be able to communicate that way again and that saddens me. Hopefully one day, this will be possible again.

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Thailand’s Auto Parts Sector Shrinks Amid COVID19

Thailand’s Auto Parts Sector Shrinks Amid COVID19

Thailand is one of the largest exporters of vehicles in ASEAN and a major driver of the economy—with a highly integrated network supply chain downstream.

READ: Impact of COVID-19 On The Automotive Manufacturing Supply Chain

Due to the widespread COVID19 pandemic, the auto parts industry is expected to shrink, according to the auto parts industry club under the Federation of Thai Industries (FTI). This is driven by temporary closures of car manufacturing plants across Thailand such as Toyota Motor Thailand, Honda Automobile Thailand, Ford and Mitsubishi Motors, as well as reducing global purchasing power.

READ: Automotive OEMs Must Improve Online Sales Models To Mitigate COVID-19 Sales Slump

Thailand’s auto part industry is valued an average 1.6 trillion baht per year, following car production output in Thailand. However, due to economic difficulties, FTI has previously reduced its production estimate by five percent for 2020—from two million units to 1.9 million units.

READ: FM Global: Neglecting Idle Facilities Amid COVID-19 Will Cost Companies Dearly

The club is considering a downgrade in the outlook for sales value and auto parts volume in 2020 due to the impact of COVID-19 which will be announced in May.

 

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Impact Of COVID-19 On The Automotive Manufacturing Supply Chain

Impact of COVID-19 On The Automotive Manufacturing Supply Chain

The COVID-19 pandemic is causing massive supply chain shocks, and the automotive industry is not spared. How can automakers build a resilient supply chain in times of crisis? Article by Katherine So.

The coronavirus (COVID-19) outbreak continues to headline the news every day, with reports citing its alarming levels of spread and the resulting widespread panic as the world grapples to contain it. However, its impacts are also rippling through industries including the automotive sector. This evolving crisis is creating a domino effect downstream and disrupting normal operations of the manufacturing supply chain. Moody’s Investor Service slashed its global vehicle sales forecast to a 2.5 percent fall in 2020 instead of the previously predicted 0.9 percent drop compared to 2019 due to the virus.

READ: Auto Sector Faces Biggest Existential Crisis Since 2007-09

Supply Chain Disruptions

China is the world’s largest automotive market and Wuhan, the epicentre of the outbreak, is one of the major auto-industry hubs in the country. This “motor city” is home to seven major domestic and foreign auto manufacturers, including Honda, Nissan, Peugeot Group, as well as hundreds of auto parts suppliers. In 2019, the province produced 2.24 million units, accounting for 10 percent of China’s car manufacturing capacity, according to China Passenger Car Association (CPCA), and exported US$60 billion worth of auto parts. Moreover, 80 percent of car production worldwide involves Chinese parts. 

READ: Coronavirus Outbreak Reveals the Weakest Links In The Supply Chain

Many auto companies across China halted production during the nationwide shutdown to keep their employees at home. This includes Nissan, Honda Motor and PSA Peugeot Citroen and Tesla, which postponed production of its new models in its new facility. As the supply chain is greatly integrated, disruptions in any part of the supply chain can impact the regional market. In this case, the shortage of auto parts from China have resulted in closing of Hyundai’s manufacturing facility in Korea. 

“Carmakers will face severe parts-supply issues, something companies didn’t encounter during the SARS period,” said Cui Dongshu, secretary general of China’s Passenger Car Association. “Wuhan is the most cost competitive among China’s car-industry hubs, therefore many parts makers produce components there and supply their clients around the world.”

According to IHS Markit, this slowing of operations and facility shutdowns until mid-March due to the virus can lead to a reduction of 1.7 million vehicle production in China. Furthermore, car sales in China has dropped 92 percent in first half of February, according to CPCA.

READ: Bosch Cutbacks Operations In Response To Falling Automotive Demand

Recently, manufacturing facilities in China such as those of Volkswagen and Nissan have started to resume partial production and are still struggling to regain full capacity. However, as the outbreak morphs into a global pandemic, the automotive market is hit with yet another wave of threat in Europe and the US. Fiat Chrysler and Ferrari are closing its plants in Italy; BMW, Toyota and Honda are shutting its UK facilities temporarily; Ford and General Motors are shutting factories in the US; while other automakers like Jaguar Land Rover and Peugeot are ramping up efforts to deal with infections among workers. 

According to Globaldata, shutdown of vehicle plants in Europe would cause the removal of over 1.3 million vehicles from production, in turn costing the European auto industry a GBP29.3 billion loss in revenues. Similarly, IHS anticipates a drop of US car sales to 15.4 million vehicles compared to 16.5 million in 2019. The crisis has left manufacturers scrambling to find alternative solutions and source for different suppliers to prevent shortages. 

READ: Siemens Connects Healthcare Providers And Medical Designers To Produce Components Through AM

Impact In ASEAN

The ASEAN automotive market is expected to face another challenging year. “The automotive industry has a very integrated supply chain. Therefore, any disruption in the global automotive supply chain will impact every regional market including ASEAN—either by less sales of cars or because of shortage of parts necessary for the production of cars,” commented Rodrigo Cambiaghi, EY Asia-Pacific and Greater China Supply Chain and Operations Leader. 

The Vietnam Ministry of Industry and Trade has forecast that most automakers will experience partial shortages during this time of crisis and sourcing from other markets would be difficult due to familiarity of technical standards of Chinese parts. As a consequence, Vietnam’s industrial production growth could drop 2.3 percent due to reduced imports of parts from China, according to management fund VinaCapital. 

READ: Ford & Toyota—First Automakers To Suspend Production In Vietnam Due To Covid19

Thailand, as one of the largest exporters of vehicles in Asia will not be spared as well. Toyota Motor Thailand predicts that sale of domestic vehicles will drop 6.7 percent to 940,000 units in 2020. Despite this, the Thailand Government has drawn a plan to transform Thailand into a regional hub for electric vehicles by 2025 and has put various strategies in place to promote production and development of EVs.  

Malaysia has also recently launched its National Automotive Policy (NAP) 2020, which incorporates three new advanced technology elements—Next Generation Vehicle, Mobility as a Service and Industry Revolution 4.0 and focuses on three strategies—for value chain development, human capital development as well as safety, environment and consumerism. Some vehicle manufacturers, especially Chinese car companies, were affected by the outbreak, however, Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said that the total industry volume (TIV) forecast for 2020 will remain the same for now. 

The current COVID-19 situation is still unfolding and the market is fluid. Amid the gloomy outlook, the situation is expected to improve by the second half of the year, according to Fitch Solutions, as countries have sufficient capacity and infrastructure to ramp up output quickly. Moreover, with growth opportunities in ASEAN’s automotive markets, vehicle sales are forecasted to grow 3.5 percent in 2020. In the meantime, what can manufacturers do to mitigate the risks?

Building A Resilient Supply Chain

Rodrigo Cambiaghi

Based on the developments from this pandemic, coupled with learnings from past disruptive instances, Rodrigo Cambiaghi, EY Asia-Pacific and Greater China Supply Chain and Operations Leader shares the key pillars to help companies build a resilient supply chain:

READ: COVID-19 Forces Companies To Evaluate How They Operate And Embrace Technological Investment

  1. Conduct end-to-end supply chain risk assessments and prioritise critical focus areas
    • In the short term, responsiveness and speed are everything. Proactively engage supply chain ecosystem partners, such as suppliers and logistics service providers (LSP), to conduct a risk health check:
      1. Identify – changing demand and inventory levels to locate critical gaps in supply, production capacity, warehousing and transportation
      2. Define – common goals and an actionable short-term and outcome-driven resilience strategy with breakdown activities among the supply chain ecosystem, aiming to effectively and efficiently leverage additional networks among various suppliers’ pool, production and distribution networks.
      3. Deploy – Leading companies build action plans based on scenario analyses to limit the impact of disasters. A fact-based dashboard, including aligned key KPIs help to create enterprise-wide and ecosystem visibility. This can help a company dynamically re-prioritise its plans as needed.
  1. Develop a robust risk management process and diversify supplier network
    • Enterprises should map out supply chain networks from end consumers to tier-N suppliers. For each supply chain node/arc-like channel, warehouse, factory, supplier, or transportation mode, firms should establish a methodology to measure risk.
  2. Implement digital and automated manufacturing capabilities paired with strong manufacturing excellence
    • Leverage automation and IoT solutions for smart manufacturing operations to mitigate reliance on labor intensive processes. A strong manufacturing excellence program enabled by digital technology can allow standardisation of daily work and job aids, relieving the pressure of relying on specific individuals to make an operation perform. IoT capabilities can help foster a digital ecosystem of connected systems providing users relevant and updated data to make the most informed decision at any given time. Automated manufacturing capabilities will enable a company to run a manufacturing operation using interchangeable personnel and reduces labor requirements.
  3. Evaluate and adjust procurement category strategic priorities
    • Transform procurement into a value generation function via timely reviews and adjust category strategic priorities to define new business relationships with suppliers to meet the company’s overall supply chain objectives. An agile procurement operations system enabled by various technologies and factoring category strategic priorities across variables such as cost, quality, delivery, innovation, etc. will also help drive resiliency. Companies can introduce digital procurement technology to benefit from supplier social networks. Implementing a supplier social network in sourcing and supplier lifecycle management can strengthen sourcing capability and supplier collaboration in challenging circumstances.
  4. Invest in more collaborative and agile planning and fulfillment capabilities
    • The art-of-possible today in technologies that can bring more agility and collaboration within the enterprise as well as across business partners are endless. From IoT devices for demand sensing and goods movement tracking to advanced forecasting solutions and social medial demand behavior monitoring are heavily impacting how companies understand demand signals and how quickly they can react to them. These capabilities are extremely important for business performance even in normal business conditions and they increase the supply chain resilience in pandemic events like the coronavirus outbreak we are living today.
    • The current COVID-19 pandemic has caused disruption through all sectors with various degrees of impact. It is time for companies to rapidly assess, recover, and respond quickly through numerous obstacles and challenges that still stand in the way. Through the chaos of recovery, it will be very easy to overlook the root cause and gaps within a supply chain that may have paralysed businesses during this unpredictable major event in the first place. Building towards a resilient supply chain will be at the epicentre of future discussions for years to come.

 

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