Industry Transformed: Optimizing to Meet the Challenges of Today
November 5, 2020
The effects of the pandemic over the last six months are still being realized, but business leaders have found new short-term solutions to optimize and thrive. For the industrial and manufacturing sectors specifically, we saw disruptions with suppliers, dramatic shifts in demand, remote operational challenges including reconfiguring factories, and many using financial levers to shore up liquidity. The health and safety of employees and customers has been front and center but keeping business lines and operations running to deliver to all stakeholders continues to be paramount. For the Chief Financial Officer, many have had to drastically adjust business models to account for new scenarios, shore up liquidity, reallocate working capital, and deliver in a virtual world with entire finance suites working remotely. For the Chief Operating Officer in this sector, many were forced to implement supply chain risk management strategies in real time and have since begun to navigate restarting operations at reduced speeds, capacities and costs. In turn, this has emboldened many to speed up their digital transformations as connectivity is a key driver of business continuity.
As industrial leaders embrace new digital technologies, from cloud to AI, data analytics, 5G and remote diagnostics, how are executives thinking about operational processes differently? What valuable lessons have leaders learned over the last 6 months that will continue into the future? And what digital solutions have companies embraced in order to deliver in a uniquely challenging time?
This roundtable discussion focused on how this sector is prioritizing investments and adapting operations, managing costs, and adopting new technology to navigate challenges and further build out dynamic organizations.
Don Allan, Executive Vice President and Chief Financial Officer, Stanley Black & Decker
Rob Atkinson, Executive Vice President and Chief Operating Officer, Newmont Corporation
Phil Christman, President of Operations, Navistar International Corporation
Jonathan Collins, Executive Vice President and Chief Financial Officer, Dana
Tracey Doi, Chief Financial Officer and Executive Vice President, Toyota Motor North America
Scott Howat, Senior Vice President, Finance, BAE Systems, Inc.
Steve Pelch, Executive Vice President and Chief Operating Officer, Emerson
Timothy Wholey, Vice President and Senior Partner, IBM Global Business Services
Karen Ubelhart, Senior Industrials Analyst, Bloomberg Intelligence
Click here to view the video of the full discussion.
Here’s what they had to say:
Timothy Wholey, Vice President and Senior Partner, IBM Global Business Services,
shared what he has been seeing in the field and how he and IBM are responding, “We’ve looked heavily at supply chain, that’s my group in process re-engineering within the industrial sector. We also looked at finance transformation and within supply chain planning, source fabrication. So smarter factories, connected manufacturing, and then the logistics function on the backside are all areas where we started to look at how we can introduce technology and really optimize what’s happening within the field and within the procurement and supply chain activity. If you look at the supply chain activities that have happened, demand sensing has been disrupted, source of supply, especially if you have a global supply chain network, that’s been disrupted and compromised. Now as we move forward, it’s got us thinking in different ways of how we can maximize supply chain optimization.”
Healthy People and Communities are Foundational
Several panelists discussed the importance of looking after employees and communities as well as business operations and the supply chain, as a successful business depends on healthy people. Tracey Doi, Chief Financial Officer and Executive Vice President, Toyota Motor North America, discussed how Toyota has been proactive in looking after its associates in a holistic way. “Our team member base is so important for us. And one of the key elements of Toyota’s culture is a term called ‘Mendomi’. We treat our team members like family, and we want to make sure that we are offering good listening, good sensing, so that we can better understand how to support them. The whole family, not just the individual team member. Because we know the importance of childcare and all the challenges with uncertainty.”
As Jonathan Collins, Executive Vice President and Chief Financial Officer, Dana, shared, outreach on health and well-being extended beyond employees to the local community. “I think what was very unique for us about this downturn is the breadth of how it affected all of the constituents in our business. So not only did we have to think about the operating and financial concerns, but we really had to think about protecting employees, how we could help support our communities during this downturn. And that added some dimensions that were pretty unique in Dana’s case. Obviously everyone on the phone, I’m sure experienced having to protect our employees. We had to change the way we operated relative to social distancing, providing PPE. But in addition to that, we also had to think about our local communities.”
Rob Atkinson, Executive Vice President and Chief Operating Officer, Newmont Corporation,
explained that Newmont worked extensively with the local communities as well as employees, “Because we were learning and sometimes we were ahead of governments, we had to reassure our local community members, first nation people, indigenous people in Australia and in South America. And we had to provide them confidence that we were looking after them. And one of the big things that we had to do in Newmont was we took the decision actually to shut down some of our mines to make sure that we were looking after the communities and that things could come under control before we fully operated again. And one of the key examples there, is that we talk about testing, we talk about PPE, but in the likes of Mexico, to give you a sense, we’ve set up 18 testing stations, seven at airport, seven at bus stations, four at the site. And we are testing people when they arrive, when they leave the site. You’ve got to win that confidence of your local communities through your actions rather than your words.”
In addition to community relations, Phil Christman, President of Operations, Navistar International Corporation, observed the importance of government relations. “I think our government relations people were significantly important in keeping our plants running, because what we’d find is, the regulations of running in New York were different than in Michigan and in large part, local governments weren’t aware of what essential industry meant. And so we’ve dealt with that in the US, we dealt with that in Mexico, we dealt with that in a lot of countries. And so, really never before did we need to get our government relations people involved in our supply chain.”
Preparation Pays Off
While nothing could completely prepare a business for a pandemic, companies that had well-developed contingency and risk mitigation plans found that the systems they had in place were helpful. As Don Allan, Executive Vice President and Chief Financial Officer, Stanley Black & Decker shared, “I would have to say that we’ve done a lot of scenario planning, a lot of contingency planning, over the years at Stanley Black & Decker that prepared us for this circumstance. We were having daily pulse meetings with our global operations plants, DCs, our vendor base, initially monitoring liquidity with suppliers then flex into how can they handle the higher capacity as we went through that kind of snapback impact. So I can’t say we’ve ever experienced anything like this, for sure. I do think a lot of the contingency planning we’ve done in various other recessions and other periods of time, help build muscle to be able to react very quickly.”
Steve Pelch, Executive Vice President and Chief Operating Officer, Emerson, shared how navigating the pandemic strengthened company performance. “So a pandemic like this really shows you where your weak spots are. It also shows you where your strengths are. And it’s not only how you competed today versus yesterday, how you’re able to serve your customers, it’s again about how you’re able to serve that industry compared to your competitive peers. So I think we always have done risk mitigation exercises. We’ve always had dash boards that are in all four regions, supply chain and whatnot. This one kind of shows, okay, where are those real holes? And it shines a light on those.”
The Extended Supply Chain
Panelists spoke at length about the ways in which they became closer to their supply chain or benefitted from strong relationships already existing. They saw the need to provide expertise and practical assistance to keep the supply chain from being disrupted. Scott Howat, Senior Vice President, Finance, BAE Systems, Inc., explained, “It would quickly became apparent that our number one issue was making sure that not just our first tier, but second and third tier suppliers were able to provide us the parts they needed for us to manufacture what we need to get it to our customers. That was a challenge up front, but we did a, I think a really good job, making sure that we kind of reaffirmed our connection with those supply base to make sure that the supply chain kept running.
“We have a lot of small businesses and small vendors, and this is probably the first time in my career sitting in a finance chair, that I’ve told people to go call vendors and ask if they need to get paid early. So, I think you have to take your financial hat off sometimes during these unprecedented times and preserve the liquidity of your supply chain as much, if not more than your own company. So that’s kind of where our focus has been.”
Acceleration of Innovation
Businesses have had to make investments in and adapt to new technology quickly. For many, these technological upgrades were already planned for down the road, but the need for implementation became immediate. Don Allan, Executive Vice President and Chief Financial Officer, Stanley Black & Decker, said, “Three years ago, we created a center of excellence that’s focused on industry 4.0 and the technologies that can be deployed into our plants and our DCs, and eventually into some of our key suppliers that accelerate the automation of production. But probably just as importantly, if not more importantly, digitize our plants, so we get the right type of data and information real time to be making decisions in the moment to ensure the right levels of productivity increase the efficiency and effectiveness of the plants, et cetera. And so that’s been underway. What’s happened now as we sit here and say, my goodness, we have to accelerate this.”
This Bloomberg Roundtable was Proudly Sponsored By