The Digital Supply Chain podcast

Sustainability And Circular Economy In Manufacturing - A Chat With IDC's Maggie Slowik

July 19, 2021 Tom Raftery / Maggie Slowik Season 1 Episode 149
The Digital Supply Chain podcast
Sustainability And Circular Economy In Manufacturing - A Chat With IDC's Maggie Slowik
Show Notes Transcript

Sustainability, and the circular economy are two topics which are only gaining in importance. I have covered them in several previous podcasts, but this time I wanted to approach the topics from an analysts perspective, so I invited IDC's Maggie Slowik to join me on the podcast.

Maggie is a Research Manager for IDC's Manufacturing Insights team and has published research on Sustainable Manufacturing, so she was the ideal candidate, and she didn't disappoint.

We had an excellent conversation and, as is often the case, I learned loads, I hope you do too...

If you have any comments/suggestions or questions for the podcast - feel free to leave me a voice message over on my SpeakPipe page or just send it to me as a direct message on Twitter/LinkedIn. Audio messages will get played (unless you specifically ask me not to).

To learn more about how Industry 4.0 technologies can help your organisation read the 2020 global research study 'The Power of change from Industry 4.0 in manufacturing' (https://www.sap.com/cmp/dg/industry4-manufacturing/index.html)

And if you want to know more about any of SAP's Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain, and if you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

And remember, stay healthy, stay safe, stay sane! 

Maggie Slowik:

We are now seeing for the first time companies, manufacturers that are doing it out of self interest that are saying, you know what we can actually now sell on the sustainability value proposition. There's a true opportunity there. And we can make a difference and potentially beat competition. Just just on the grounds of this.

Tom Raftery:

Good morning, good afternoon or good evening wherever you are in the world. This is the digital supply chain podcast, the number one podcast focusing on the digitization of supply chain. And I'm your host, global Vice President at SAP. Tom Raftery. Hey, everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP. And with me on the show today I have my special guest, Maggie. Maggie, would you like to introduce yourself?

Maggie Slowik:

Yes, sure thing. Hi, Tom. And it's great to be part of your podcast today. My name is Maggie Slowik and I work for a company called some IDC and IDC. In case you don't you don't know us, we are one of the leading technology research and advisory companies. A Boston headquartered company with a huge global footprint. I myself am based in London, and I'm part of a team called manufacturing insights. So my customers as the name would sort of apply our manufacturing companies. So we serve both technology vendors who have a manufacturing value proposition as well as manufacturing end users. And that's sort of my my day to day job. And as part of my remit, I have a very strong focus on sustainability. And I'm also part of idcs, European technology for sustainability and social impact practice. So we do look at the topic of technical sustainability, with a very serious focus.

Tom Raftery:

Fantastic, fantastic, and it's it's a real hot button topic for me as well. So I'm absolutely delighted that you've agreed to come on the podcast to talk about this today. But quite I mean, why a Why is sustainability important to you personally, and taking it from there? Why is it important to IDC and your customers and, and why now? I mean, we're in the middle of a pandemic, hopefully, heading out of the pandemic, but you know, this is you think this would have gone away from people's priority list, you know, while all this was going on, but in fact, it seems to have gained in importance. Why Why is that?

Maggie Slowik:

Yeah, absolutely, Tom, I mean, I have prior to joining IDC, I used to work for a supply chain business intelligence provider. And, you know, sort of like 10 years ago, five years ago, we talked about sustainability, we've been talking about it for much longer. Now. It's always been sort of a very trendy buzzword. But I'd like to argue that companies sort of did it, you know, sort of, we had isolated cases of success, some some companies did it, because it was convenient. For for marketing purposes. purposes, I'd like to say or sort of, you know, maybe not the best word to use here for for green washing purposes. But um, so in any case, it's been something fashionable, but something that wasn't sort of taken very seriously on on an industrial and sort of scale. But all of a sudden, with the with the pandemic, we saw a big change happening last year, because and this is especially true for manufacturing companies who, you know, where you could argue that sustainability efforts have not been easy to address in the past for for a number of reasons. But all of a sudden, you saw a paradigm shift, because you saw that overnight, manufacturing companies had a hard hard time sending people to the shop floor, and they had to operate in whole new ways. And all of a sudden, they saw their co2 emissions dropping overnight, and it became very evident very quickly that change and radical change was possible. We have some data at IDC that actually highlights that the pandemic has had a very strong positive impact on manufacturing companies in terms of impacting their sustainability development goals. And so I'd like to say that you know, a there are regulatory pressures that are now increasing more and more, you know, this European Green Deal and, and all the implications for manufacturers to create change across the entire value chain. And it's really difficult to stay on top of these offer these regulatory pressures, but there's also a different opportunity to to create a competitive differentiator. I'd like to say so we are now seeing for the first time companies, manufacturers that are doing it out of self interest that are saying, you know, what we can actually now sell on the sustainability value proposition, there's a true opportunity there. And we can make a difference and potentially beat competition, just just on the grounds of of this. So I think this is a big topic, a lot of our customers are asking us if we have research, or we have thought leadership on this. And we even have a Sustainability Index that I can talk a little bit more about later, where technology vendors can sort of benchmark themselves against other other peers. So it's definitely a topic that's very much on the go. And it's finally the topic is finally moving. It's no longer just a fashionable trend. But it's becoming a legally binding activity for manufacturing companies.

Tom Raftery:

Fantastic. And as I mean, that's great to hear. And do tell me a little bit about that Sustainability Index you mentioned, because that was not something I was aware of.

Maggie Slowik:

Yeah, sure thing, and happy to sort of send information over for that. So I had mentioned our practice that we have at IBC. And what we do is, we invite technology vendors to provide information across three different dimensions. And one of them is technology vendor performance. And that is just to sort of highlight the vendors, sort of initiatives when it comes to sustainability to demonstrate what exactly are they doing when it comes to, to the topic? And then the other one is, now how can they, as a technology provider, enable their customers to become more sustainable, right? Because we also see in our research that the onus is actually on these technology providers to provide them with the right tools to become a sustainable companies. So that's the second dimension, you know, what, what technologies are there to enable manufacturing customers to become a sustainable, and the third dimension that these vendors can measure themselves against is what we call technology for good and that is really highlighting, sort of not for profit activities that are impacting the community and the wider communities and you know, the sort of influence that technology can can take there. So it's a it's a fantastic index, we have been sort of getting a lot of traction from from the vendor community, we did the first iteration on infrastructure providers and record your running one with cloud providers, I think the next round is going to be on system integrators. So again, happy to send you some more information to to generate more interest and invite any technology provider who's listening on this on this podcast to potentially participate, as well as any manufacturing and user to to read this index.

Tom Raftery:

Fantastic. Fantastic. That sounds really interesting. That's great. And I mean, this whole shift to sustainability. You know, it kind of in some ways, mirrors the whole shift to industry 4.0, because it's it's it's an ecosystem play. It's, it's it's very hard to do any of these big processes, and then shifts without involving other partner organizations. One, I was talking to a really cool company yesterday, I'll be doing a publishing podcast with them in a couple of weeks time around the circular economy, for example, is that something that you're also looking into?

Maggie Slowik:

Yeah, absolutely. Tom, and I love the fact that you bring in the word industry 4.0. Oh, because I mean, by the way, it is reported, oh, it's now 10 years old, I attended Hannover fair, this year, virtually, unfortunately. And in April. And, and it was very interesting to listen to some of these discussions. Because, actually, you could say there's a very strong bridge between industry for it on sustainability in the sense that those companies who have already made investments in industry afforded over have made investments in some of these key digital technologies, they have no excuse not to look at sustainability, these technologies are already out there to support them to get them going on the sustainability journey. Right. So we got just just to mention a couple we got, we got cloud, we got IoT, we got artificial intelligence. There's also the RP that is undoing so much for you as a, as a manufacturing enterprise to support the sustainability initiatives. Right. So this is just a sort of, kind of sort of set the scene. But coming to the circular economy, I mean, with these technologies, you actually have a huge opportunity to, to now sort of act as part of the ecosystem, which is a trend, a general trend that we're seeing in manufacturing anyways, right that in order to create more value, In order to sort of tap into these opportunities that you haven't been able to before, you need to be become part of an ecosystem. And the same is really true for for sustainability in order to really make a difference. You need to look at this at this network that surrounds you, you need to look at partners, who can take away the ways that you generate, ideally, you wouldn't want to generate this waste, right? Again, with these technologies, the ways to reduce waste, for example. But being part of this ecosystem, play and moving away from the linear economy to circular economy, you can actually identify partners who are good, who could do something with this waste and sort of work with you. And so it's a huge, it's a huge source of economic opportunity to work with these partners. And, and really move away from buying raw materials, transforming them into products, and then generating waste. It's all about sort of finding takers. And by the way, I think this is also the role of it, to increase these efficiencies, and to help you as an organization find, find the right partners who can sort of process who can, who can recycle upcycle, refurbish whatever, have you, your products at the end of their lifecycle? So it's a huge opportunity. Really

Tom Raftery:

cool. And, I mean, you mentioned some of the technologies there, you know, a lot of them associated with industry 4.0, how specifically, can they help organizations with their sustainability goals?

Maggie Slowik:

I mean, it's, I think it's just almost almost too obvious for first for some companies to sort of close their eyes to the opportunity, I'd mentioned the role of ERP and a source enterprise resource planning, right. And I think that is something that, you know, sort of is a core technology with within the manufacturing enterprise and, and a lot of the enterprise data that goes, that actually goes through the MRP. And so you do have an understanding of the, of the raw materials of the of the, of the, that you that you buy and, and, and the the energy you're consuming. So there's so much information at your fingertips that actually can then help you to sort of report on it to look at sort of how can we optimize our processes? How can we reduce co2 emissions? How can we reduce our energy consumption, so sort of looking at this data collecting, it can actually help you to, to create more efficiencies, it's just sort of about the commitment, and and making sure that you have access to this data, and you collect it in as much as possible a real time as young as possible. So so there's, there's a lot of sort of opportunity to make the most of this data for your sustainability efforts, for sure. But I mean, another opportunity there is, let's have a look at sort of augmented reality. I think that's another sort of fantastic tool, actually, you know, in the UK right now, it's a research recently published a report on the on the impact of, of Brexit, on manufacturing companies, and one of the one of the technologies that we think is going to be hugely helpful in in dealing with this post Brexit, but also post pandemic world is augmented reality in the sense that you don't need to send technicians around anymore. And you know, that that, again, is a huge contributor towards co2 reduction, co2 emissions, right. But it's a way of sort of, you know, doing things remotely and and being more environmentally friendly. And the same, the same way these sort of remote technologies can also help companies with their sustainability efforts.

Tom Raftery:

tremendous, tremendous. One of the issues always in any big programs like this is people because, you know, I say lots of times, changing technologies is easy, changing people, not so much. And you know, a lot of these sustainability initiatives will require significant change. How do you manage the people in something like this? Yeah,

Maggie Slowik:

I mean, we often I mean, it's funny because often when you talk to a manufacturing and you that, that the topic of people always comes about or tried, and it comes about when we talk about industry for at all, and how difficult it can be to get a shop floor worker who has been with the with the organization for 20 or 30 years, to actually commit to use these technologies, right, and to report back on the feedback. This is sometimes very, very difficult. And I think the same is the case with the sustainability efforts. Because you're now need to have this commitment from people, but you need to also educate them. to, um to treat, for example, just coming back to the waist example, to treat, waist, sort waist and in a in a certain way, right. So this is educational aspect to ensure that sort of people also deal with with with these instructions on the shop floor. And and do this in a continuous way, right. So it's not easy but sort of requires a lot of change management, we actually have also spoken with customers before, who have reached out to, to the help of universities. And so on one instance, we heard the interesting story of a manufacturer actually working with a nudge theory to sort of help these these workers on the shop floor to be more mindful of waste, and the daily sort of unworked. So I think I think it's an interesting sort of concept. And I think it also applies to, you know, when we hear well, only, you know, the big companies have the luxury to really drive sustainability efforts. I think that's not necessarily true, because, you know, smaller companies, they don't have that whole technology legacy in the first place, or that that complexity that the large organizations have, and they are modest, so native to begin with. So and I think, and also with the smaller organizations, you can do a lot more with people, and more easily then again, at these larger, more complex organizations. So again, that is that it requires work, but change doesn't happen overnight. And it does. And it does require this open and interact communication top down as with a lot of strategic initiatives. Interesting.

Tom Raftery:

Yeah. And are we seeing any kind of generational patterns here as well? Or is that a gross generalization? Because it's, you know, it's it's typically thought that the younger generations are more open to sustainability initiatives, and maybe older generations, not as much.

Maggie Slowik:

Yeah, I mean, I think it probably does to be careful here probably is a bit of an overgeneralization. But, but yes, of course, you know, you do see, I mean, it's no big surprise here that you do see a lot of sort of the younger generations being hugely driven by by sustainability, right. And also to choose employers based on a sustainability commitment, right, and advocating that in the, in the open sort of public, and so it's a huge driver. And, and I think that, yeah, those those companies who sort of have a very clear sort of commitment, and who would say, you know, we're doing something about this, these, these sorts of the sort of the sort of ethos is definitely going to attract and retain talent going forward. And I'm not saying that sort of older generations wouldn't so much care about this. I think, I think maybe the change just requires more time, I think it's the more that maybe the better way of phrasing it, you're

Tom Raftery:

very diplomatic. Not like me. Yeah, it's it. It's an interesting point you bring up about employees, and, you know, attracting good employees and retaining good employees, because the cost of attracting employees and retrain or training up new employees, is significant for organizations, you know, so if you can minimize those costs, by deploying more sustainability initiatives, you know, that's always a good thing. And then the flip side of it is, if you can increase your revenues by attracting more customers and keeping more high value customers, again, by deploying sustainability initiatives, you're increasing your revenue, and you're cutting your costs. So it seems to be a lovely, perfect storm there.

Maggie Slowik:

Yeah, and, and sort of just to wait into this. Absolutely. Tom, and we, I mean, I think also, trust is sort of like another sort of key word here. I think this is another driver that we see manufacturing companies sort of motivating into into doing something about sustainability, right because customers and by that I could also mean employees right? They're sort of like demanding you know, companies doing something about this and and it is about trust if if something goes wrong in the supply chain, and even if it's not sort of like you know, if it's even further down your tears, you know, it's a supplier supplier, you know, something goes wrong, you know, it's your name as your organization that is sort of going to be swept through the media and and that is a breaking of trust. So, absolutely. I think these sorts of things, because it's sort of what I would call the indirect our cost of sustainability but speed About revenue. This is another thing that I did want to mention is that we actually have an index at IDC, where we have been tracking organizations for the last couple of years that have been investing in digital technologies just to see, you know, how they have been doing in terms of sustainability and in terms of their their performance. And what we observed is that these companies who have made those digital investments, they actually use them for further sustainability efforts, it's easier for them, as I mentioned before, it should be fairly straightforward to to use these tools that you have at your disposal to, to drive the sustainability initiatives, but they actually also generate a better revenue and profit. It's a bit of a chicken and egg sort of situation, you know, but I'm certainly you could argue that if you have these technologies, if you do not sit idle, if you have a strategy, and you make the most of these technologies, you can actually create some noticeable change, and you can really make a difference. And that will be seen and that will be known within your customer base for sure. And that, again, loops back to the, to the topic of trust and reputation.

Tom Raftery:

Interesting. And something we haven't addressed explicitly, which I think and I'd love to hear your thoughts on this, which I think is going to increasingly be an issue is the whole issue that we alluded to earlier, when we talked about data. And now we've alluded to talking about customers. And it's the idea that if you can demonstrate that your emissions are lower, then you are de facto lowering your customers emissions when they buy from you. So if they are actually looking to reduce their carbon footprint, and they're looking for low carbon suppliers, if you are publishing that data, you suddenly become a lot more attractive to them, to help them reduce their emissions.

Maggie Slowik:

Yeah, absolutely. And, and, you know, that sort of ways, plays into this into the notion of data and how important it really is on this journey to sustainability. And we have been timing date data is sort of one of the cornerstone topics when we talk about industry forward or technology anyways, but it's ever more important when we talk about sustainability, because it gives you really this sort of transparency that you just talked about, right? And also the traceability capability to really be able to download again, in case something goes wrong, or in case you need to make some co2 calculations, it really gives you a precise idea of you know, how much that is, it allows companies to really download their product history or when and as they need to, when something goes wrong, but, but also, again, the ties back to the consumer, sorry, sorry, to the information hungry consumer or customer who increasingly want to have this data at their disposal, and you as a manufacturer, you need to be able to say, Okay, at this stage, you know, across the value chain, this is who supplied me with raw materials, and this is the the sustainability sort of credentials or index profile of this particular supplier. And then, you know, you need to be able to explain and account for the journey that the materials and then the, then the product has traveled through. So that that is sort of becoming more and more important. customer wants to pick up a bottle of I don't know, ginger beer and be able to see how it was sourced and and just to be able to have all of this information at the fingertips just by looking at the label. All these things are just becoming have become a de facto nowadays.

Tom Raftery:

And what about the inclusion of emissions reporting requirements in RFPs? Will that become de facto soon?

Maggie Slowik:

Yeah, I mean, we definitely, we definitely see a lot of sort of. Yeah, I mean, that definitely a lot of sort of pressure on manufacturing companies to do that. But I think there is still a quite a bit of obscurity. And in terms of how to do this, I think companies are still struggling. We were just recently talking to a potato chip manufacturer who was saying that they're really, really struggling with meeting the the Green Deal requirements and again, as in the previous example, reaching out to academics to help them with some sort of re rethinking their business. But also, the flip side of that is an end as a positive thing is it puts the onus on the Technology vendor community and really saying, hey, this, you know, something that's important to us. And we need your help Mr. Technology vendor to be able to properly report on the so we do see this as well, in terms in, in vendor selection, for sure.

Tom Raftery:

Okay, super, Maggie, we're coming towards the end of the podcast. Now, is there any question I've not asked that you wish I had? Or is there any topic we've not touched on that you think it's important for people to think about?

Maggie Slowik:

I mean, you will often get the question, Tom, about, you know, how do I even get started? It seems like such an overwhelming task. And it's the same question, you know, that, that we get about, you know, how to start digital transformation journeys? And the answer is very simple. I mean, just just, you know, everybody can make a difference today, if they want to, and already had talked about some of these key technologies that are at the disposal at the disposal of manufacturing companies. But I think you need to get the consultants to come in and create a huge strategy or big plan for you, I think there's simple things that you can do, you need to just think about a strategy that you can commit to, and then really sort of, you know, do the most with, again, with the data and with the technology that you have, and just create, create successes of circular economy successes, sustainability, successes, and just really build on these and you know, just create this momentum, and this excitement and the commitment from employees. So it's just a, it's just a matter of really getting started just just like with digital transformation. And you know, the sooner you get started, and the better because there's a serious risk to be left behind. And on the flip side, the opportunity is that you can actually rethink you are your your design of value proposition and that role no longer just like sell on on performance, but maybe on factors such as sustainability and recyclability. Right? So it could be, I think we will soon very soon be in a world where a customer will say, I'm choosing this car, not because it looks so amazing, and the design is so appealing, but because it has upcycle seats, because it's electric, and 99% of the material is being recycled. So I think the consumer mind is really changing. And and and manufacturers have to become aware of that as well. And really, it's a huge risk to be left behind. So it's time to do something about this today.

Tom Raftery:

Maybe, maybe that's been great. If people want to know more about Maggie, or about ADC or about any of the topics we discussed today. Where would you have me direct them?

Maggie Slowik:

I mean, it would be sort of idc.com but I'm happy to sort of get people have people get in touch with me at IDC Yeah, Avia you but happy to sort of share any material that people might be interested in. But and there's a lot of sort of blogs and posts on LinkedIn. And if you just type in sustainability, or IDC and Odyssey omega Slavic, you should be able to come up with a couple of good things. Super,

Tom Raftery:

super baggy. That's been great. Thanks a million for coming on the podcast today. Thank you, Tom. Thanks for having me. Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, head on over to sa p.com slash digital supply chain or, or simply drop me an email to Tom raftery@sap.com. If you'd like to show, please don't forget to subscribe to it and your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.