“Looking at inflation and recession fears, the continued economic instability, tight labor market, and not to mention global conflict, political instability – once again, manufacturers have no shortage of challenges to overcome – but there really is no reason to panic.” 

Intro:
Welcome to the Agile Digital Transformation podcast, where we explore different aspects of digital transformation and digital experience with your host, Tim Butara, content and community manager at Agiledrop. 

Tim Butara: Hello, everyone. Thanks for tuning in. I'm joined today by Naveen Poonian, CEO of iBASEt, a global leader of manufacturing software solutions who are also recognized by Gartner in their magic quadrant for manufacturing execution systems. In today's episode, Naveen will be telling us what trends and developments we can expect in 2023 related to digital transformation in the manufacturing industry, with a special focus on inflation, on cloud adoption, and on talent or workforce acquisition. And Naveen, welcome to the show. It's great to have you with us today. Anything you'd like to add here? 

Naveen Poonian: Thank you. No, awesome to be here and glad to have the conversation. I think there's a lot of change happening, a lot of unforeseen circumstances that have happened in the market and how are we going to change and adapt and make sure we get better. So happy to be here. Thank you. 

Tim Butara: Yeah, we're definitely happy to have you. We had an episode not that long ago about digital transformation in manufacturing and distribution, but we talked really kind of big picture and not focusing on the specifics that much and not looking ahead and specifically to 2023 as much as possible. So we figured it would be quite interesting to have you here to kind of adopt this more nuanced perspective and tell us more about these specific things, which we'll get right into right now. 

So my first question, how are manufacturers currently dealing with inflation and preparing for a potential recession? And do you expect to see the same strategies or approaches in 2023, or do you expect we’ll see something different? 

Naveen Poonian: So, with the looming recession, what's really happening with manufacturers, they really need to take a closer look at their operations and how can they do things better, how can they leverage things like data to really get an understanding of how they're operating and to optimize how they're operating and also to remove costs. So with costs going up, you need to find better ways of manufacturing. 

And so a lot of companies are looking at technology. How can they leverage technology to better manage their operations, understand how they can change how they're running their process, how they optimize their process, how do they find bottlenecks in their process to ultimately get products out faster with higher quality, but also reducing cost at the same time? 

So there has been and what we're seeing in the market is a lot of companies are making significant investments in technology. So a lot of IT and business coming together, putting systems in place to drive better visibility into operations, improve their forecasting, getting an understanding, right? When you have work in process, where is it? What's happening? Am I having a good day today? Am I able to get this product out on time? 

So it's essential to have these types of systems in place to manage those day-to-day manufacturing operations. And right now, when you see, and especially in our world, it's complex, discrete manufacturing. So it's not a simple process where you're manufacturing pens. You might be manufacturing rockets or airplanes or satellites, medical device equipment. And so you really need a sophisticated system to get visibility on that shop floor. 

And most businesses have blind spots and they struggle to understand how they can improve. Oftentimes they're only improving symptoms, right? They're solving little symptoms and they don't really understand the root cause of a problem and really getting down to it. And that's the power of getting that data, to really understand that and make actionable decisions using the data. 

And especially as we now move into this next generation of AI-powered machine learning, it's really redefining what visibility means to executives and really empowering organizations to better navigate these volatile markets so they can outperform competitors with cost and speed. 

Tim Butara: I think another key point here is also the supply chain crisis. And I'm interested in learning about how technology is helping. We spoke about how technology is helping them, how they're using it to the best potential, how they're leveraging it. But what about specifically for supply chain issues? Is data also crucial here? Are AI, machine learning, is that also used for this or what's the situation like here? 

Naveen Poonian: Exactly. So supply chain has just become much more critical. And especially in this market, you hear a lot about supply chain disruptions. I mean, some companies aren't able to get the raw goods to produce the products. Some companies, some of the OEMs are saying, hey, this supplier is not good, or the supplier who is now in China may be supplying certain parts. I can't rely on that. They have a whole different policy of COVID, they're having shutdowns. I'm not able to get product out. So I'm going to pivot and now maybe do my manufacturing in India, or I'm going to reshore it and do my manufacturing back in the US. Right? 

So the agility is necessary with changing that supply chain. So you're seeing a lot of companies want to do that. But really, this is once again where data comes into play. How do you really understand how your supply chain is affected? Whether it's COVID, whether it's the Ukraine war, whether it's any sort of systematic type of event or even a black swan event, how do you know how your supply chain gets affected? The only way to really know that is to get data. 

And so you're starting to see that investment in supply chain solutions, all sorts of supply chain solutions. It might be logistics. Has my product shipped on time? Am I able to procure and get business from this supplier? We're more on the manufacturing and quality side. So getting visibility into supplier and the work that they're doing and the quality of the product that they're delivering. Right. So I have certain specifications that I need to give to my supplier. Are they able to accomplish this? Are they able to log that data and information, so I know that this product is coming and it's coming at the specification that I want it to. 

And ultimately, our bigger vision is really – how do you ensure that you understand where work and process is? So we deal with a lot of OEM manufacturers. As I say, they're building very complex and assembling very complex products that's built by a diverse supply chain. So you might be getting components coming from Spain, Italy, Japan, France, Australia, and you have to put this thing together. How do I know my components in Spain, Australia, France, Germany, wherever it might be, is being produced and is being produced at a quality level that's necessary for me to eventually put this piece together? 

So really understanding where a product is in that life cycle from a component standpoint or a part standpoint is really important because ultimately I can't put my product together without this diverse supply chain working cohesively and synchronized. So the more data you can get, the better. Sometimes the suppliers might not want to provide that data, but ultimately we're all working together, we're all trying to come together and get the product out the door. So the closer you can bring the supply chain into the OEM, the better it is for manufacturers and really getting sometimes very critical products out to market. 

Tim Butara: And what about, following this same line of technology changes that we can expect to see in 2023, what about cloud adoption? What are we likely to see? What are the most likely trends for next year? 

Naveen Poonian: Yeah, so what we're seeing is heavy push towards cloud adoption. So I think initially before COVID, everyone was very comfortable with having on-premise software and really having big IT departments. A lot of companies that we deal with actually have billion dollar IT budgets. Right. Very big IT organizations. 

But what you're seeing is this push towards cloud, really because of its ability to give companies that agility that they need, scalability and resilience and even security. So a lot of people talk about security and why I'm going to go to the cloud. That's where it's going to be attacked and that's where everyone is going to go after. But you could say the same thing for on-premise environments as well. Once it's attacked, how do you repivot your operations? 

In a cloud environment, you can turn things off and turn things on, and you have better monitoring. You have really, I would say, newer technologies, so you can monitor things more effectively and actually have that data to do that. Whereas in some cases, with some of the legacy IT infrastructures, it's a little bit harder to do and harder to manage. And really, how do you manage your IT environments remotely? Right. So that's becoming more critical. 

We have a lot of organizations now that are moving to the cloud, and IT departments are distributed. They may be in Washington DC, they may be in Texas. And so their IT organization actually is a global organization, but they're all able to do their job because of that type of infrastructure. 

In 2023, what we're seeing is discrete manufacturers are trying to unleash the full power of analytics. And to date, some of these have been– analytics have been used for quality inspection and security use cases. But increasingly, you want to see that across operations, such as overall production performance, customer experience, product traceability safety program. 

So what you want to see, in order to really achieve this, is you need to start thinking about how to run global operations, right? How do you have this interconnected environment, interconnected systems that really work together? And a lot of companies have a globally distributed environment, especially in this world, trying to find talent and getting the right talent. I might need to go to Slovenia, I might need to go to Macedonia, I might need to go to India to find that. So how do you bring these people together? Cloud really makes that much more achievable. 

And recent research has revealed this growing shift to cloud based MES, for us, software, for manufacturers to migrate key operations and analytics applications and take full advantages of host cloud infrastructure. And so what we're really seeing is companies are really looking for those cloud native services. Right? How do I quickly integrate solutions effectively? AWS and Azure are two hyperscalers that help you build your infrastructure, but also help you build their touch points so you can start actually having applications work together more seamlessly. 

For instance, we're not necessarily an AI company, but we have a lot of data that AI algorithms can effectively create a very strong solution for the market. So these applications working together is really important. Plus, if you need to spin up additional infrastructure or you need some additional resources in AWS and Azure make it very easy. It's a lot harder to do it in an on-premise world. 

And so security, once again, it goes hand in hand with this. And I think that's also been the prevention in our world, aerospace and defense especially. There's been a reluctance to go to the cloud, but attacks are going up. Right? So attacks targeting cloud infrastructure are on the rise. But also, you see with some of the events that have happened here, companies who have on premise software, they're also being attacked, and it's a little harder to manage when that's happening. 

So manufacturing operations really, it's not just physical plants anymore. They're really cloud infrastructures, and they're all subject to the same cyber threats. But I think if you just take a security first approach and you leverage cloud and the benefits that are there, I think that's going to really help companies in terms of how they can deploy their operations and be more effective in deploying their operations. 

And in the foreseeable future, I think you're going to have a hybrid. You're going to have a little bit of cloud, you're going to have on-prem until people feel fully comfortable moving in that direction. And quite frankly, there's still a lot of costs associated with cloud. So it's a cost/benefit analysis. But the future, 2023, definitely more things are moving to the cloud. But when you think beyond 2023 and let's think of 2030, I think everything is moving to the cloud. And the maturity of cloud adoption and even cloud deployments are going to get better and better, and everyone's going to want to take advantage of… 

Tim Butara: Well, now that we've kind of gone through the most important technology specific innovations, I'm wondering, we mentioned in the intro that we're also going to be talking about talent acquisition or workforce acquisition. I'm wondering what are your predictions in terms of this, in terms of talent acquisition and talent/workforce retention, especially when it comes to younger generations. So Gen Z and Gen Y. 

Naveen Poonian: Sure. This is actually one of the most critical pieces that we hear from customers, right? They want to go digital. They want to transform, digital transformation. We want to get better. Why do you want to get better? Well, one thing is let's streamline how we operate. Let's just get better and get more visibility. But we need to get better. We need to adopt technology because the next generation doesn't want to manufacture. They don't want to come into manufacturing because we're doing things on paper. We're highly disconnected. We're not operating off tablets or iPhones, and we're not using things like augmented reality and making manufacturing cool. 

And that is actually very key for this next generation. They care very much about what they're doing. So I think the why is there – why am I going to produce a rocket that goes into space, right? We're changing the world. We're going and doing space exploration, we're going to Mars, we're landing on the moon, and then we're using the moon to land, to go further into space. These are fantastic things that actually the younger generation can get behind, but they also want to feel like they're cutting edge, they’re latest and greatest. And this is really where technology comes into play. 

So manufacturers are increasingly looking to digitize those manual processes, things that were done on paper, right, reams and reams of paper to try and get this thing out the door. And that's foreign to the younger generations. And so to meet this labor gap, there is this heavy push towards digital transformation. 

And once again, they don't want just a boring tool. They want a tool that really stimulates that next generation. So it's not just about digitization, but it's even about user experience and UX. And that's a big focus that we have at our company, is how do we make it really cool to build products, right? And how do you interact with an application that stimulates you and makes you feel better? 

So one key thing that manufacturers have to do is they have to ramp up these digital initiatives to attract that next crop of workers who are growing up in a digital world. And really, everything is connected. They have data at their fingertips, and that's absolutely necessary. A lot of research that we've seen, we recently interviewed 400 different companies, and we found that 95% of discrete manufacturers still use paper-based processes, and 27% still use paper for more than half of all their processes. So that's got to change, and that is really a culture change that needs to happen. 

Tim Butara: Yeah, I'm really glad we included this question, especially I love the point about user experience. And basically, I guess it's even more true for younger generations. They're so used to these great digital experiences, so used to having applications that function not just okay, but actually function really, really well. And because everything is digital, because the work that they do is also somewhere in the digital realm, they kind of expect to have similar experiences across the board, so in their personal lives, and if a job doesn't offer the same kind of digital experience, is it still viable in the future that we're kind of headed towards? So I guess this is the kind of the logic behind it. 

Naveen Poonian: And it makes it exciting, right, this is where technology can really make it exciting. And, I mean, we're even working with universities like Purdue and innovation centers like MTC in the UK. How do we look at that next generation? And a lot of times, they're providing feedback. We're trying to use apprenticeships to get them excited, get them in the software, working with the software, working with our customers to get that excitement level to go up. 

And so you have to start early, and you have to start in college, right, when they're coming out. And if you look at Apple, right, Steve Jobs was king of this, if you notice that, well, in the US, all universities had Apple computers in the universities. So they took a very good strategy about getting people excited. And so all this next generation, those coming out wanted Apple products. I want these really cool Apple systems. I want the iPad, I want the iPhone, I want all these Apple products. 

But bottom line is, they made it fun to own these products, right? And so you cannot not think about that. You have to build in that fun aspect. Even though you're doing complicated things like bringing these products out to market, you do want to make it fun for them, right? Because at the end of the day, you don't just want to clock in and clock out and be doing a job. You really want to be stimulated and motivated by it. And it's really our job as a software developer to make sure that the experience is top notch. 

In our world, it's manufacturing. It's not always easy, but the more you listen to that next generation and actually we're hiring for that next generation, so we're hiring UX designers who – some of them didn't even have manufacturing experience. They're all about making it intuitive and how do you make it simple? And so if someone who doesn't understand manufacturing can use it, and working with people in manufacturing, we all of a sudden have a great product that's intuitive and easy to use.

Tim Butara: Do you think that next year more manufacturing companies will start to realize this, start to focus more on user experience and attracting these younger generations? 

Naveen Poonian: Yeah, 100%. I think this is where we're actually seeing accelerated adoption. So not only in our existing user base, so we might have customers who have deployed, but they're doing massive adoption and scale. And we have our legacy application, and then we have our new application, and our new application is web based. It is more exciting. It has a better look and feel, and they all want to move to it. Right? They all want to go there because of that, because it has that better user experience, and it has to be a focus for these companies. And really, companies just need to start doing something right. 

So once again, you're not going to boil the ocean and be able to do everything right, modernize all your applications, and everything is going to be cutting edge or bleeding edge, because you have a lot of companies who are also dealing with large enterprise applications that they can't just change overnight, right? 

But if you start to look at what's the majority of users, a lot of them are end users, people who are on the shop floor and doing the manufacturing, and they are interacting with the system, there's changes that you can start to do now. And, just pick a few use cases, three to four use cases. Start, get people excited about the future. Get people excited and show them, hey, look, we're making all these changes. We're investing. Don't keep the status quo. Don't keep things going, oh, we've done it this way forever, so let's just keep doing it that way. That's not going to get you the next generation. That's not going to excite even the existing employees. Right? 

There's two things here. There's, how do I attract Gen Y and Gen Z? How do I get them in? But how do I even retain my existing talent who might be getting bored with how we're doing our work, right? So there's a whole retention aspect that's really important, too. There is a fight for talent. So the companies that make these investments and accelerate what they're doing here – and as you said, have a focus on better enhancing that user experience and working with software vendors to really accomplish that. Those are the ones who are going to outperform over the next five years. 

Tim Butara: Well, Naveen, this has been an excellent conversation so far, and I only have one final question before we start wrapping up the call. If we take everything that we've discussed so far into account, into consideration, what would be your number one piece of advice for manufacturing business owners and decision makers who are listening right now and maybe planning their strategies for 2023? 

Naveen Poonian: Sure. So looking at inflation and recession fears, you know, the continued economic instability, tight labor market, and not to mention global conflict, political instability – once again, manufacturers have no shortage of challenges to overcome. But there really is no reason to panic. Technologies exist. Companies exist, like us to help overcome these challenges, right? This is where we thrive, this is where we live, and this is our focus, right? 

And so there are going to be other unforeseen events that happen. Is there another COVID? Is there another virus that's going to happen? We have to start thinking about the future, how things are going to change, and how we need to react faster. We need to be more agile. We need to be resilient. We need to start thinking about the future. And really, how do we leverage technology to do that? 

And so my main piece of advice is manufacturers just need to be proactive and not reactive. Some companies have made a lot of money, right? They're manufacturing. You look at a company like Boeing, they've been doing very well and doing well for a long time, but then COVID hits and then they hit a few snags in terms of how they manufacture, quality issues. You got to be proactive. You got to change the way that you're operating. 

So I think that is very important. So being proactive with understanding how I can be better and then be prepared to weather that next storm or to take advantage of the next wave in manufacturing. You see a lot of these companies, like eVTOLs, right, a lot of these vertical lift electric vehicles that are coming out. But there's 10,15, 20 of them. Who's going to win? Who's going to actually capture that market? Well, it's the people that invest in the infrastructure and the technology that's going to allow them to scale and to achieve those goals.

So it goes both ways. How do I prevent disaster, but also how do I accelerate all the great stuff that I'm doing? And that just comes down to, be proactive. Get started. Start working with your vendors or even consultants to start an initiative. And it's okay to start small, but just get started. That's the bottom line. 

Tim Butara: Yeah. And just the first part of your advice, the first part of your answer here – just don't panic. Very Douglas Adams like. And it kind of underlines everything because if you panic, then it's hard to be proactive and it's hard to do all those other things. But if you just start with the baseline of don't panic, that will allow you to kind of optimize in the other areas as well. 

Naveen Poonian: 100%, clears your mind and prevents you from overthinking it. 

Tim Butara: Awesome. The perfect note to finish our conversation on today, Naveen. Just before we jump off the call, if listeners would like to reach out to you or learn more about you, where would you point them to? 

Naveen Poonian: Sure. So, a few different options. We have a lot of content. A lot of the things that I've been talking about today, we talk about at ibaset.com. We also have a blog there, so feel free to sign up for our blog. We also have LinkedIn, an iBASEt LinkedIn, so just search us there. Once again, we have our content there and then obviously you can follow me, Naveen Poonian is my handle on LinkedIn and I also have a Twitter. 

Haven't been as involved on Twitter, I have to say, but I am very involved on LinkedIn networking with the business community and really love giving thought leadership and what we see in trends and best practices. So feel free to reach out and we're always happy to have a conversation and help you in your journey if you're in manufacturing or even maintenance, repair and overhaul, right. You got to build great products and you got to maintain those products as well. 

Tim Butara: Awesome. Thanks so much, Naveen. 

Naveen Poonian: I really appreciate it and have a great rest of your afternoon. 

Tim Butara: Awesome. You too. And as well as to our listeners, that's all for this episode. Have a great day everyone, and stay safe. 

Outro:
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