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Plan for supply chain disruption as trade policies shift

PwC names supply chain disruption among three areas of uncertainty; data aggregation and skills gap are challenges to IoT adoption, according to new survey of IEEE members.

We are in an era of trade policy uncertainty and manufacturers need to understand and plan for this changing trade...

landscape, according to a new report from PwC.

The report, "The new US trade policy era: What it could mean for US manufacturers," advises manufacturers to monitor the trade policy directions of the Trump administration and prepare for the effects of these policies, including supply chain disruption, in the next year and beyond.

"Companies need to begin doing their homework in terms of assessing their risk and understanding their supply chain," said Bob McCutcheon, PwC's industrial products leader. "I think a lot of companies in the early stages of these discussions were sitting back and saying we don't know what it's going to look like, or what changes, if any, are going to take place, but I think a wait-and-see approach could be a dangerous approach."

Three trade policy uncertainties

Trade policies can take many potential directions, and these will evolve as the U.S. administration and other governments begin to renegotiate trade agreements. With this in mind, there are three "black boxes" -- or uncertainties -- that manufacturers need to pay attention to now.

The first black box is understanding the imported contents of products, as economies may move to implement value-added taxes or protections for domestic jobs. This is difficult given the complexity of global supply chains, but the report indicates that U.S. manufacturers could be under increasing pressure to account for the origin of parts.

"Companies often don't have a full understanding or appreciation for the origin of all the component parts in their manufacturing products in a way that can help them make strategic decisions about the supply chain," McCutcheon said. "They may understand their suppliers, they may understand all the component parts that are in the manufacturing process, but have they completely mapped out that supply chain in terms of country of origin and be able to then reflect on that in terms of what exposures they may have for instance to NAFTA?" 

The report says manufacturers need to have alternative suppliers ready in the event of trade tariffs or other border adjustments that could significantly increase manufacturing costs.

Plan for supply chain disruption

Supply chain disruption is the second black box of uncertainty, and manufacturers may be able to reconfigure their supply chains once they have a better understanding of the origins and value of the contents of their products, according to the report. Changes to NAFTA, for example, could bring supply chain disruption, including complex shifts of cross-border supply chains. Some manufacturers might look for new suppliers in different jurisdictions and begin to shift supply chains closer to production following a "build where you sell" model.

Finally, manufacturers need to get ahead of trade policy changes by planning for multiple scenarios. 

"There's no one recommendation that you could provide that from a blanket perspective would apply to every company, because everybody's in a unique position based on their product mix and their portfolio," McCutcheon said. "You really have to look at the company's specifics and secondly you can't provide a meaningful set of advice or suggestions if you don't yet know what the outcome of any changes to NAFTA might be. Right now we're advising to do the analysis, do the assessment, understand your profile and where the risks and opportunities may be. We often get caught up on the risk side, but there could be significant opportunities here as well, so I think it's prudent to look at all those scenarios."

Lack of skills a concern for IoT adoption

Data aggregation issues and inadequate employee skills levels are two of the main obstacles impeding enterprise IoT adoption, according to a new survey.

The survey was conducted by Northeastern University-Silicon Valley and asked more than 500 members of the Institute of Electrical and Electronics Engineers (IEEE) about the challenges faced by IoT technology in enterprises.

The survey responses came from a variety of IEEE members in a diverse mix of industries, according to P.K. Agarwal, regional dean and CEO at Northeastern University-Silicon Valley.

"Approximately one-third came from manufacturing, but there was a mix of software and hardware engineers, networking people, business development, data analysis, sales and marketing, so it's a pretty good representation of what's happening," Agarwal said.

Data aggregation and data analysis was cited by 37.83% of respondents as the biggest challenge for IoT adoption in the enterprise. Inadequate current skills levels for the IoT workforce was the second most important concern at 25.66%. Other significant concerns were security (18.35%) and integrating infrastructures (11.24%). Far down the list was developing a comprehensive IoT strategy, which was only cited by 6.37% of the respondents.

"Data aggregation is one of the biggest challenges because there are a lot of components to this, and the fact that we're deluged with data means the engineering part is a big challenge," Agarwal said.

Addressing the skills gap

The skills gap challenge needs to be addressed with educational programs that cover a variety of levels and industry verticals, according to Agarwal, and NU-SV has begun an IoT concentration in partnership with Cisco.

"We're looking at other models of how to deliver this kind of education, all the way to the high school level, because there are going to be a lot of paraprofessional jobs that will come about," he said. "There are these new sets of competencies and it's not just at the high end of the spectrum. Twenty-five years ago everybody started to have to learn how to use a PC, and that's what it looks like to us."

One of the other more interesting results of the survey, Agarwal said, was that communication skills -- the ability to explain ideas clearly and effectively -- ranked as the most important career strength by a wide margin at 58.82%. This was followed by knowledge and issue expertise (19.54%), and collaboration, or the ability to bring people together to solve issues (14.04%).

"Communication and collaboration is very important, and as things are getting more connected, people realize they have to be connected as well," he said.

The survey indicates that the most likely industries to be early adopters of IoT technology are defense and military (54.75%), security (48.6%), healthcare (41.53%), and manufacturing (36.31%).

There was no clear winner in the field of platforms that respondents said they planned to use for IoT implementations, however. GE Predix led the field with 18.01%, followed by ThingWorx (15.38%), C3 IOT (12.01%), Electric Imp (11.44%), and IBM Watson (10%).

"Everyone is still experimenting and positioning, and there's no one dominant platform right now," Agarwal said. "Eventually it will have to settle on two or three platforms because you can't have 20 different platforms out there each doing their own thing, but I don't think anyone has one answer, and a lot of people are going to jump in."

Next Steps

Read how technologies like IoT, big data analytics, machine learning and AI can help uncover and mitigate supply chain risks.

Discover ways to get ahead of supply chain disruption.

See why the adoption of IoT systems in enterprises is being held back by worries over skills.

Dig Deeper on ERP and supply chain management