AI in operations

 

The original article was published by PwC. You can find the article here.  

The manufacturing sector is undergoing a significant transformation driven by various megatrends like climate change, technological disruption, demographic shifts, a fracturing world and social instability. Impacts include a shift towards green practices, global changes in production footprints, increasing digitalisation, tightening regulations and workforce challenges. Rising costs from inflation and energy prices further amplify these pressures. 

Artificial Intelligence (AI), encompassing machine learning and newer developments like generative and agentic AI, is at the forefront of addressing these challenges. By revolutionising procurement, production, R&D, and supply chain processes, AI is reshaping the competitive landscape and enhancing value chains.

Over 400 operations executives from 30+ countries across Europe, the Middle East, and Africa were recently surveyed to provide insights for this study. Globally, the participants are from diverse sectors like manufacturing, transport and logistics and retail. Our findings highlight a strong belief in AI’s potential to enhance profitability, with nearly 70% of global respondents —and 81% of South African respondents—expecting at least a three percentage point increase in operating profits by 2030. Whereas locally, in SA, over 50% of respondents anticipate a more substantial increase of five percentage points or more.

Graph - Expected increase in operating profit margin through AI in 2030

Bridging the AI maturity gap

Although manufacturers are seeing promising impacts from AI, a very small minority —4% globally  and 13% locally —report that they are already achieving significant financial benefits and ROI, underscoring a relatively low AI maturity level. Less than a third have moved beyond initial pilot phases, and only about 25% of South African responses qualify as ‘AI Operations Champions,’ who are systematically implementing AI across their enterprises. Notably, South African AI maturity appears to be substantially higher than the global percentage of 8%. Scaling these efforts will require strategic investment, an area where companies show varied readiness levels.

“AI is revolutionising our approach to operations by drastically reducing the time needed for a whole range of core operations processes, from R&D and supply chain to production and procurement. As AI evolves into an indispensable decision support assistant, it will not only enhance our decision-making processes but also autonomously handle repetitive tasks, driving efficiency and innovation.”

Stefan Schrauf, Global Supply Chain and EMEA Operations Transformation Co-Leader, Partner, PwC Germany

Unveiling the benefits

Our research underscores that the rewards of AI integration are nonetheless significant. AI is increasing  sales delivery in volumes, enhancing decision-making, enabling the reduction of operational costs and providing new revenue from additional products and services.  Moreover, it is helping address skill gaps within the industry. ‘AI Operations Champions’ are reaping the most benefits by effectively scaling and integrating AI across their operations. Looking forward, survey respondents anticipate impressive improvements.
Graph - Manufacturers expect AI to benefit both the top and bottom line through a variety of levels

Exploring diverse use cases

Globally, supply chain use cases are the most widespread, but the companies we studied are taking advantage of a broad range of applications for AI. The research reveals a number of differences across industry sectors. We explore these in detail in the full paper, including practical examples. For example, the automotive industry shows particular strength in production use cases, while the pharmaceuticals, life sciences and medical technology sectors are highly active in the R&D space.

Overcoming challenges

Gloablly, data management emerges as the primary hurdle to AI adoption, with challenges around data availability, quality and security. This differs locally, where the cost of AI software and the lack of specialised AI experts are the primary concerns. Additional concerns include organisations  lack of AI knowledge and organisations resistance to change.

Four principles to accelerate your AI journey

We have identified four core principles that are critical to getting the most value from AI. In our full discussion of these principles, we include examples of what Operations Champions are already doing to drive successful implementation of AI across their organisations.

  • Define a clear AI strategy with leadership sponsors 

Align AI with your business goals, supported by leadership endorsement. Understand external transformation factors and articulate a compelling vision for AI integration across your operations.

  • Focus on high-ROI use cases 
Develop complementary use cases that support your business strategy, emphasising projects that offer strong returns. Leverage GenAI to achieve rapid ROI.
  • Build a strong technology and data foundation 
Establish an integrated AI tech stack to support scaling across the organisation. Avoid siloed solutions to reduce long-term costs and foster technology and service provider partnerships.
  • Emphasise organisational structures and AI governance 

Create a central AI function and adopt a ‘hub-and-spoke’ model for balanced top-down and bottom-up implementation. Focus on responsible AI practices to build trust.

AI is undeniably transforming manufacturing. The question is no longer if or how it will impact operations, but rather how fast. Operations leaders must make bold AI investment decisions now. Revolutionise your manufacturing business today and gain a competitive edge.

 

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