Building a stronger manufacturing future
As we navigate an era of dynamic changes and uncharted challenges, robust and resilient manufacturing in Greece, in a new productive model, is imperative for the future.
Manufacturing can play a leading role in Greece’s productive transformation and could be the base on which sustainable growth can be built. However, the manufacturing sector itself needs to transform, in order to increase its resilience and adaptability at a time of constant change, thus ensuring its ability to create jobs and reduce regional disparities in the long-term.
Greece has a long manufacturing tradition, which, despite a decline in traditional sectors, continues to grow. According to the latest study “Building a stronger manufacturing future (GR)“, conducted by EY Greece in collaboration with SEV Hellenic Federation of Enterprises, the Greek industrial sector generated 14.4% of the Greek GDP in 2022, with manufacturing representing 10.3%. EY Greece’s and SEV’s study analyzes the next day of the Greek manufacturing sector, as per the following key pillars: manufacturing excellence, digital transformation, and sustainability.
While strides have been made since 2015, there is still room for considerable improvement through increased innovation and technology adoption, enhanced use of technology, achieving scale, strategic sufficiency in key commodities, and growing access to international markets for tradeable manufacturing goods. There are also opportunities stemming from the reshoring trend, which is underway.
On a global scale, the manufacturing sector’s GDP contribution is on an upward trajectory, surpassing 28% in 2022, although EU manufacturing is facing competitive challenges when compared to the USA and China, while other countries like India, are also steadily on the rise.
Navigating critical challenges and tapping into reshoring opportunities
Manufacturing, as a sector is grappling with many challenges.
Disruptions in supply chains triggered by the pandemic, have been followed by persistent shortages of raw materials and vital components, alongside a notable spike in energy costs.
Geopolitical disruption, such as the conflicts in Ukraine and the Gaza Strip, coupled with tensions in the Suez Canal, are driving up shipping rates, further complicating global trade dynamics.
Achieving Green Transition in a competitive and sustainable fashion remains an urgent imperative while, the increasing shortage in both skilled and unskilled labor, adds further layers of complexity that need to be addressed.
Additionally, rapidly evolving consumer preferences and expectations heighten the necessity for flexibility and adaptability among manufacturing enterprises, that will enable them to navigate unforeseen shifts in demand.
Reshoring was prompted by the need of numerous businesses to reassess the widespread practice of relocating production lines to low-cost, developing markets, in light of new emerging risks. These include supply chain disruptions, rising transportation costs, slow and uncertain deliveries, and heightened exposure to the consequences of conflicts and natural disasters, in addition to nascent trade conflicts.
The emerging trend of reshoring manufacturing activities closer to domestic markets or neighboring countries, represents a notable opportunity for Greek manufacturing.
Moreover, the reshoring trend is intertwined with the urgent need to address the issue of the EU’s strategic dependence, particularly concerning critical raw materials, metals, and minerals. Production or extraction of these materials currently occurs in emerging markets, underlining the necessity for strategic diversification for resilience within the EU manufacturing landscape.
The Greek manufacturing enterprises’ perspective
The study examines what motivates manufacturing businesses to address such challenges, as well as the anticipated benefits, the obstacles they need to overcome, and the key success factors.
The importance of having a clear vision and measurable goals, the pivotal role of the leadership in fostering a culture that embraces and effectively manages change, and the critical need for training and developing talent, are also analyzed. Additionally, the study underlines that manufacturing excellence, digital transformation, and sustainability initiatives, should not be piecemeal, but integrated into a comprehensive manufacturing development strategy.
EY’s and SEV’s survey among 112 Greek manufacturing businesses provided key quantitative and qualitative dimensions. Participants appear positive about the future of the sector in Greece over the next three years, with over half of them stating that they are optimistic (54%), or even extremely optimistic (4%). Additionally, a significant portion have positive views on the reshoring trend.
However, although 46% of respondents say that reshoring will positively affect the overall growth of Greek industry, only 28% say the same about their own organization.
The most significant external challenges of the past three years, include energy and fuel cost (72%), human capital (65%), supply chain disruptions (63%), and raw and packaging materials cost (61%). For the next three years, human capital (73%) was mentioned as a top challenge. Specifically, businesses are concerned both about accessing skilled human capital with specialized expertise and knowledge (85%), as well as unskilled or entry-level human capital with basic skills and qualifications (62%).
The vast majority of survey participants state that their businesses have implemented manufacturing excellence (81%), digital transformation (87%), and sustainability (87%) initiatives in their manufacturing activities. However, in all three cases, data shows that most businesses implement such actions on an ad hoc basis – where they deem necessary – or on a small scale, or within specific operational units, rather than as part of a structured program or broader strategy.
Specifically with regard to manufacturing excellence, respondents rate the level of success of the initiatives implemented so far as satisfactory (67%), high (20%), or very high (2%). Most actions undertaken concern functional areas of production (90%) and quality (69%), while top management commitment and support (76%), and high employee engagement (57%), are cited as the most significant factors for the successful implementation of such initiatives.
Critical factors for driving the successful implementation of manufacturing excellence initiatives:
As for digital transformation initiatives, respondents believe that the most significant objectives achieved, include increased labor productivity (43%) and improved operational efficiency (41%). Digital technologies or systems already integrated or being integrated today, mainly include Warehouse Management Systems (WMS – 62%), MES/MOM/real-time production data (47%), and predictive maintenance analysis (41%). For the next three years, the top priorities identified are predictive maintenance analysis (45%), as well as artificial intelligence (AI) and data analytics (43%).
Main objectives achieved by the implementation of digital transformation initiatives:
Businesses seem to have recognized the growing need for the use of AI, as 83% plan to implement AI-based solutions. Over the next three years, businesses plan to leverage AI particularly in production planning and scheduling (46%), quality control (43%), predictive maintenance (38%), inventory management (37%), and supply chain optimization (36%).
Finally, regarding cybersecurity, one out of four respondents (23%) reported that their organizations have strong cybersecurity infrastructure and processes in place, while 43% stated that significant initiatives have been implemented to safeguard operations.
Lastly, with regard to sustainability initiatives, the most significant goals achieved were the reduction of the environmental footprint (68%), as well as energy efficiency (60%), and compliance with existing and upcoming ESG regulations and sustainability reporting (57%). Main areas where significant actions have already been implemented, include waste management and the circular economy (87%), as well as energy efficiency and renewable energy sources (79%).
Main areas where actions related to sustainability have been implemented:
12 + 1 requirements for a robust manufacturing sector:
The study concludes with a set of proposals, along the following areas:
- Investment in more environmentally friendly energy sources and energy efficiency solutions, aiming to reduce operational costs.
- Placing humans at the center, in the era of the fourth and fifth industrial revolution.
- Continuous investment in health and safety to eliminate workplace accidents.
- Increasing the resilience of supply chains to address unforeseen events.
- Development of ecosystems and strategic partnerships to enhance competitiveness and effectively navigate ongoing crises.
- Integration of manufacturing excellence into the DNA of businesses through specialized and end-to-end programs.
- Adoption of the Servant Leadership model as a driving force for the successful implementation of manufacturing excellence programs.
- Timely and extended adoption of AI solutions as a key driver to increase the international competitiveness of Greek manufacturing.
- Designing and implementing a comprehensive digital transformation program for manufacturing enterprises.
- Ensuring cyber protection for manufacturing enterprises.
- Wider promotion of sustainability at an ecosystem level, by including the entire value chain.
- Scaling-up Greek manufacturing enterprises through investment, mergers and acquisitions, partnerships, and collaborations.
- Public policies to create an investment- and business-friendly environment.
By investing in manufacturing excellence, promoting digital transformation, and fostering sustainability practices that create long-term value for businesses, the environment, the society and consumers, the Greek manufacturing sector will be able to play its critical role as a catalyst for economic growth.
Summary
The recent study conducted by EY Greece, in collaboration with SEV – Hellenic Federation of Enterprises, analyzes the next day of the Greek manufacturing sector. The study features the views of 112 representatives of manufacturing enterprises in Greece, on three key pillars: manufacturing excellence, digital transformation, and sustainability.
