[COVID-19 Transformation] Global Companies' GVC 'Digitalization' Accelerates

Post-COVID, an Era of Great Transformation...⑥ Global Supply Chains at a Crossroads
Moves to Restructure Supply Chains Through Automation Technology...Minimizing Risks Such as Infectious Diseases

[Asia Economy Reporter Su-yeon Woo] As the global economy experiences unprecedented shocks due to the novel coronavirus disease (COVID-19), companies are accelerating the 'digitalization' of their global value chains (GVCs). While GVCs have traditionally been based on the division of production according to wage differences between countries, the 'post-COVID era' GVCs are shifting focus towards supply chain restructuring through automation technologies.

Before COVID-19, the GVC strategies of Korean and global companies focused on 'efficiency.' However, the global economy, including Korea, has once again felt the downsides of GVCs based on international division of labor due to the pandemic. The lesson learned is that alongside efficiency, considering stability?even at additional cost?is essential to minimize supply chain risks.

Companies are seeking answers to the new GVC strategy of stability through automation and digitalization of production. This is based on the judgment that digitalization can reduce labor cost burdens. Having digital and automated systems is also advantageous in reducing production risks caused by unexpected variables such as pandemics, compared to labor-intensive production systems.

Among domestic companies, Hyundai Motor Group has taken swift action. The company is building a Global Innovation Center in Singapore and preparing a pilot project for an intelligent manufacturing platform that integrates advanced technologies such as artificial intelligence (AI), Internet of Things (IoT), and robotics. Robots intervene in the electric vehicle manufacturing process, with minimal workers controlling the robots to improve work efficiency. LG Electronics is attempting a strategy to enhance the productivity of its partners by aiming to build smart factories. LG Electronics plans to dispatch production experts from its headquarters this year to complete the establishment of smart factory solutions and automation systems for over 100 partner companies.

Global companies are also actively pursuing digitalization strategies for their GVCs. Mercedes-Benz is promoting 'Factory 56,' which introduces a 5G communication network to the production process at its Sindelfingen plant in Germany?the first automobile factory to do so?where robots handle more than 80% of production. BMW, in partnership with Microsoft (MS), is introducing advanced technologies such as 3D printing and smart data analytics at its Regensburg plant in Germany to shorten manufacturing processes and improve production efficiency.

Professor Heo Jeong of Sogang University advised, "While investment expansion to Korea, where quarantine safety has been confirmed after COVID-19, can be expected, the employment creation effect may not be significant if industrial automation accompanies it. Instead, if employment creation is induced in industries necessary for industrial automation itself, such as smart factories and IoT, the overall direction for the Korean economy can be favorable." Professor Heo Dae-sik of Yonsei University said, "After COVID-19, real-time information exchange of supply and production plans and inventory information through digitalization of primary partners has become essential. Support for resources and personnel is also needed for small and medium manufacturers, which are secondary and tertiary partners, to undergo digital transformation together."

This content was produced with the assistance of AI translation services.