Digital transformation in manufacturing gets spurred to stay ahead instead of keeping up with the times. It became a kind of business imperative. Does your organization have a leadership mindset? Do you want to be competitive? Then you have to innovate, digitize, and transform business processes.
Catch a little throw of statistics: the digital transformation in manufacturing market was valued at $263.93 billion in 2019. And by 2025, it is expected to reach $767.82 billion. The landscape of the production transformation around the world striving for innovations.
IDC predicts that half of all manufacturers are going to invest in digital transformation by 2022. The numbers are quite promising. But these manufacturers have to fuse operational, engineering, and information technology. In light of COVID-19, this task turns out to be even more challenging.
That shouldn't put you off, however. Let's dig into the digital transformation in the manufacturing industry. And look at this topic from such aspects:
- Manufacturing and COVID-19: Quarantine Lessons from 2020
- Digital Transformation in Manufacturing Industry: 5 Trends That Change Business
- Upsides & Downsides of Digital Transformation in Manufacturing
- 8 Focus Areas for Digital Transformation in Industrial Manufacturing
- Digital Transformation Management: How to Do it Properly?
Manufacturing and COVID-19: Quarantine Lessons from 2020
The shutdown, disrupted processes, loss of cash flows, uncertainties. These are common for many companies worldwide. The pandemic has shaken manufacturing industries too. Only “essential” businesses operate and most of the manufacturing organizations fell into this "essential" list.
Thus, in February-March, the NAM survey presented that 53% of respondents expect the impact on their operations during and post COVID-19 times. And 35.5% of manufacturers have experienced supply chain disruptions to their businesses.
At the beginning of 2020, some manufacturers have already adopted some technologies. Those are cloud computing, wireless connectivity, cybersecurity, automation and robotics, and supply chain. IndustryWeek's Manufacturing Operations During the COVID-19 Crisis shows that before COVID-19 spread, 57% of their respondents were already on the digital transformation route.
The same report shows the operations during the pandemic. And it presents impressive numbers: 2% ceased operations and 12% partly ceased while 8% even managed to increase their capacity.
Uncertain times make manufacturers more cautious about investments. Thus, COVID-19 tested and proved that digital transformation in manufacturing brings a significant advantage. The investments in operational technologies are expected to grow and the trendy 5 is supply chain solutions, operational intelligence/analytics, edge and cloud technologies, video and Lidar for worker safety and health, and adoption of automation and robotics.
Turning to innovation and process transformation helps the manufacturing organizations respond to the crisis efficiently. McKinsey survey of manufacturing and supply-chain professionals shows that 93% plan to focus on the resilience of their supply chain, and 90% plan to invest in talent for digitization.
Digital Transformation in Manufacturing Industry: 5 Trends That Change Business
The digital transformation in the manufacturing industry goes from self-prescribed therapy to a new normal. Industry 4.0 (aka the fourth industrial revolution) focuses on technology connectivity and communication. It's also about streamlining operations to reach the customer-focused goals. No wonder that the digital transformation trends come in so many varieties. Let's check some of them out:
#1 Automation in manufacturing
In a sentence: The smart technologies transform and optimize the analog processes, human activities, and knowledge into the system performed actions, decisions.
Sample: BJC HealthCare is a healthcare service provider. They take advantage of radio frequency identification (RFID) technology to track and manage medical supplies. This IoT-based technology uses radio waves to gather information saved on a tag connected to their healthcare supplies. Since 2015, BJC HealthCare has reduced the amount of onsite stock by 23%.
#2 Big Data increases visibility
In a sentence: The huge and complex information that comes from cloud and enterprise apps, websites, sensors, cameras, and other sources in different formats and protocols.
Sample: PepsiCo uses Hortonworks, Trifacta, and Tableau for improving their supply chain management and accuracy of reporting. They aim to deliver the appropriate volumes and types of products to the retailers. PepsiCo's customers share their reports on the warehouse and POS inventory. This way PepsiCo reconciles and forecasts the production and shipment needs. The company shares its experience with Big Data analytics in a webinar.
#3 AR keeps trending in manufacturing
In a sentence: AR technology superimposes virtual objects on physical objects by means of AR devices.
Sample: Jaguar Land Rover (JLR) proved the value of AR in training purposes. JLR cooperated with Bosch and its BOSCH CAP software. They got the app that scans the vehicle's dashboard and shows the operations behind the paneling. It excluded removing and reinstalling the dashboard, simplified training, and cut the expenses.
#4 3D printing (aka additive manufacturing)
In a sentence: A design file from virtual inventory gets printed with a 3D printer layer by layer.
Sample: Fast Radius is one of the top smart factories in the world. They offer AM and CNC machining and injection molding. The proprietary technology platform gathers data from stored design in their virtual warehouse. Then this data enhances the choice of suitable goods for 3D printing. Plus, Fast Radius optimizes its supply chain via its virtual inventory.
#5 Digital twins concept in manufacturing
In a sentence: A digital representation of a physical product that helps to control and improve it via online simulation.
Sample: Siemens uses the digital twin practices in automotive manufacturing, and precisely for autonomous vehicles. Self-driving cars got lots of sensors for data collecting about the vehicle and the car environment. The digital twin of a car enhances possible malfunctions and prevents heavy injuries. For more detailed examples, check out the video with Dr. Norbert Gaus from Siemens.
Upsides & Downsides of Digital Transformation in Manufacturing
An oft-heard question: What does the "digital transformation" really mean? Put it simply. Traditional manufacturing processes get improved by digital technologies that address inefficiencies. And, like any technological innovation, it has pros and cons. Let's enlist them but make it brief:
Benefits of Digital Transformation
- Cutting down the expenses
Introducing the digital transformation optimizes and reduces the costs across the company. You get the advanced workflows, reduced labor costs, cut unnecessary expenditure. Plus, you got improved planning and expenses estimation, and save time.
- Decentralizing production
Under the remote monitoring systems, the production keeps function as usual. But it has increased flexibility and responsiveness.
- Adding efficiency and productivity
The technologies of Industry 4.0 helps machines to interconnect and communicate. They can make decisions on their own. And there is no need for the physical presence of an employee all the time. So digitized manufacturing reduces monotonous labor but makes it efficient and responsive.
- Introducing new business opportunities
New technologies help to upgrade processes. Likewise, they enhance redesigning existing or creating new products or services. The innovation with Big Data and AI enhances experimenting, trends adopting and predicting customers' expectations. Another aspect worth pointing out: companies become environmentally friendly and less harmful to the ecosystem.
- Fast response to customer demands
With improved manufacturing production, the organization responds faster to market requirements. Updated technologies and methods bring better-quality products. You can run the production of customized patterns or even offer customer-adapted goods. That way you get more differentiated from the competition and add value to the brand.
- Humanizing data
Digital tools like Bag Data, AI, IIoT help to put decision-making on a new level. The analytical software gets data within the context. It allows making more accurate and informed predictions and recommendations.
Drawbacks of Digital Transformation
- Keeping the good, old processes
Once you think about running a digital transformation, be ready to get rid of paper-based processes. There is no place for manual, time-consuming tasks. Revamp those outdated processes, and train your employees on how to operate with the new software.
- The company is resistant to changes
Digital transformation is a continuous process. Where much depends on the company culture and readiness to changes and innovations. Often, employees have concerns about their roles, responsibilities, and even job security threads. To ease the transition process, you can add gamification, leader boards, and training.
- Digital transformation without business model change
The transformation of business models makes the organizations leave their comfort zone. You have to upgrade technologies, move to cloud solutions, put in place Big Data, IIoT, smart wearables, and integrate everything. Here you have to choose among many platforms to choose and processes to optimize.
- Upgrade employee skills
New technologies become a stress factor for employees. In the manufacturing industry, the frontline workers often consider themselves not so tech-savvy. Generally, 87% of employees say they’re ready to learn new things. That's why they need extra training to engage them and increase their productivity.
- Software expenses matter too
Digital transformation in manufacturing comes in many forms. But to get quick results, you have to run processes in an agile manner - make them small and quickly reachable. Be ready that the first investments won't increase the production or cut the costs.
- Effective technology adoption takes time
The adoption of the new technologies company-wide requires time and effort. Let's say you found the right software to combat inefficiency. But it comes with the implementation of a few different platforms. That probably brings you chaos in processes and data. So plan the adoption gradually to avoid nasty things.
8 Focus Areas for Digital Transformation in Industrial Manufacturing
The success of the digital initiative is a well-thought and prioritized strategy. You need to include the company priorities to align the innovation vector to those priorities. Here is a shortlist of the key areas you can target:
- Workflow Automation
Fact: the global market for business workflow automation is likely to bring in $5,247.2 million in revenue by the end of 2026. And the workflow automation solutions help the manufacturing industry to battle the competition and keep the costs in line.
Want to make the critical processes more visible? Or automate assigning the right resource with the expertise to keep control of product quality? Need to reduce time and simplify the monitoring of the routine processes? Want to say "good-bye" to paper-based reports? If this sounds familiar, then you definitely need a workflow automation solution.
These tools deliver such opportunities:
- reduce the purchasing and budgeting cycles
- optimize product lifecycle development
- standardize of product quality control
- cut the supply chain cycle for approvals or receipts
- speed up the document approval
- advance the safety reporting
- Enterprise Resource Planning (ERP)
ERP software takes a vital role in the manufacturing sector. They may be expensive and time-consuming to install. But ERP systems enhance operational cost reduction and improve productivity.
As the chart below shows, the ERP systems are getting on the rise in analytics and BI, eCommerce, sales performance management, supply chain management, and treasury and risk segments.
What are the benefits of ERP in manufacturing? Once you adopting the ERP system, you
- get improved data analysis and prediction of customer's needs
- revamp or introduce new strategies to improve processes
- get a centralized data source shared across the company
- integrate the platform with other solutions (i.e. CRM, eCommerce store, and so on) or websites to adapt market changes quickly
- CRM Development
Do manufacturers need a CRM solution? The short answer: yes, they do. Digital transformation (in manufacturing too) places great emphasis on customers and their purchasing habits. So you need to improve the supply chain, information flow across the company, and production. You may say: Wait, but ERP does the same stuff, right? Not exactly, it lacks precise customer management.
The chart from SelectHub, based on the survey among 254 companies, shows that the manufacturing sector is an active user of this technology.
Another question you may have: Why do I need to invest in CRM development? No secret that CRM comes with a bunch of various tools. And if you have ERP in place, you don't need the duplicated functionality that comes with more expenses. As a manufacturer, you need a CRM that provides:
- Contact management that collects, saves and sorts out the data (calls, emails, purchases, etc.) related to customer interaction.
- Lead management helps to track potential customers via various sources. That functionality tips on tactics for each lead and allows identifying the key decision-makers.
- Order history tracks the customer lifecycle in your sales pipeline and adds details about the customer interactions.
- Optimizing Operations
To reduce costs and advance quality. The two cornerstones of the optimization of manufacturing processes. Start with the data collecting and analysis via simulation, predictive and preventative maintenance.
The next one is automation. Human factors bring potential inconsistency and malfunctions. But the optimization of the operation processes doesn't mean removing humans. Note that your company needs particular toolsets and data-driven experts to innovate.
All your manufacturing, marketing, logistics and customer services have to be integrated and communicate within a single network. Only that way, it creates and adds value.
To succeed with optimizing operations, you need to
- map and plan the efficient processes (i.e., automation adoption, implementation of cloud solutions, simulations, and the like)
- use Big Data or predictive analytics tools to get a clear picture of collected information. Taking that as a foundation, work on process optimization
- set product KPIs and track the real-time performance
- choose the key parameters you want to improve and optimize the production expenses
- Data Storage
Manufacturing companies need versatile and durable data storage solutions. Digital transformation helps "connect everything", so you collect data from sensors, monitors, and other IoT devices. Then you feed it to AI and machine learning algorithms. After that, you have actionable insights and improve efficiency.
As the computing power moves to the edge and endpoints, the data stored on devices will increase. That's why they need appropriate data storage devices to generate and process the information. See the samples of technology and data storage they prefer.
- Supply Chain Management System
In manufacturing, the supply chain management (SCM) manages the flow of materials and resources via the production process and ends as goods customers enjoy. The SCM system helps to design the processes and workflows that synchronize demand with a business unit. The ultimate goal of this software is to reduce inventory without impacting the service levels.
Among the benefits of SCM implementation, you get
- the product input to the facility is timed and tracked
- reduced downtime and shipment delays
- improved communication at a manufacturing facility
- cut the distribution, production, and purchasing costs
- opportunities to improve customer service and company infrastructure
- Warehouse Management
A warehouse management system (WMS) helps you plan, control, and manage warehouse operations, inventory movement, order picking, and shipping. WMS deals with inbound and outbound operations, optimizes the order and fulfillment process, integrates with other software (e.g., ERP or CRM), and improves the labor-management.
What benefits of WMS for you? Here are a few:
- reduce the number of goods movements
- optimize space and cut down on the inventory expenses
- increase delivery reliability - no "lost" inventory
- automate the internal work assignments and a transition from paper to electronic performance recording
- reduce inefficiency in the production planning and procurement
- Service Internal Communications
Along with the digital transformation, the manufacturing industry works on upgrading internal communication. This aspect influences how people coordinate their efforts to create goods.
Internal communication can benefit your manufacturing business in
- preventing accidents and injuries in the workplace
- advanced performance and production efficiency
- improved cohesion and employee engagement
And internal communication software enhances business continuity and resilience planning. They help employees to engage and share information and files via several digital channels. As a manufacturing company, you need industry-specific software that supports instant communication with remote workers and push-talk tools.
Digital Transformation Management: How to Do it Properly?
Digital manufacturing devices communicate and make smart decisions. That boosts throughput, uptime, and performance while reducing overhead, operating and capital costs. Sounds great, right? But where to start with your digital transformation project? Look at these tips, but don't take it as a rule book, for there might be many exceptions.
- Get the whole company aboard
Explain to your management and employees what the transformation means for your company. Help them to combat cycling misconceptions, prove that technology won't take over their jobs, and engage them to cooperate.
- Develop a digital transformation strategy
Once the company is on the same page, take time to discover the weak spots. Then evaluate how fast you can see improvement if you redesign or automate it. This way, you can collect the ground for your strategy and start developing a roadmap to reaching set targets.
- Keep the pulse on market changes
Industry 4.0 creates severe competitiveness. So take time to analyze the manufacturing trends, search for customer input and hear their needs, and look at the competitors’ success and fail stories. You know how they say: A smart man learns from his own mistakes. The wise man learns from the mistakes of others.
- Get resources in place
Digital transformation requires technology and human talents to be successful. You can hire the in-house team of the right talent or outsource some processes, or have a mix.
The in-house team is easier to control and they have a better understanding. On the other side: that is expensive, and may take more than half a year to gather the team.
The outsourcing is known to be price-moderate, larger expert pool along with reduced capital expenses. Thus, it brings a bit complicated communication and requires more attention in guidance and controlling
- Make it SMART
Fact: digital transformation is an ongoing process. So it makes sense to divide your large project into specific, measurable, attainable, relevant, and time-based small projects. Ideally, they would be low cost and effort, fast executed, and based on KPIs you've set. That way the transformation shows results faster.
- Create and maintain a digital transformation culture
The innovation culture holds a blend of digital tools, employee support and behavior, and communication. To prevent your digital transformation failure:
- improve the internal communication and process transparency
- make sure your transformation team has the required skills to lead the digital initiative effectively
- consider adoption the agile approach - quick respond to challenges, flexible to experimentation, open to new ideas, and so on
- invest in the software and employee training
The pandemic has been a rollercoaster for many industries, and manufacturing is on that list too. This situation also has shown all the vulnerabilities and accelerated digital transformation. More and more organizations are re-asserting their strategies and reconsidering their business models. Services and experience go ahead of products. So manufacturers are looking to evolve their digital operations. Have you got some ideas in mind about innovating your organization? Schedule a call and we'll help you to get started with your digital transformation.Business growth