The future of manufacturing is digital

FOR many companies that have embraced digital manufacturing technologies, systems and processes over the last decade, the results have been transformational.

ROI analyses reflect the proof-points. On an operational level, technology improves overall equipment effectiveness (OEE) scores by as much as 50%.[1] More tellingly, benchmarked against 28 separate industry averages, nearly half of companies at advanced phases of digital progression achieve superior revenue growth, and 43% boost their net profit margins. Further, organizations with enhanced digital capability, compared to those at earlier stages of maturity, are three times likelier to outclass their respective industry averages.[2]

Now, a new impetus is under way, one that may catapult manufacturing operations and value networks to yet further levels of performance capability and competitiveness.

But traditional production systems still hold sway. In the wake of Covid-19’s supply chain shocks and their business impacts, 90% of business leaders and CSCOs admit systemic weaknesses and gaps in their capabilities, particularly regarding end-to-end visibility and agility. Rooted in Lean manufacturing principles designed to deliver output standardisation and cost efficiencies, older S&OP structures and related processes are often silo-ed and inadequately flexible to meet the demands of today’s changing business needs.

Suboptimal migration to digital has contributed to these flaws. A range of surveys of global CEOs and supply chain leaders confirm that they grasp the importance of accelerating digital systems and proficiencies, but two-thirds acknowledge their organizations are still in the early or developing stage of this progression.

The technologies of Industry 4.0 can shift capabilities. Digitization, implicit in the Internet-of-Things, has opened new frontiers for information-sharing. Connectivity and next-level component designs facilitate interoperability or integration between information and operating technologies. Additive manufacturing or 3D printing refines material input efficiencies and widens prototyping opportunities. Computer processing power and speed now allows for enormous data collation; its analysis facilitates deeper insights and faster, improved decision-making. These are just a few examples of the revolutionary impacts Industry 4.0 is having upon manufacturing.

In many respects, the journey is just beginning. Machine learning and advancing artificial intelligence will unlock further economic value, projected at $13 trillion by 2030, equivalent to an approximate 15% boost to global GDP. The Automotive and Assembly sectors will be among the biggest beneficiaries, according to leading financial journal, The Economist.

But all manufacturers can position themselves to capitalize. By prioritizing a digital-first strategy, embedding a digital vision, and planning holistically around key issues, leaders can regear their companies’ all-round capabilities and competitiveness. Consider these five critical aspects:

  1. Organizational design and ecosystem. Fundamentally, digital changes supply chains to value networks. Digital creates opportunities for truly integrated operations and business processes, internally and externally – with suppliers, customers, and expanded partnerships or collaborations. Think about: restructured teams, cross-functionality, platforms for seamless collaboration and strategic partnerships.
  2. Leading companies are data-driven. And to thrive in the digital world, its collation and analysis will become ever more important. Critically assess: data systems, how data is used throughout the company, whether insights are shared, plans to incorporate predictive modelling analytic tools.
  3. The curve of technological advances is exponential. Factories and plants are already being scaled for increasing automation. And, as technology strategies are shifting into lockstep with overall business strategies, fusion is occurring between Manufacturing Execution Systems (MES) and enterprise-wide business systems. Ensure there is a holistic and budgeted 3-5 year-plan for assimilating new technologies.
  4. The quest to solve existing problems in new ways – or to disrupt the concept of business as usual – is a hallmark of enterprises with a strong digital culture. Think about: the value attached to innovation within the company, specific initiatives such as innovation teas or hubs, goals for identified, key areas of digital innovation.
  5. Digital maturity has a concomitant consequence: it forges capacity for human ingenuity. But this is conditional upon talent being appropriately enabled. New jobs, new ways of working, new expectations: the digital workplace of the future will require the iterative advancement of knowledge and digital skill-sets. Re-evaluate: upskilling programs, their alignment with planned technology upgrades, synchronization with overall business goals.

Considerations such as those above point to manufacturing’s future as being entirely digital-based. Leaders should act now to extend Lean principles and continuous improvement methods into the next generation of Digital Operating Systems. This will allow manufacturing operations – within digitally-transformed networks – to meet the demands of, and the potential within, the industrial and consumer markets of the next 10-20 years.

Strategy decisions around technology investments and business ecosystems should envisage, now, how value networks of the near future will succeed in the paradigm of hyper-competitiveness, exponential rates of change, and the march towards Industry 5.0.

[1] ‘Digital lean: a guide to manufacturing excellence’, Bain & Company, 2019, page 8, fig.4

[2] ‘Uncovering the connection between digital maturity and financial performance’, Deloitte Insights, 2020, page 14, fig.8.

by Glenn Leask, President and CEO, CCi.