There has been a lot of talk about digital transformation in the manufacturing and supply chain industries lately. What is digital transformation? At its simplest, digital transformation is the digitization of processes, procedures, and workflows that were previously conducted by hand with paper and/or time and manual labor (like inventory control).
Even though the prospect of digital transformation can be intimidating, at its core, digital transformation is all about modernizing the business to remain competitive for life in the 21st century. Avoiding digital transformation leaves old-fashioned companies at risk of becoming obsolete dinosaurs.
A recent study by research firm McKinsey & Company “suggests that established companies are leaving as much as US$2 trillion on the table in total return to shareholders because of missed opportunities in digital transformation,” according to an article from Manufacturing Automation.
According to the April 2018 publication by IDC, Digital Transformation in Manufacturing, 77% of manufacturers view digital transformation as an opportunity while only 23% see it as a risk, making digital transformation a top priority among most manufacturers.
A deluge of new and evolving technologies such as IoT, real-time data sharing and cloud-based software may be catalyzing the global drive to digitization and automation on the shop floor and beyond.
But before jumping on the digital transformation bandwagon, there are a few things every manufacturer should know:
1. The Manufacturing Renaissance is Here
If you haven’t heard the term Manufacturing Renaissance already, now is the time to hear it.
Digital transformation has been driving manufacturing into what is being called the “Manufacturing Renaissance” in recent years, with no sign of stopping anytime soon. Although the Fourth Industrial Revolution (also called 4IR or Industry 4.0) is well underway, Manufacturing 5.0 is on the horizon and new technologies seem to be coming out of the woodwork from all sides. Manufacturing Renaissance refers to the bigger picture. That is, embracing entirely new production techniques and business models at scale, some of which are disruptive to traditional methodologies and theories.
In layman’s terms, technology is driving global change, which in turn changes the way organizations conduct business. The Manufacturing Renaissance refers to how those same forces are influencing the future of manufacturing and production.
Some of the technologies contributing to this “renaissance” include:
- Artificial Intelligence (AI) & Machine Learning
- Internet of Things (IoT & IIoT)
- Robotics & Smart Materials
- Physical & Process Automation
- Additive Manufacturing (3D Printing)
- Cloud-Enabled Software & SaaS
- Automated Data Collection (ADC)
- Mobile Hardware (Enterprise Mobility)
Not only are these technologies becoming more familiar, they are also becoming increasingly feasible to deploy due to lower costs, faster returns on investment (ROI) and lower total cost of ownership (TCO).
According to Automationmag.com, “The new era of automated production and data exchange opens a broad range of use cases that can cut cost, increase yield and support new manufacturing methods.”
Additionally, the ability to collect highly accurate data in real-time directly from a mobile device is helping to extend existing systems onto the shop floor and into the field. Data updated in a central ERP database directly from an employee’s handheld device allows that data to be then shared across the enterprise, supply chain and supplier network (if desired).
2. Manufacturing is Still Critical to U.S. and Global Economies
But wait! With the recent trends of pushing manufacturing out of the U.S. and overseas, is manufacturing still relevant in today’s economy?
In 2019, the manufacturing sector will become more important than ever. Not only does manufacturing occupy a core component of U.S. GDP, but the Bureau of Economic Analysis also states that in 2018, U.S. manufacturing:
- Generated $2.33-trillion in GDP
- Contributed 11.6% of total U.S. economic output
- Created 18.2% of the world’s goods
- Employed 12.75-million workers
Additionally, the Readiness for the Future of Production Report 2018 produced by the World Economic Forum lists the United States as the highest-ranked in ‘Drivers of Production,’ meaning the U.S. is well-positioned to capitalize on Industry 4.0 to drive change in production systems and leapfrog its global competitors.
3. Technology is Adding More Value Than Ever
Manufacturers and supply chains have been under more pressure than ever to increase production and cut costs. Sure, supply chains have demonstrated resilience over the decade thanks to intelligent individuals, teams and organizations working hard to adapt to change and overcome new challenges. Technology may be the key to addressing the challenges of today.
In the 21st century, technology is becoming one of the primary value-adds of organizations worldwide. Undergoing a digital transformation maximizes the effectiveness of these new technologies by connecting devices, removing manual processes and opportunities for human error, and creating a pool of valuable data that enhances our ability to make better business decisions.
A digitally transformed manufacturing ecosystem is sometimes referred to as digital manufacturing.
Where digital transformation really helps the supply chain is in its ability to create value within existing operational infrastructures in a way that sets the foundation for scalability as the business grows. For manufacturers, new technologies can help uncover efficiencies at every stage of the production process, including quality control (QC) in receiving, basic input of raw materials, and output, storage, and distribution of a finished product.
For example, digitizing paper-based inventory control can enable a process manufacturing to:
- Automate data collection at receiving to maximize the accuracy of raw materials, WIP inventory, and finished products.
- Remove blacklisted ingredients before they reach the shop floor, increasing compliance and reducing scrap.
- Achieve real-time visibility as components flow through WIP stations, optimizing stock levels and uptime.
- Comply with regulatory requirements for recalls through traceability for food ingredients, authentic parts, pharmaceuticals, etc.
And that’s just one form of digital transformation. Many others exist and many more are emerging on the market.
Enterprise Resource Planning (ERP) software is a major technology offering that unifies data, business practices and operations on an impressive level. To say that it adds value to manufacturing and shop floors would be an understatement. The ability to centralize supply chain data companywide in real-time enables faster, more effective decision-making while also powering growth—even at global levels.
If you are considering implementing an ERP system, SAP Business One is designed for small to medium organizations, while JD Edwards may be better suited for mid-size to enterprise manufacturers. Larger enterprise-level manufacturers with significantly more buying power ($10+ million) will want to pursue a more comprehensive ERP like SAP ERP. However, manufacturers of any size interested in fulfilling government contracts will want to use Deltek Costpoint Manufacturing ERP.
Tightly integrating your ERP with a manufacturing execution system (MES) and automatic data capture (ADC) platform like RFgen will help you maximize efficiency and profitability even further.
It doesn’t matter if you are employing just-in-time (JIT) manufacturing or lean manufacturing methodologies, or you are a traditional repetitive manufacturer or job shop, the right technology still has the potential to add significant value to your organization and improve customer service.
4. Digital Transformation Benefits Every Industry
Every manufacturing industry has something to gain from digital transformation. Let’s take a look at some industry-specific examples from around the manufacturing sector:
Technology is revolutionizing the way the food and beverage industry tracks ingredients and products to maintain compliance. For example, when Clif Bar & Company brought their third-party manufacturing operation in-house, they discovered a need to centralize their product data. By bringing in an inventory control system with automated mobile data collection via barcodes and wireless scanners, Clif Bar was able to connect their ERP, warehouse, manufacturing and other business systems into a single ecosystem. Employees could then data material and inventory data in real-time as it flowed through the production process with a quick and easy barcode scan from anywhere on the shop floor or warehouse. That simple solution enabled the company to achieve full traceability, refine daily transactions, and reduce costs while maintaining the highest level of quality standards.
Food Logistics provides a thorough rundown of the many ways “software and tech” are also transforming the distribution, wholesale and retail end of supply chain management as well.
Aerospace & Defense
Aerospace manufacturer Dassault Systèmes has taken digital transformation a step further by tapping into advanced technologies for its experimental 3DEXPERIENCE Learning Center. This component of the company’s Innovation Campus focuses on the applications and practices within each life cycle of an aerospace facility with the goal of reducing the average 3- to 5-year life cycle to just 90 days. That includes manufacturing, certification and post-sales support. Customer collaboration rooms, immersive 3D virtual reality (VR) technology, additive manufacturing and multi-robotics additive manufacturing (MRAM) are just some of the innovative tools they use in their pursuit to achieve this.
Often thought of as one of the traditional workhorses of manufacturing, the automotive industry giants have been making use of robots, AI and digital technologies for years. But smaller auto manufacturers like those making trailers for the trucking industry can also benefit. By taking the first step toward digital transformation with a process called automated data collection (ADC), this trailer manufacturer experienced gains in several areas across their enterprise, including:
- Large-scale collection of highly accurate data companywide
- Improved efficiency of quality assurance processes
- More accurate and timely estimate delivery to customers
Not only do each of these outcomes improve internal organizational health, but they also contribute to a better workplace and increase the company’s ability to deliver a higher level of customer service.
5. Reach Out to Experts
Embarking on a new Digital Transformation journey can be intimidated to say the least. One of the most effective ways to ensure you set yourself on the right path to success is by bringing in an expert. Not every organization has the internal expertise to leverage for an honest assessment of your business, so hiring an independent consultant or asking for a vendor-provided assessment may be your best option. Vendors can be an indispensable resource in helping you to analyze your processes, define problems, locate inefficiencies and provide solutions to streamline and automate your workflows.
When seeking out the guidance of experts:
Reach out early. Potential vendors can help provide indispensable information as well as inform future phases of your research journey. Be upfront on where you are in your buying journey to help you get the most out of your relationship with potential solutions providers: Are you discovering what is available on the market? Studying product demos? Or are you ready to buy in the next few weeks or months?
Experience matters. Whether you are bringing in a consultant to analyze your business or hiring a new vendor, there’s no replacing the value of having expert guidance from professionals who have years of experience.
Know your business processes. B2B consultants cannot under-emphasize this point. You may think you know how your business processes work in theory, but very often the way you think your business works isn’t the way it’s actually operating. This can lead to unpleasant surprises when an outside consultant comes in to examine your workflows.
Have a plan. Implementing a new technology system is challenging enough, but jumping in head-first without a solid digital transformation strategy could set you up for failure. Instead, work together with other stakeholders and departments in your own organization to gain buy-in from key decision-makers and formulate an effective digital transformation strategy.
Many organizations take a more siloed approach by default, such as adopting new technology in IT, but not bringing in operations for input. When the new solution is sprung in their business colleagues, adoption may meet resistance, greatly increasing the chance for implementation failure.
The Manufacturer published this informative guide to making your digital transformation successful.
Digital transformation in manufacturing is becoming more important than ever for enterprises wanting to remain competitive in the 21st century.
With supply chains so interdependent on connections within the supplier network, as well as their own enterprise, technologies that enable them to become more cost-efficient, agile and flexible in anticipating and fulfilling the needs of your customers can be priceless. From a business standpoint, the possibility of unlocking new levels of operational efficiency and performance is hard to ignore.
Digitization and automation technologies are becoming cheaper year by year, offering more options and flexibility than ever. Even mid-sized enterprises can reduce ROI and total costs of ownership (TCO) of new potentially transformative solutions as these technologies become more cost-effective and accessible.
All of these factors mean that undergoing a digital transformation should no longer be a matter of if, but when. Sure, change is challenging—even intimidating—but the right digital transformation strategy may be exactly what your company needs to jump ahead of the competition.
Don’t be afraid to ask for help from experienced consultants who are experts in handling challenges just like yours. The right advice can help you minimize risk and maximize productivity gains from new digital technologies. For complex B2B sales, some vendors offer a fully-guided approach to transitioning from legacy solutions to a newer, more effective ones.
Digital transformation doesn’t require spending millions of dollars on a massive dream solution. Instead, start small, such as by automating data collection on raw materials using wireless mobile devices, barcodes and barcoding software that communicates with your ERP system.
Regardless of where and how you start your journey toward digital transformation, the trend of digitizing and automating business processes isn’t going to end anytime soon. If anything, new innovations such as IoT, real-time data tracking and cloud-based SaaS services indicate that digitization is going to accelerate. Don’t let your organization get left behind.