What is Digital Transformation?
Digital transformation is the process of using digital technologies across industries to modify or create new business processes, enhanced working culture, and effective end-user experiences. The objective is to meet evolving technology, business, and market requirements more effectively.
Digital transformation spans across traditional roles of operations, sales, marketing, and customer service and creates value in numerous ways. It includes the entire gamut of using smarter applications and enhanced experiences to manage businesses and engage with customers using digital technology to our advantage.
The relevance of digital transformation in manufacturing
PWC predicts that out of every 2,000 manufacturers, 86% will benefit from cost reductions and revenue gains from their digitization efforts over the next five years.
Fortunately, manufacturing is one industry that can easily harness new-age digital technology to deliver greater supply chain efficiency and productivity using smarter, better and safer operations methodologies. As more and more manufacturers adopt digital technologies, industry 4.0 is gaining higher traction. This is transforming traditional supply chains and converting them into dynamic powerhouses.
- It has resulted in creating interconnected smart supply chain systems with a network of smart sensors and intelligent digital devices helping manufacturers collect equipment data and leverage artificial intelligence and predictive analytics.
- It creates valuable real-time data that can be applied across manufacturing operations and the distribution value chain.
- Finally, it has also replaced redundant manual tasks with efficient automated processes on the factory floor, saving time, money and resources for manufacturers.
Industry 4.0 and digital transformation
Industry 4.0 refers to the ideal combination of traditional manufacturing and industrial practices with the world of IoT (Internet of Things) driven technology and advancements. As we witness the fourth technological revolution across our factories, manufacturers are rapidly adopting advanced analytics, machine learning, artificial intelligence, and cloud computing along with several human-machine interfaces to create more meaningful results.
These technologies are now making more sense and finding greater value in the manufacturing sector. This is because they are more cost-effective, reliable and sustainable, irrespective of the size of operations. With industry 4.0, manufacturers are also making use of digitization and its applications to remain more relevant in the future while eliminating the risk of becoming obsolete.
Road to digital transformation in manufacturing – The Challenges
As digital transformation is changing the landscape of manufacturing processes, right from how products are manufactured to how final services are delivered, this creates immense pressure on those manufacturers who still rely on traditional processes and legacy systems. In the absence of adopting relevant digital technologies, manufacturers may lose out to competition and it may impact their ability to deliver better services, save operating costs and create higher revenue streams.
Here are some of the key challenges faced by manufacturers in their journey of digital transformation:
RESISTANCE TO ADOPTING A NEW
An over-dependence on traditional processes can create a barrier in adopting improved processes and new technologies. Most workers might perceive change as a threat to their existing roles and responsibilities and a job security issue. This can be managed using a smart digital solution which is less time consuming, high in efficiency and reduces job stress for employees.
ABSENCE OF AUTOMATION
Many times, manufacturing companies do not have the necessary level of automation in place, to plug and play a ready to use digital solution. In fact, the true value of automation lies in eliminating redundancies and time-consuming tasks. Using the right digital model, organizations can easily automate and eliminate redundant manual tasks to achieve quick response times and faster decisions.
LEGACY BUSINESS SYSTEMS
Most of the time manufacturing organizations get trapped in their own legacy systems. The solution here is to get out of the comfort zone and move towards revamping legacy systems. This results in faster, smarter and more efficient processes that have a quicker time-to-market. Digital technologies that can replace legacy business models can help here.
To achieve holistic digital transformation, it is critical to have relevant skilled labor who can support the organization in this process. Most often, companies lack the resources or the ability to train existing workers and upskill them to drive digital transformation initiatives. With a quick skill-upgrade, factory workers and employees can easily start implementing digital technologies in their day-to-day jobs and enjoy efficiencies.
Most digital transformation initiatives require significant monetary investments, which manufacturers may or may not be able to commit to. This may impact the success of the initiatives itself in the long term if budgetary requirements are not satisfied initially. However, budgetary commitments once made can help manufacturers reap long-term recurring benefits which are more profitable from a digital ROI perspective.
Benefits of digital transformation in manufacturing
Digital transformation in manufacturing is a strategic and a much sought after initiative, as it provides a host of advantages across the organization. Along with better productivity, product and service quality and output consistency, it also helps lower operational costs and provides an overall competitive advantage.
Here are the top 6 benefits of digital transformation in manufacturing that manufacturers find most relevant:
Increased operational efficiency : With digital processes in place, manufacturers start moving from traditional manual processes towards faster and accurate, automated systems. By deploying cloud-based digital solutions, manufacturers can easily streamline process flows and instantly access valuable analytics, which helps quicken decision making. This can accelerate overall operational efficiencies, avoiding rework and predicting unplanned downtime.
Improved ability to innovate : When manufacturers have access to the state-of-the-art technology, they start finding ways to achieve unique capabilities like better employee collaboration, reducing manual risks and errors, higher accuracy, and improved quality. They have a larger scope to innovate and create new processes that help eliminate silos by intertwining capacity planning and development with new technology.
Cost reduction : Digital transformation across factory operations helps manufacturers with better insights into various supply chain issues. They are able to make more informed decisions and deal with demand and supply irregularities. This directly results in them significantly reducing supply chain costs like inventory, material, equipment, etc. to save time, effort, and resources along the value chain.
Data-driven insights : One of the biggest benefits of digital manufacturing systems is having the ability to track key operational metrics and accurately analyze the data as a result of these efforts. With these data-driven manufacturing insights, manufacturers are able to device effective operational strategies to sell better and improve the bottom line accordingly.
Better collaboration and consolidation : Another valuable outcome of digital transformation is that it has made it that much easier for organizations to connect and collaborate within and beyond. Digital platforms enable greater cross-functional participation and these combined efficiencies can contribute to maximum output together.
Faster time-to-market : A higher rate of digital optimization drivesquicker time-to-market using automated processes. By integrating digital strategies across the factory workforce, workers are better equipped to handle uncertainties. Also, when day-to-day tasks are automated, it enables a more tight-knit collaboration between teams and this results in products moving faster from the floor to the market in a more efficient way.
Digital transformation in manufacturing- Trends
According to McKinsey, as technology evolves rapidly, manufacturers must future-proof their Industry 4.0 transformation plans or they might be at risk falling behind their competitors.
Today, most manufacturers have a clear opportunity to accelerate their digital transformation journeys and leap toward greater levels of productivity and efficiencies. It will ensure they are ahead of the competition curve. However, the critical task is to appropriately position and future-proof their digital transformation plans so that they don’t get tied down by their own technology and processes.
Research shows that within the next five years, 85% of industrial companies are expected to have implemented relevant Industry 4.0 technologies across all their key business functions.
2020 is expected to be the year of widespread digital adoption. Interestingly, the role of IoT here in manufacturing will overplay across numerous points including IoT in retail, automobile, consumer goods, healthcare, etc. And this is where data and connectivity will act as key drivers, providing incredibly important insights that will change the way traditional manufacturing is done.
Studies show that nearly 70% of manufacturers credit the IoT with increasing their profitability, and most manufacturing companies will invest around $267 billion by 2020.
Another area that will see significant technology adoption is the use of predictive analytics across factories. With the manufacturing environment is directly impacted by market risks, rising operations costs and the pressure to meet revenue targets year on year, predictive analytics will play a pivotal role. Using the power of analytics, manufacturers can make better, smarter, faster, and less risky decisions about everything from machine maintenance to supply chain optimization. This finally creates a positive customer experience, quality improvement in manufacturing goods produced to delivery schedules.
AI and digital transformation in manufacturing
Artificial intelligence in manufacturing is no more the thing of the future, as several manufacturers are successfully reaping the benefits from AI in supply chain across their operations. The AI-enabled supply chain has impacted just in time manufacturing in numerous ways using improved processing, algorithms, and the massive volume of sensor data in machines. With advanced machine learning, all this data can be analyzed and critical insights can be gained, helping manufacturers with quick decision making and significant cost savings.
AI-powered operations can help manufacturers with automated, sustainable and efficient solutions, by breaking through operational bottlenecks. These bottlenecks can hamper productivity and growth and keep manufacturers from achieving their revenue targets.
ThroughPut’s ELI is an AI-Powered Bottleneck Elimination Engine that analyzes your existing industrial data in real-time. ELI is continuously detecting, identifying, prescribing & preventing your shifting bottleneck operation to save millions in delays, inefficiencies & lost revenue.
With ELI, operations managers can easily achieve unprecedented productivity & operational excellence. ELI enables you to do supply chain forecasting, meet and beat your supply chain goals by nailing-down bottlenecks & eliminating waste to achieve end-to-end efficiencies.