Why digital transformation is no longer a luxury for manufacturers!
If you're still debating whether to start on a digital transformation journey for your manufacturing operations, we'd say you shouldn't, you're probably late already and you should plunge straight in.
Digital transformation is no longer a buzzword these days. It is fast becoming mainstream and many manufacturing organizations are already in their journey of digital transformation and reaping the benefits or looking to embark on one soon. With Covid-19 accelerating the need for mitigating disruptions, companies now understand that Digital Transformation is the only way to accomplish it. They are also beginning to realize that the transformation journey is a marathon rather than a sprint and are willing to put in the time and work more than ever before.
What is Digital Transformation
Before we weigh in the pros and cons of Digital Transformation, here's a quick primer on what it means. Digital transformation is the application of digital technologies across areas of operations to ensure value and a superior experience to the end-user. The end-user can be anybody—customer, employees, or partners/vendors.
It is also a cultural change in many cases and will fundamentally change the way businesses operates.
Digital transformation is often uttered in the same breath as Industry 4.0 or the fourth industrial revolution which is nothing but the philosophy or the movement that started a decade ago to utilize digital technologies to turn manufacturing data to insights and create smart factories.
The first step in digital transformation of any manufacturing organization is the integration (or convergence) of information technology (IT) with operational technology (OT). And the application of digital technologies such as Virtual Reality, Internet of Things, Augmented Reality, Robotics, 3D Printing, Machine Learning, Artificial Intelligence, Big Data, Smart Sensors and Edge Devices to enable this convergence powers the digital transformation.
Why Digital Transformation
With close interconnection between physical and cyber systems in the factory, there are innumerable benefits that a manufacturer can achieve. The data that the IT-OT convergence generates on the various aspects of manufacturing operations such as man, machine, material and method uncover opportunities for continuous improvement. Here are a few high-level benefits that digital transformation brings:
• Optimized and flexible production with reduced production costs - with the visibility powered by technology, manufacturers can now take informed decisions and optimize across the business.
• Enhanced business model innovation – allows manufacturers to figure out new ways of developing products and new ways to monetize them.
• Seamless connection of the value chains – use of digital technologies allows manufacturer to create a stronger alignment of the supply chain with the business operations. This allows optimizations to be passed on to the suppliers which can then promote growth and scale.
• Superior customer experience - Industry 4.0 technologies can take the client experience to another level where advanced production technologies and rapid prototyping enable each customer to order a one-of-a-kind product at a lower cost.
Challenges in adopting Digital Transformation
While the benefits are for everyone to see, one could wonder why manufacturers are still not taking the plunge. From our observations and our interactions with various manufacturing leaders, we've found the following barriers to implement digital transformation.
•The most difficult aspect of digital transformation is gaining top-level leadership support. This is because this includes cost, cyber security risks, lack of understanding of the benefits, and apprehension due to formidable challenges in the implementation.
• For brownfield setups, the equipment and technologies will be at varying stages of maturity and integrating them with industry 4.0 technologies raises concerns on compatibility and hence the success of such integration.
• Small and medium sized industries find it difficult to adopt industry 4.0 because of the lack of capital for appropriate emerging technologies. And the rate at which digital technologies changes constantly poses a huge investment risk and a fear of being left behind.
• Customers and organizations deploying industry 4.0 technology are both concerned about cyber security. IIoT network breaches can cause sensitive data to leak or operations to be disrupted.
• Manufacturers are concerned not just about security, integrations, and implementation, but also about how these solutions will determine their success or failure in the near future.
Benefits outweighs the risk
We understand taking this step is a daunting task but taking the leaf out of many successes and on seeing how the digitally transformed manufacturing organizations have fared better in the pandemic situation, we can safely say that the benefits far outweigh the risk.
First, a recent survey by McKinsey indicates that 96% of the companies who have scaled up some Industry 4.0 use cases felt they were able to respond to the crisis better. The survey also reports that value perception of Industry 4.0 has surely increased after the pandemic.
Second, regardless of a company's size, digital transformation is achievable. It is a myth that Digital transformation is a large-scale change that's unmanageable. It need not be undertaken all at once, manufacturers need to understand and prioritize use cases where digital transformation can be applied which can then be scaled up gradually and expanded to other areas of operations over a period.
Third, age of a company does not really matter. With smart sensors and IIoT technologies, it is proven that even legacy equipment can be connected to the digital fabric of the organization. For example, Tata Steel in Jamshedpur, India, is a 110-year-old plant with a lengthy tradition of cultural and technological legacy. With incremental investments into digital technologies such as predictive analytics in manufacturing and dynamic supply chain planning, they were able to minimize the cost of delivering their patrons by nearly 20%.
Right now, is an ideal opportunity to reexamine execution of Industry 4.0 at your organization. While it may cause challenges of change management in the short-term, the advantages will offset any hardships that the change will bring. If you want a sounding board for your digital transformation strategies, our consultants are here to help.
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