Manufacturers are looking at their strategy for digital transformation right now. In their 2019 study, Capgemini Research Institute found that smart factories could add at least $1.5 trillion to the global economy. The report, “Smart Factories @ Scale”, explains that value is added through productivity gains, and improvements in quality, market share and customer services. The report also highlights how these technology-led initiatives are an opportunity for manufacturers striving to find new ways to create business value, optimise their operations and innovate for a sustainable future. But why? Here are seven reasons that show this is a business imperative now.
Reason 1: Improve Processes to optimise output
Productivity is key to manufacturers. Finding the most efficient way to use resources and increase output, while maintaining quality, is directly tied to profitability. Quite simply, the more widgets you can make with the resources you have, the more you can sell and therefore, the greater the profit you achieve. Adding more resources – whether that is people or machinery – is costly and time-consuming. By contrast, optimising the resources you already have is faster and cheaper. Integrating processes is also essential to drive productivity. Frequently, multiple processes are required to produce finished goods. It is hard to optimise the full end-to-end production line if processes are separate and operate independently of each other.
A Digital Operations Platform that integrates disparate systems can be used to optimise output. When systems are integrated and know about each other, they can be optimised to deliver greater output. Optimisation can be further improved with real-time visibility of performance. That enables operators to quickly make informed decisions about managing throughput and therefore increase output. This leads to better responsiveness to the demands on production and, ultimately, delivers more widgets ready for sale.
Reason 2: Optimise the Supply Chain
Consider how difficult it is to optimise separate production processes that are all within your control. Now consider the challenge of optimising a complex supply chain with none of it under your control. Supply chains are made up of separate, unconnected organisations. For many manufacturers, they are also located around the world. Creating connectivity between them without digital automation is daunting, if not impossible.
Digitally connecting the various elements of your supply chain enables them to work together to meet your needs via your systems. Logistics can be optimised, and systems can predict the need for new supplies of components and raw materials. That leads to orders being placed in time to avoid shortages that can delay production.
The right tools can provide an overall view of your supply chain so you can see where inventory exists. It enables you to predict and prevent bottlenecks. If one organisation in your supply chain is out-of-stock, automated systems can work their way through your network of approved suppliers to locate the stock you need. If you can eliminate bottlenecks and lack of inventory, you can keep producing to maintain and grow sales and improve customer service.
Reason 3: See data in real-time
The best decisions can only be made with the most accurate, complete, and timely data. Modifying processes or throughput based on last month’s performance or last week’s sales is never going to be as effective as basing it on today’s data. Making the wrong decision when managing production is costly and leads to wasted resources and delays. Increased costs will impact profitability. Delays impact the customer experience and risks losing them.
Operators with visibility of real-time production statistics can make the most effective decisions to optimise the production line. Real-time visibility of stock against incoming demand through orders makes it instantaneous and straightforward to determine which finished goods are required. Systems that understand the full end-to-end manufacturing process can schedule the right tasks at the right times to lead to an optimal production rate for goods. This leads to faster order fulfilment delivering higher customer satisfaction and, potentially, competitive advantage.
Real-time visibility of machine output and performance can also lead to improved asset management and helps avoid downtime – but more on that later. Simply ensuring that production knows exactly what Sales requires at the moment they need it, ensures they are always producing the correct stock at the right time.
Reason 4: Eliminate the waste of old legacy systems
Many manufacturers have separate legacy systems. They have all grown up over the lifetime of the manufacturer. They were probably state-of-art when they arrived, but now they are old-fashioned. Worse than merely being old-fashioned, they are often a drain on resources. System downtime costs time, output and, therefore, money. If it leads to production downtime, it also causes customer dissatisfaction. System failures cost money to resolve and reduce your ability to serve your customers directly impacting your profits and indirectly impacting your reputation all detrimental to your business.
There are also hidden costs. The intellectual capability and skills of your IT team is used simply to maintain the status quo and keep production going. This wastes the potential they have to understand business processes and look for ways to make improvements. They are unable to take a proactive view of business needs if they are focused on keeping things running. The business loses the opportunity to plan for future enhancements. Those enhancements could lead to better-served customers, the ability to look for new opportunities, proactively respond to new market conditions and plan for growth.
Reason 5: Keep your data secure
Maintaining the security of the data you hold and managing the privacy of the people you hold data about is paramount in today’s world. Legal obligations exist, and customer expectations are high. Knowledge of data breaches can be as damaging to an organisation’s reputation as product safety issues. Oversight of data and security is a critical role in an organisation, and handling this across separate systems is a complex management process. This is essential in today’s world, and another example of how legacy systems can be draining resources.
Modern cloud-based integrated systems for manufacturers have data security built-in and understand the privacy requirements. From the outset, they are built to manage data within strict policies. It means you can not only meet your legal obligations and protect your reputation but also save valuable management resources at the same time.
Reason 6: Manage your assets to eliminate downtime
As mentioned earlier, optimal production can only be achieved with fully performing equipment. The cost of downtime naturally varies between industries, but all agree that the cost is high. One anecdote tells of costs in the region £1,500 per hour, per machine, of wasted materials in the use of molten glass. Another is in the oil industry – a rig that goes offline can be costing something in the region of half a million dollars per hour.
Modern cloud-based solutions can use Artificial Intelligence (AI) to monitor equipment and assets in the background quietly and predict maintenance requirements. Findings from Aberdeen Research’s “Aberdeen Market Intelligence on Operations Optimization in Manufacturing ” shows that manufacturers are increasingly looking at condition-based maintenance (CBM) to optimise operations. Equipment downtime can be reduced by implementing predictive maintenance strategies using AI to predict the need for CBM. Interestingly, the same research shows that best-in-class firms are 17% more likely than the industry average to implement CBM. 44% of firms run CBM based on sophisticated analysis (i.e. using AI), and this percentage is growing.
Aberdeen Research also tells us that 82% of companies have experienced downtime over a three-year period and, perhaps shockingly, $2M (over £1.5m) is the average cost of an average four-hour outage. Proactively reducing and potentially eliminating downtime is a business imperative for manufacturers.
Reason 7: Maintain a competitive advantage
Organisations that stand still, fail. Markets are advancing, customers’ expectations are increasing, and competitors are investing to secure their own market advantage. The data is clear. IDC predicted that globally, $2 trillion (over £1.5 trillion) would be the value of spending on digital transformation by the end of 2020. 30% of that will be made by discrete and process manufacturing companies. The same report says half of all digital transformation investments in 2017 will go toward technologies that support operating model innovations, focusing on making business operations more responsive and effective by leveraging digitally-connected products/services, assets, people, and trading partners.
In short – your competitors are investing in transforming their operations and supply chains digitally – it’s imperative that you do the same!
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