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The Definitive Guide: Digital Transformation in Manufacturing

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Manufacturers face many challenges today that threaten their continued profitability. Global, regulation, the pace of technological change, and customer expectations are all on the rise against a backdrop of supply chain disruption, severe labor shortages, and the fallout from COVID-19.

Digital transformation in manufacturing promises to merge operational technology with information technology. By building a cyber-physical production system, manufacturers can deliver greater efficiency, create more innovative, higher-quality products, and forge stronger relationships with suppliers and customers.

This guide defines digital transformation in manufacturing and outlines the benefits, success factors, and culture essential for its success. We break down the technologies at the forefront of the digital revolution and outline the first steps manufacturers need to take on their digital transformation journeys.

The Current State of Digital Transformation in Manufacturing

The benefits of successful digital transformation in manufacturing reach well beyond the factory. Every aspect of an organization, from services and supply chains to products and customer experiences, is enhanced. Silos are broken down, expensive-time consuming processes are automated, and products are improved.

The benefits of successful digital transformation in manufacturing include:

  • Single Source of Truth: Digital transformation democratizes data and unites every individual and team around a centralized data repository or single source of truth. Employees can access the same clean, concise data on demand, enhancing decision-making and collaboration.
  • Smart Factory: Digital transformation lets manufacturers create smart factories that self-monitor and solve problems independently of human intervention (fix machinery, order replacement parts, optimize resource use, etc.). Unlike traditional factories that are great at producing identical widgets at high volume, smart factories can be “reprogrammed” to create an array of goods. This output flexibility provides agility in response to evolving customer demands and market conditions.
  • Innovative Products: Digital transformation lets manufacturers produce and sell smarter, more innovative products that support their customers’ digital objectives. These “intelligent” products are more competitive and improve customer satisfaction.
  • Partnerships and Supply Chains: Digital transformation lets manufacturers integrate and partner with other technologically advanced companies and participate in the most efficient digital supply chains.
  • Additional Services: Digital transformation allows manufacturers to sell new products and services to customers, dramatically increasing revenue. A random example: A manufacturer that sells biotech equipment can build a VR experience that lets customers design their entire lab virtually. This digital service adds value (it provides a helpful way for customers to plan the layout of an expensive lab) and allows the manufacturer to demo and sell additional products.

Digital Transformation Technologies

Here are six technologies every manufacturer should consider when planning a transformation. These technologies are often complementary. The most significant gains in efficiency, productivity, and profitability are achieved at their intersection.

  • BDA (Big Data and Analytics): The ability to receive, analyze, and extract valuable insights, forecasts, and predictions from data sets so large that they exceed the limitations of earlier processing methods.
  • IIot (Industrial Internet of Things): Using smart sensors embedded in machinery, packaging, vehicles, and even staff uniforms to track and record every aspect of a manufacturing operation in real-time. Manufacturers can use this information for various purposes, including condition monitoring (tracking real-time conditions such as temperature and vibration to identify potential faults,) predictive maintenance (early detection of defects that could lead to future failures and downtime), and autonomous production.
  • Cloud Computing: Instant access to scalable software solutions and unlimited computing power and data storage via the internet.
  • Additive Manufacturing (3D Printing): The ability to print 3D objects from CAD models revolutionizes product prototyping and custom tooling.
  • Industrial AR (Augmented Reality): The ability to overlay images onto the real-world, allowing engineers and others to work faster, solve more problems, access data more rapidly, and eliminate errors.
  • AI and Machine Learning: Algorithms enabling computers to solve problems, make decisions, and learn from their experiences.

Digital Transformation Culture

Digital transformation is as much about people as it is about technology. Manufacturers forget this at their peril. Employees are often resistant to any change—especially when digitizing current practices—and failure to win hearts and minds usually results in time and money wasted. According to McKinsey's research, “just 16 percent of executives say their company’s digital transformations are succeeding.”

How can manufacturers foster a digital culture conducive to effective change? It starts at the top with strong, experienced leadership and a clear digital transformation vision communicated effectively. Leadership must embed systems to break down silos, democratize data, and empower people to work in new ways.

Nurturing a digital transformation culture requires continuous improvement. Staff should be encouraged to fail and learn from their mistakes. Digital enables rapid small-scale experimentation that can lead to valuable discoveries and a more engaged, creative workforce. Innovation is the key to future success.

Your Next Steps Towards Digital Transformation in Manufacturing

Fueled by the COVID-19 pandemic, the rapid pace of digital adoption has been staggering. Global spending on digital transformation is projected to reach $1.8 trillion in 2022. By 2025, that figure could hit $2.8 trillion. The direction of digital adoption might not have changed, but we've been catapulted forward many years (seven years according to McKinsey, to be precise.)

At present, the manufacturing sector lags way behind many other industries in digital. The majority of manufacturers still have a long way to travel along the path to digital transformation. And while there are risks inherent in any digital transformation project, the most significant threat comes from a “do-nothing” approach.

Advances in technology and the rise of SaaS solutions have made digital transformation projects less expensive and laborious. Time to value is faster, and the return on investment is more considerable. These advances have made digital transformation more accessible. But they’ve also leveled the playing field. Digital-first global competitors and new entrants can compete with more established businesses for the first time.

So, where to begin your digital transformation journey? These steps are a good starting point:

Recruit Digital Capabilities

The team that has taken your company to where you are today might not be the one to guide you towards a digital future. Fill skills gaps with new employees experienced in IIoT, AI, and machine learning. Choose a dynamic, passionate CIO to lead all your efforts.

Inventory Company Activities

There will already be passionate, digitally-minded employees at your company who have begun small-scale digital initiatives themselves. Others will have strong views about which direction the company should take on its digital journey. Survey these people for their ideas early.

Create a Clear and Compelling Strategy

Your digital transformation strategy has to be one that your entire enterprise understands and buys into. It should involve all the right stakeholders in its creation. Digital transformation spans long-term planning horizons. CIOs must master emergent strategies that develop and respond to feedback from many economic, social, and governmental interrelationships.

Cultivate a Growth Mindset

Any technology shift needs to be backed up by a corresponding change in culture. You need to cultivate a ‘growth’ rather than a ‘fixed’ mindset—one in which taking interpersonal risks, such as asking for help, admitting mistakes and vulnerabilities, or expressing concerns, are not only tolerated but actively encouraged.