How digital will transform manufacturing

1. Digital transformation will drive the bottom line

Manufacturers will adopt technologies in the coming year that will allow them to transform their operating models and digitally connect processes, events, actions, internal associates and external partners. This will enable them to develop global standards that are flexible to accommodate regional, customer or product requirements.

Additionally, information about product usage, production capabilities, customer requirements and market requirements will be ingested, analysed and shared faster than ever before.

Becoming a digital enterprise ensures the productiveness of associates is not only fully utilised but that their knowledge is spread across the enterprise.

This will be central to manufacturing strategy and will be the lynch pin for all major initiatives as the success of this adoption will be directly measured by the impact on the bottom line.

2. Customer focus will become an obsession

Understanding customer requirements and innovating based on known and unknown wants will begin shaping manufacturing value chains. This will spur manufacturers to adopt capabilities, such as mass customisation, faster than expected in order to provide differentiated products to business and consumer customers.

This customer focus shift will be coupled with the increase of demand-driven micro logistics networks that push finish good closer to the customer and are able to nimbly respond to customer demand.

3. The Internet of Things will fuel new revenue

The Internet of Things (IoT) will drive a shift in business models that price based on availability rather than goods or services.

Manufacturers will begin focusing on providing pricing models for equipment and products based on controllable outcomes. This will be most prevalent in several selected industries, such as industrial equipment, power generation and HVAC providers.

These pricing models will exactly match customer requirements to compensate for static growth and hard fought margins.

As an example, industrial equipment manufacturers will provide pricing based on yield, quality availability and uptime. This is because they will be able to monitor equipment performance and dynamically predict remaining useful life of equipment and components to ensure assets are effectively maintained and utilised without failures or unplanned maintenance interruptions.

4. Manufacturers will know what’s where, and when

Central to ensuring inventory usage is maximised, which IoT aids with, is the ability for manufacturers to increase visibility to all inventory levels. This includes static materials and maximising the value of, and gaining real-time visibility into, inventory in-transit.

Equally important is the ability for manufacturers to become resilient to exceptions and disruptions. This will enable manufacturers to eliminate short-term forecasting and become near term demand-driven, also known as ‘capacity for resiliency’.

Central components of this capacity for resiliency are supply chain risk management and enterprise quality management and in 2016, an incorporation of 3D printing. This is part of an innovative postponement strategy to ensure specific products can be utilised for specific demand at the last possible time, ultimately increasing the total value of held inventory.

5. Everyone will collaborate to innovate

Manufacturers have increasingly relied upon suppliers to provide high levels of service and in 2016 they will begin relying on them to provide product and service innovations that support customer centricity, operational excellence and supply chain resiliency.

This will require a deeper strategic understanding of unique and standalone capabilities and capacity, and a comprehension of the capabilities that can be delivered by a group of partners and the enterprise.

On this basis, manufacturers will transition their supply chains to supply webs where partners are interdependent, co-innovative and collaborative with each other on both a tactical and strategic nature in order to create shared and distributed value.

>See also: The critical success factors for digital transformation programmes and how to meet them

6. Protecting property will become paramount

According to analysis by Netnames, counterfeiting increases by 15% annually and already costs manufacturers a staggering $1.8 trillion dollars in lost annual revenues. Unlike previous years, the protection of both intellectual and physical property will become paramount in 2016, especially as manufacturers, and their partners, become more connected and digital.

Information sharing is critical to successful collaboration. However, protecting schematics and technology advances from piracy or theft from suppliers will force many manufacturers to make some very difficult decisions.

Manufacturers will take direct action to monitor partner production outputs, and component and materials orders, and take a concerted effort to track certified products to quickly identify the root causes of found counterfeit goods. These efforts have not been done in earnest until now.

2016 will be an exciting year for manufacturers, fraught with opportunity and uncertainty as customer perceptions drive change at breakneck pace. Only the manufacturers that quickly shift to digital practices will survive.


Sourced from Sean Riley, director of strategic business solutions, Software AG

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...