Digital transformation: Why operational maturity is your road map to readiness
The digital age is upon us, heralding a period of transformation and reinvention for manufacturers across all sectors. From smarter robots and additive manufacturing, to big data and advanced prescriptive analytics, Industry 4.0 brings with it a wave of technologies that is changing the face of manufacturing as we know it. These organizations are at the precipice of unprecedented change — so how will they position themselves for success? The key is taking a maturity-based approach to operational excellence to successfully cross the threshold into a digital future.
As more and more organizations enter the digital race, speed, agility and adaptability have become highly-prized attributes. And with good reason: Organizations that make the switch to digital have a distinct competitive advantage, and are uniquely placed to offer the ultimate customer experience. But there is a danger of moving too fast: Preparing your organization for Industry 4.0 requires careful evaluation and planning, as well as a deep insight into the readiness of each and every one of your functional areas and processes.
According to an IDG survey (State of Digital Business Transformation, 2018), “89% of organizations have plans to adopt a digital-first business strategy, however only 44% have fully adopted this approach”. That said, only organizations with a sufficiently high level of operational performance maturity will gain any benefit from the shift to digital.
The 2018 Gartner Hype Cycle for Manufacturing Operations Strategy draws specific attention to this point. According to the report, “Organizations managing new technologies and business models require assimilation to new infrastructures and processes for higher maturity”.
This, Gartner states, has exposed a weakness in established TPS, TPM, WCM and lean-based systems, as they do not effectively leverage technology with the consistency required. The report thus recommends the use of a “stage-based maturity approach to define the iterative progress and stage-based achievements to phase the deployment of your corporate production system”.
The five stages of performance improvement maturity
Organizations that have succeeded in achieving breakthrough performance all have one thing in common: They moved systematically through five stages of standard best practice maturity to build the foundations of sustained performance improvement. The illustration below shows the five-stage journey of performance maturity:
- In Stage 1, functions work in silos with little synchronicity between supply capability, market demand and product innovation.
- In Stage 2, companies build projects with experts to solve problems (e.g., quality, demand forecast accuracy, lean). However, a collection of projects on its own is difficult to manage, and it is also difficult to build end-to-end process value network capabilities in this stage.
- In Stage 3, external collaboration initiatives are increasing, and aligned KPIs and targets are deployed for all value chains. Customer segmentation influences value chain designs.
- In Stage 4, there is an agile and coordinated approach to creating optimal value. Detailed strategies for all value chains are developed and best practices are extended to partners. This stage involves a huge cultural shift.
- In Stage 5, the organization operates as an end-to-end demand-driven value network (DDVN) focused on delivering exceptional customer value. Processes are fully integrated, ensuring world class process performance.
The performance improvement journey begins with an assessment of the organization which will determine what its overall maturity score is, as well as the maturity scores pertaining to people, processes and technology. In other words, before starting the transformation process toward Industry 4.0, organizations should define their transformation road map according to the actual maturity level of their capabilities.
Determining levels of maturity across the entire organization is vital, as it allows organizations to establish their baseline. A maturity assessment should reveal the gaps between the baseline state and the desired end state; highlight priority areas; and provide the road map and implementation pathway that will lead the organization to Stage 5.
Creating reliability and responsiveness in manufacturing operations is the critical starting point. This is where an integrative improvement system enables organizations to design and develop processes and build skills and competencies first, while simultaneously laying the foundation for a successful transition to a digital environment.
Integrating digital capability across your organization
Industry 4.0 advocates the use of digital technologies to manage, track and monitor every aspect of operations processes at site level. The Industrial Internet of Things (IIoT), cyber-physical systems, automation, big data analytics and cloud computing will enable the integration of functional silos and foster greater network connectivity. Not only will operations processes become more efficient, but new possibilities will bolster your organization’s competitiveness and reduce risks in operations.
The journey to developing Industry 4.0 capabilities will be different in every organization, and is likely to evolve as new technologies emerge. Following are some of the fundamental capabilities your organization needs to develop — across every stage of the digital transformation journey — to ensure long-term success.
- Data management capabilities to capture accurate and usable data needed for big data analytics
- Standardized systems, such as an Enterprise Resource Planning (ERP) system, Quality Management System (QMS), Computerized Maintenance Management System (CMMS) and Manufacturing Execution Systems (MES), to support interconnectivity
- Identification of new skill sets managers and operators need to develop in order to use the new technologies
- Focus on implementing lean principles to drive out waste and improve agility
- Standardized and wide-scale big data and predictive analytics, business intelligence reporting and virtual environments
- Systems integration within the site, such as MES, QMS, Warehouse Management System (WMS), Transport Management System (TMS), and ERP, and with other key sites
- Selective introduction of mobile, wireless, telemetric, cloud-computing and sensor-based machine technologies to support automation and visibility
- Introduction of additive manufacturing (3D printing) where appropriate
- Implementation of autonomous decentralized systems and artificial decision support
- Connected machines and systems that enable remote monitoring, diagnostics and maintenance, and dynamic calibration; and automated changeovers and quality checks
- Systems integration with key partners’ systems that enable automated replenishment
- Use of advanced prescriptive analytics, automation and machine learning
- Realization of autonomous factories
Five hurdles to digital transformation success
Implementing Industry 4.0 technologies is not without its challenges. Here are five problem areas that must be addressed in order to ensure a successful switch to digital.
You’ll need to develop your employees’ skills and capabilities as the focus shifts to the programming and servicing of machines. Advanced IT, mechanical and engineering skills will be required and must be included in your long-term workforce training plan. A well-established integrative improvement framework will also help to address this issue.
In these early stages of IIoT and Industry 4.0, there are few suppliers that can provide turnkey solutions. Sourcing appropriate technologies from a number of information technology and automation partners is the best way to compensate for this shortcoming.
Digital transformation brings with it the increased risk of security breaches. Protect data from the threat of potential viruses and other cyberattacks with constant monitoring and an investment in enhanced security systems.
Common standards ensure the interoperability of digital technologies across organizations and are vital for global connectivity. But to efficiently unlock opportunities, your organization’s value chain will need to adhere to international standards to connect and interact in an organized manner. Various associations have already been established to define such standards, such as the Industrial Internet Consortium and the Smart Manufacturing Leadership Coalition in the USA.
New technology implementations will always be met with a degree of resistance. It’s important to address the concerns of employees who are resistant to change, and to assuage their concerns about potential job losses. Remember to communicate change to all stakeholders across the organization; encourage them to share their perspectives, questions and ideas
In an increasingly digital world, manufacturing organizations need to become more efficient, flexible and collaborative to keep up with rapidly changing demands. Manufacturers seeking to optimize their operations need to understand the interplay between traditional continuous improvement and Industry 4.0. Valuable synergies can be generated by implementing CI and Industry 4.0 technologies in an integrative manner, rather than independently or sequentially.
By taking an incremental, maturity-based and integrative approach to operational excellence, organizations will be able to adapt to new emerging technologies at the correct pace, and ensure that the right systems, processes and capabilities are in place to capitalize on the opportunities the digital era is set to deliver.