Smart manufacturing: Digital maturity for measurable gains
Smart manufacturing, rooted in data-centricity, technology adoption and digital capabilities, is characterized by an overall culture of value creation.
It’s opportune for manufacturing organizations to update their operations and future-proofing strategies: The US senate has just passed a $250 billion industrialization bill to reignite its manufacturing and technology sectors. The need for competitiveness and innovation – if it wasn’t already crystal clear – has been ramped up. Smart manufacturing and digital systems represent the path ahead.
The destination, however, requires clarification. Manufacturing has been evolving – in waves, bursts, cycles and spurts – since the Industrial Revolution 250 years ago. The current transformation phase, encompassed with Industry 4.0, is toward full digitization. Leading manufacturers are nearing this, and a select band have already achieved comprehensive digital capability. This status, described as digital best practice, isn’t in itself the final frontier: maturity provides the culture and platform to keep evolving. Industry 5.0 is approaching, and digitally mature manufacturers will be poised to keep pace.
Smart manufacturing generates gains
Digital maturity gains will be specific to each organization, but there is evidence, from multiple sources and studies, of the competitive advantages of digital technologies in manufacturing. For instance, a 2020 report by the Manufacturers’ Alliance for Productivity and Innovation (MAPI), Accelerating smart manufacturing: The value of an ecosystem approach, concludes that nearly half of digitally mature companies report higher revenue growth and/or net profit margins compared to industry averages. Digital operations deliver process optimization and cost-efficiencies, and refine continuous improvement, together translating to billions in measurable savings.
Digitally-driven networks capitalize on Industry 4.0 technologies to engineer greater all-round value – in processes and outputs, revenues and customer satisfaction levels, innovation and growth drivers. But what are the characteristics of a smart manufacturing organization
Digital systems are multifaceted
The characteristics of digitally mature organizations, or those running mature digital operating systems, are clustered around seven pillars – as informed by global researchers and consultants, Gartner.
1. Goal orientation
Digitally mature manufacturers have shifted from technological exploration to performance deliverables. Instead of the probative “Let’s see what technology can do for us?”, CEOs and CSCOs now demand achievement of specific improvement or innovation goals, or both.
Indeed, one of the primary indicators of a successful transformation is the identification of clear objectives. Knowing why the organization is pursuing digitization, and highlighting anticipated gains, helps to roadmap the digital development process.
|Key ingredient: detailed strategies|
|Detailed goals and strategies for all value chains are developed and supply chain best practices are extended to partners.|
2. High-performance talent
Smart manufacturing requires smart people. Beyond technical skills, the workforce needs to be enabled. Organizational structures should facilitate collaboration; advanced analytics steer decision-making; digital platforms are integrated – internally and, as appropriate, externally – to drive innovation.
An engaged workforce outperforms an unmotivated one, but an inspired workforce is yet more productive than an engaged one – and will truly harness digital capabilities.
|Key ingredient: high-performance culture|
|A growth mindset, oriented to constant learning, elevates delivery. The appropriate organizational culture is prioritized because it is understood as being crucial to a successful digital transformation, and ongoing progression (also see side-bar Smart factories need smart skills).|
3. Extended manufacturing network
Hyper-connectivity is a major attribute of digital operating systems, not only within the core manufacturing functions – evidenced, for example, in the integration of operational and information technologies – but throughout the value chain. This allows for a dispersed but coherent and aligned web of manufacturing locations and external supply partners, with end-to-end agility in demand planning and shaping, and the flexibility to segment production to meet specific value chain needs.
But advanced digital enterprises also have a different outlook. Capitalizing on Internet-of-Things (IoT) and associated digital tools and platforms, they seek outperformance by building an ecosystem of collaborative alliances, partnerships and joint ventures toward mutual efficiencies, risk mitigation, innovation and expansion. The potential of synergistic and collective capability is inevitably greater than that of a single organization. Manufacturers who develop a digital ecosystem are able to access incremental areas of expertise and resource, and leverage scale and competitiveness beyond their silos.
Such partnerships gather momentum for iterative cycles of value creation uplift, and further stages of maturity.
|Key descriptor: collaborative capability|
|Digital fully integrates plants and factory facilities within a broader ecosystem. Manufacturing becomes the hub of a customer-centric, value-driven enterprise.|
4. Data and metrics
Integrated digital capability senses and sources data across the network, and utilizes the information to predict and guide opportunities for value generation. KPI achievement is constantly tracked through near real-time dashboards, and improvements targeted against global benchmarks, such as data-driven decision-making and AI-driven predictive and prescriptive analytics.
|Key ingredient: real-time oversight|
|Across production assets and processes, people and outward logistics, smart technologies facilitate constant monitoring. Decision-making – both automated and man-made – is quickened. Judgements are optimized through the sharing of digital dashboards across the network using mobile and cloud technologies.|
5. Operational visibility
Improved visibility is a cornerstone of a high-performance network and constant, end-to-end improvement. Transparent, synchronized operations, aligned to external partners, enables a high degree of agility and increased visibility and insight into, for example, product availability and the statuses of orders.
|Key ingredient: agility|
|There is an agile and coordinated approach to demand creation, supply capability and product innovation to create optimal value. Scenario planning and risk modeling by value chain enables greater levels of risk mitigation and reduced risk costs to be shared across sites and new continuous improvement methodologies are routinely adopted into the integrative improvement system and are seamlessly deployed across the end-to-end supply chain.|
Workflow processes are, in themselves, a fundamental foundation for smart manufacturing. In mature organizations, processes are based on Lean principles and best practices, and digital technologies assist in the design and achievement of optimal objectives as standardized work is widely used and site processes are fully integrated.
|Defining characteristic: standardization, integration and automation|
|Advanced systems – including automation – use processes as a springboard for development and innovation. Key partners and customers are fully integrated and synchronized into site operations through joint strategic projects and standardized processes. In a mature factory repetitive, high-volume tasks will be completed using robotic process automation (RPA).|
The technology imperative is a business intelligence imperative. From factory floor decisions, to product innovation, to holistic enterprise planning, digital enables the navigation of complexity through data retrieval, analysis, connectivity and optimized judgements. Advanced manufacturing is rooted in technological capability as a core enterprise attribute.
|Defining characteristic: advanced IT capability|
|The use of advanced automation, predictive analytics and disruptive technologies sets new digital transformation standards in manufacturing. The organization is a strategic partner on major global digital platforms to deliver differentiated end-to-end customer experiences. Enterprise systems and technologies, such as operational technology, digital twins, blockchain technology, and AI and machine learning, to name but a few, are part of a fully integrated digital ecosystem involving multitier external partners, and the integration of human and digital workforces through automation is optimized.|
The journey to maturity needs solid foundations
The end-to-end capability of a smart manufacturing enterprise is not an immediate reset. Rather, it is a metamorphosis. Before pressing the accelerator on smart manufacturing systems, organizations should assess their current level of maturity across four key areas:
- Digital transformation
- Integrative improvement
- Operational alignment
- Value-chain alignment
Then, a plan has to be developed to outline the actions needed to progress in each key area, based on best practices. The execution of this plan and initiatives to sustain the improvement made will allow an organization to progress from having an operational focus, to supply chain integration, and then to comprehensive end-to-end demand-driven capability. As no two organizations’ DOS implementation strategy will look the same, organizations are advised to make use of a DOS orchestration system to ensure a smooth implementation process that yields the desired results.
The backbone of a manufacturing enterprise is always its production plants and factory lines, but the true value lies in the end-to-end value chain. Digital technologies, in opening a portal to new initiatives and ways-of-working, also enable continuing efficiency gains. Waste reduction, process acceleration, warehouse automation, demand planning, procurement, transport, order fulfillment and new product development – these production basics and value chain extensions can be refined further by smart systems.
The timing of investment decisions is also important. Balance the competitive lever of first-mover advantages with a transitional pace matched to the culture and capability of the overall business.
Digital maturity is organizational fitness
The pandemic has tested the strength of global supply chains like no other event in recent history. It has revealed that the most resilient are those with strong foundations, as well as the agility to pivot rapidly – a key attribute of digital operations.
Stages of digitization can be envisaged as conditioning, or a process of gearing. Once global economies recover, projections are that digitally rooted manufacturing and business models will catalyze $5-7 trillion in cumulative growth to the end of the decade.
“Think of digital transformation less as a technology project to be finished than as a state of perpetual agility, always ready to evolve for whatever customers want next,” advises Amit Zavery, Vice President and Head of Cloud at Google.
Digital technologies forge this capability. Smart manufacturers are thinking and investing wisely today, for tomorrow. Organizations which gear their enterprises around digital capability will lead – and thrive.
‘Smart manufacturing continuous improvement maturity model’, ARC, March 2020
‘Leadership in the digital business transformation’, Business Finland and the Association for Computing Machinery, October 2018
‘Uncovering the connection between digital maturity and financial performance’, Deloitte Insights, 2020
‘Adopting a Digital Business Operating System’, Jan Bosch, Chalmers University of Technology, Sweden, 2018
‘Accelerating smart manufacturing: The value of an ecosystem approach’, Deloitte Insights and the Manufacturers Alliance for Productivity Innovation (MAPI), 2020
‘Now. Next. Beyond. If you don’t plan in three dimensions, will you be left behind?’, EY, 15 May 2019
‘Hype Cycle for Manufacturing Operations Strategy, 2020’, Gartner, 6 August 2020
‘FutureScape: Worldwide Digital Transformation 2021 Predictions’, International Data Corporation (IDC), 29 October 2020
‘State of the Industry: A Manufacturing Renaissance in the Post-Pandemic World’, podcast, Machine Metrics, May 2021
‘The Risks and Rewards of Digital Maturity’, MIT-Sloan Management Review, 3 June 2019