Digital transformation: why operational maturity is your road map to readiness

Digital transformation: Why operational maturity is your road map to readiness
Executive Summary
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 organisations 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 organisations enter the digital race, speed, agility and adaptability have become highly-prized attributes. And with good reason: Organisations 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 organisation 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 organisations have plans to adopt a digital-first business strategy, however only 44% have fully adopted this approach”. That said, only organisations 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, “Organisations 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
Organisations 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:

digital transformation
  1. In Stage 1, functions work in silos with little synchronicity between supply capability, market demand and product innovation.
  2. 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.
  3. 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.
  4. 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.
  5. In Stage 5, the organisation 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 organisation 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 towards Industry 4.0, organisations should define their transformation road map according to the actual maturity level of their capabilities.

Determining levels of maturity across the entire organisation is vital, as it allows organisations 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 organisation to Stage 5.

Creating reliability and responsiveness in manufacturing operations is the critical starting point. This is where an integrative improvement system enables organisations 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 organisation
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 organisation’s competitiveness and reduce risks in operations.

The journey to developing Industry 4.0 capabilities will be different in every organisation, and is likely to evolve as new technologies emerge. Following are some of the fundamental capabilities your organisation needs to develop — across every stage of the digital transformation journey — to ensure long-term success.

Stage 2
  • Data management capabilities to capture accurate and usable data needed for big data analytics
  • Standardised systems, such as an Enterprise Resource Planning (ERP) system, Quality Management System (QMS), Computerised 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
Stage 3
  • Standardised 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
Stage 4
  • Implementation of autonomous decentralised 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
Stage 5
  • Use of advanced prescriptive analytics, automation and machine learning
  • Realisation 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.

1. Developing new skills and capabilities

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.

2. Sourcing Industry 4.0-capable systems and machines

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.

3. Mitigating the risk of security breaches

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.

4. Standardising across industries

Common standards ensure the interoperability of digital technologies across organisations and are vital for global connectivity. But to efficiently unlock opportunities, your organisation’s value chain will need to adhere to international standards to connect and interact in an organised 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.

5. Managing resistance to change

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 organisation; encourage them to share their perspectives, questions and ideas.

Conclusion
In an increasingly digital world, manufacturing organisations need to become more efficient, flexible and collaborative to keep up with rapidly changing demands. Manufacturers seeking to optimise 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, organisations 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 capitalise on the opportunities the digital era is set to deliver.

 

Disclaimer
This resource has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained herein without obtaining specific professional advice. Competitive Capabilities International (CCi) does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this resource or for any decision based on it.

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