Digital Transformation in the Manufacturing Industry: Adapting to Industry 4.0

robot arm in the background while person in the foreground examines graphs and data on a tablet.We live in a world that’s undeniably changing, as new technologies like smartphones, tablets, the Internet of Things (IoT), the cloud and more revolutionize professional processes. Digital transformation – which involves embracing new tech to improve operations and performance – has subsequently become a top priority for all kinds of companies. Those that don’t adapt are unlikely to survive.

Naturally, organizations in different industries face unique challenges and considerations related to digital transformation. In a previous blog entry, we discussed what the transformation process means for the healthcare industry, including how high-tech tools can benefit both providers and patients, as well as industry-specific challenges to adaptation.

In this entry, we’ll take a look at another industry that faces significant disruption related to digital transformation: Manufacturing.

Why Manufacturers Must Transform

With technologies like Big Data, analytics, the IoT and more rapidly changing life as we know it, some experts have identified this era as the fourth industrial revolution in human history. Professor Klaus Schwab, founder and executive chairman of the World Economic Forum, has written a book on this topic that’s available via the Forum’s website.

This industrial revolution – also known as Industry 4.0 – is a monumental event that’s already having a significant impact on manufacturing. The majority (76 percent) of manufacturers are either working on a smart factory initiative or already have one underway, according to a 2017 report from Capgemini Digital Transformation Institute.

Other key takeaways from the report include the following:

  1. More than half (56 percent) of manufacturers have already invested $100 million or more in smart factories.
  2. Smart factories are projected to yield $28 million in additional operating profits over the course of five years for automakers who qualify as “digital masters” (i.e., those with robust visions, governance and employee skillsets who are in an advanced digitized production stage), compared to beginners in the field.

We can already see how manufacturers have increased efficiency with new tech like intelligent Enterprise Resource Planning (ERP) systems, stated industry expert Jason Chester – director of Global Channel Programs for InfinityQS – in a 2019 interview with The Manufacturer. At the same time, he noted that consumers have become less loyal to brands, so competition is higher than it used to be.

Manufacturing companies that don’t embrace new tools and adapt to the digital age could potentially find themselves falling behind in efficiency and productivity – and losing clients to organizations that do transform. The majority of manufacturers (52 percent) strongly agree with the statement, “Embracing digital technologies is necessary for survival,” according to a study conducted by Mint Jutras.

How Emerging Tech Can Benefit Manufacturers

Emerging tech can lead to greater efficiency, productivity and profitability in numerous ways, according to the Sage article “Industry 4.0: Why you need to invest in it to increase growth.” Here are just some of the kinds of technology that manufacturers can use to transform operations.

Automation: Robots and automation are already in use in the manufacturing industry, and they have the potential to take on a more prominent role as technology advances.

Machine learning: This high-tech tool can offer real-time insights into operations, improve safety, enhance supply chain management and visibility and more. Check out our previous blog entry on “5 Key Ways Machine Learning is Changing Manufacturing” for more info.

IoT devices: With internet-connected devices, manufacturers can create smart factories and digitized supply chains.

Big Data and analytics: IoT devices collect huge amounts of data, which businesses can then use to gain insights into how to improve performance and make better decisions.

However, integrating these new tools into the workplace is far from easy for many manufacturers. Similar to organizations in other industries, they must overcome various hurdles during the transformation process.

Digital Transformation Challenges for Manufacturers

Only a small number (10 percent) of global manufacturing companies qualify as “Digital Champions,” according to a 2018 study conducted by PwC. The researchers defined Digital Champions as viewing digitization “in ways that are far-reaching and aggressively innovative, well beyond mere automation and networking” and showing “mastery of four critical business ecosystems: Customer Solutions, Operations, Technology and People.”

Similarly, the Capgemini Research Institute classified only 6 percent of manufacturing companies as “Digital Masters.” Additionally, the Capgemini report found 39 percent of manufacturers report struggling with their smart factory initiatives.

Barriers to successfully tackling digital transformation can include the following in the manufacturing industry, according to the aforementioned studies:

  • Lack of a clear vision and/or strategy for transformation
  • Difficulty finding and hiring the necessary talent
  • Overall organizational inertia
  • Not enough investment

Partnering with an IT managed service provider can make a big difference for manufacturers seeking guidance on the path to successfully adopting advanced tech. Our team of trusted technology advisors, for instance, has in-depth knowledge of and extensive experience working with cloud solutions, IoT, analytics and more.

If you’d like to learn more about digital transformation in the manufacturing industry and/or our advisory services, don’t hesitate to contact us by calling 877-599-3999 or emailing Adapting to the digital age isn’t easy, regardless of which industry you’re in, but it’s essential if you want your business to survive.

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