Future-proofing a digital manufacturing transformation

Advanced manufacturers at the cutting edge of the Industry 4.0 revolution are engaged in a fine balancing act. The technology that is reshaping the manufacturing sector and driving the next S-curve of performance improvement is constantly on the move. But manufacturers also can’t afford to wait and see what the future holds before making crucial capital-investment decisions they need in order to keep ahead of the competition.

Artificial intelligence (AI) shows just how important it is for manufacturers to flick the switch today. Analysis from the McKinsey Global Institute suggests that front runners who begin implementing AI now can anticipate a cumulative 122 percent cash-flow increase within the next five to seven years, compared to just a 10 percent cash-flow bump for AI followers.

Is everyone above average?

But our research also shows that many companies find it difficult to gauge how fast they are moving vis-à-vis their competitors—which is understandable in a fast-changing, uncertain environment. In our fourth Digital Manufacturing Global Expert Survey, conducted in 2018, more than nine out of every ten companies surveyed said that they were either at the forefront of digital manufacturing in their industry—or at least on par with the competition. These numbers clearly don’t stack up: 90 percent of companies cannot be with or ahead of the pack.

Some 92% of surveyed manufacturers think they are at least equal to their competitors in digital manufacturing.

There’s a clear opportunity for manufacturers to accelerate their digital-transformation journeys and achieve the higher levels of productivity they need in the short term to keep them ahead of the curve. The critical task is to future-proof their digital transformation so that the technology and processes they introduce now don’t lock them out of the next round of advances.

Future-proofing starts with a clear vision for how digital manufacturing will deliver a competitive advantage, along with a phased road map for implementation based on a business case in which technology is the enabler rather than the driver of change. Without this business-first orientation, it’s easy to be led by the latest shiny object rather than focusing on the digital-manufacturing solutions that address specific operational pain points and drive tangible bottom-line impact.

The road will shift, so think holistically

The road map is critical. It needs both a clear definition of the size and nature of the business opportunity and a precise understanding of the required IT and operational technology (OT) architecture—along with the attendant resourcing requirements.

But the map can’t just focus on the destination that’s visible from the starting line. To ensure technology decisions will build a long-term competitive advantage, companies must also think holistically throughout their transformation. This means taking a long-term view that extends from past fixes into the future. And it means looking not only across business units, but also beyond the company into the business’s entire ecosystem.

At its core, future-proofing consists of four components. The first is a scalable technology stack that leverages industry standards as much as possible to ensure cross-organization interoperability. Second, an agile mindset across software and analytics encourages fosters innovative solutions. Third, access to external partners fills capability gaps deep functional and integrative expertise. Finally, a focus on building skills to drive internal collaboration across functions and break down organizational silos.

What’s next?

Critically, companies also need to understand how technology is expected to evolve, so they’re ready to integrate advances into their operations at the optimal time. We therefore reviewed the technologies in early deployment across the manufacturing sector and those that are currently making headlines in tech labs across the world.

We identified nine broad technology areas that we believe will have a significant impact in manufacturing over the next few years, driven by advances in 26 specific technologies. We further grouped these into four digital levers, each representing a major category where technology is creating the most value for companies in Industry 4.0 transformations (Exhibit 2).

Through four major digital levers, nine technology areas are poised to deliver value to manufacturers.

Given the breadth and the complexity of these technologies and trends, we will discuss them individually in future posts. But to give a taste, think about advances in our first value area; “Digital management tools and connectivity.” Built-in AI engines and cognitive capabilities are fast becoming key elements of the IoT platform, improving performance transparency and access to real-time information through more user-friendly visualization for operators and managers.

Meanwhile, Serverless FaaS (function-as-a-service) is set to significantly reduce operational cost, complexity, and engineering lead time. Companies will no longer need to worry about owning IT infrastructure and paying for capacity up-front—but the trade-off will be increased reliance on vendors. Many aren’t willing to make the shift just yet, preferring to wait until vendors conduct their own efforts to improve support services and fine-tune best-practice standards. We see these steps as so likely that even if individual manufacturers are hesitant now, they should still start thinking about strengthening their vendor ecosystems so they can seize major opportunities as critical technologies evolve.

Under “Digital ways of working,” human-computer interface tools like augmented (AR) and virtual reality (VR) will become increasingly common on the shop floor. The manufacturers that will benefit the most will be those that invest today in digital capabilities to help them understand how and where these tools can add the most value in delivering game-changing productivity improvements.

The constant evolution of all of these technologies offers a sizeable opportunity for early movers to gain a big advantage over their closest competitors. We estimate that between $1.2 and $3.7 trillion in global productivity gains are up for grabs in the manufacturing sector by 2025. But that means the consequences from missteps are much higher, too. Keeping ahead of the rapidly evolving technology ecosystem has never been so critical for manufacturers that want to keep one step ahead of the competition and capture the lion’s share from this technological bonanza.

The authors wish to thank William Advinin, Hidayat Hidayat, Andras Kadocsa, Milan Shah, and Krish Suryanarayan for their contributions to this post.

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