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Digital transformation in manufacturing needs to navigate the changing landscape

The manufacturing industry is operating in an environment that is becoming increasingly complex and more connected than ever before. Yet the world of manufacturing has not kept pace with digital and the need to evolve for the industry’s future success is critical. 

The first wave of Aurecon’s Our Digital Futures research – The Digital Landscape – has highlighted areas of focus for organisations to stay ahead of the digital curve. For the manufacturing industry, this includes focusing on exports and developing more customised solutions for end users.

In this article, Dr Ingrid Appelqvist, Client Director, Manufacturing, APAC within Energy, Manufacturing and Resources, tackles why manufacturing has some catching up to do in the digital age. There is a need for transformation in the manufacturing industry and to achieve this and remain competitive, manufacturers must evolve too. It will be critical to embrace digitisation – not only the technology, but also the strategic leadership required to ensure digital initiatives are implemented effectively.

For many years in manufacturing, digital technologies have been used largely to achieve efficiency gains and cost reductions, however new evidence reveals that taking a broader, more strategic view to embracing ‘digital’ can deliver even greater value for manufacturers – such as smarter working and generating growth, new revenue and other opportunities.

Digitally mature streaking ahead

With 98 per cent of manufacturers in Australia being small to medium enterprises, there are many not yet on the digital curve and some just dabbling. Those who don’t dive in soon are at great risk of either standing still or dying out. However, those leading the way – the digitally mature – are sprinting ahead of the pack and making huge gains.

While the industry itself is maintaining a growth rate of 1 to 2 per cent, the more innovative manufacturers – who have taken up smart manufacturing initiatives using a range of technologies combined with strategic leadership around those initiatives – are seeing massive growth ranging between 10 to 20 per cent.

Those doing this well, and fully realising what can be achieved in the digital age have common characteristics:

  • They have a strategy and digital ownership: aligned closely with the business strategy, the digital vision is a differentiator for digital forerunners. This game plan, owned and driven by a chief digital executive, creates focus and greater opportunities for manufacturers to connect strategy, performance, revenue and ROI. Any company, even specialist or niche operators, should have a strategy around innovation – detailing steps around what you will do and when, and where it will get you.
  • They are using a range of new innovative technologies: sensors, automation, digital twins, IoT, machine learning – which all interact with each other to provide value, enable higher quality and higher margin products. Data is also being used in an intelligent way, be that to make decisions much earlier, make the right sorts of decisions or reduce the risks inherent in making those decisions.
  • They constantly look for new ways to overcome new challenges and support their business. They are proactive, always looking for what else could be adopted to provide greater value. This is a signature of any company looking to grow and build their maturity in digital transformation. They don’t rest on their laurels, they keep moving.

Another critical tell-tale sign of a digitally mature manufacturer is their ability to think differently – about their supply chain, about their consumers and about their workforce.

Historically, a lot of supply chains have been linear and focused on efficiency. Now however, the best are moving to digital supply networks and are seeing reductions in time taken for products to get from A to B, cost savings and much faster product innovation cycles. Manufacturers are using digital ways of working to better understand the entire supply chain, to see themselves not in isolation but rather as part of a complex structure. By understanding the total value chain, manufacturers are demanding more from suppliers such as how they want products or raw materials delivered and in what format, what logistics are needed to be transported to their processing facilities, then after they’ve produced products how those products will be taken to market.

The megatrend of the ‘choosy customer’ is seeing a shift from mass to customised production. As consumers become more digitally capable and start to demand bespoke client experiences, the more digitally mature manufacturers can respond to this for competitive advantage. With a strategic approach to embracing digital technology they are well placed to take advantage of using, for example, advanced materials, more sensors or data analytics to produce bespoke products or services. With digital capability they can also ride on different waves of customer demand.

Best in class manufacturers are also looking at how the interface of robots and automation with humans can advance them significantly. This means they’ve started reassessing the types of employees they want and those making gains have a diverse and digitally literate workforce, where often workers with a digital background are trained into the manufacturing process rather than the other way around.

Complex but simple: you need to keep moving

There are opportunities for every manufacturer to embrace ‘digital’ more strategically and we are getting to the point where digital interactions and predicting end user engagement are almost business as usual requirements to be competitive. Despite this, there remain many enterprises not yet on the digital curve, often due to lack of understanding of ‘digital’, a fear of stepping into the unknown and concern that current processes and technology will be dropped in place of new ones where there is little knowledge around how successful they might be.

The beauty of ‘digital’ is the possibility to start small and build on success. There is no need to jump straight into buying the most advanced technologies and then realising that it was not fit for purpose. Instead, focusing on solving a key operational challenge by applying the correct digital solution is the way to go. 

The key is to start small and at low cost, learn, see what advantages eventuate and become bolder from there. Leadership is fundamental to take an organisation through the changes, find the benefits and get to the next stage. However, progress, even incremental, is essential. Manufacturers cannot continue taking small steps and then remain static. The key to moving forward is the right leadership around digital initiatives. With this, companies can gain momentum and achieve the progress that is possible when new approaches are implemented.

The first wave of Our Digital Futures was released in July 2019. The research will be released over three waves as The Digital Landscape, The Future of Digital and Your Digital Strategy.

To learn more and read the full report for the first wave, visit ‘Our Digital Futures’ at Aurecon.


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About the Author

Ingrid Appelqvist is Aurecon's Client Director for Manufacturing. Her current interests are digitisation, automation, machine learning, robotics, and decentralised processing for new innovation in food manufacturing.

This article was originally published on LinkedIn Pulse as 'Manufacturing has some catching up to do in the digital age' by Ingrid Appelqvist.

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