Accelerating smart manufacturing – The value of an ecosystems approach

Posted on 25 Jan 2021 by The Manufacturer

A Deloitte and Manufacturers Alliance for Productivity and Innovation (MAPI) study finds ecosystems can create competitive edge for manufacturers facing ongoing disruption.

We should start by explaining what is meant by “ecosystem” in smart manufacturing terms. Essentially, an ecosystem is formed when different entities come together in meaningful ways to solve shared challenges, meet shared objectives, and create greater value and exponential results. Underlying all of this is the concept of collaborating and coevolving.

Why this matters

Ongoing disruption and economic hardship caused by the COVID-19 pandemic have increased the urgency for manufacturers to accelerate smart manufacturing initiatives for future competitiveness. Deloitte and the Manufacturers Alliance for Productivity and Innovation’s (MAPI) new report, “Accelerating Smart Manufacturing: The Value of an Ecosystem Approach,” examines how smart manufacturing initiatives may have been impacted by COVID-19 and suggests an ecosystem approach to help companies stay the course, accelerate digital transformation and drive productivity and performance.

As part of the study, Deloitte and MAPI surveyed more than 850 executives at manufacturing companies across 11 countries in North America, Europe and Asia, representing a factory footprint of approximately 10,000 facilities.

Key takeaways for the UK

  • Manufacturing ecosystems are accelerating digital transformation and results, with early adopters achieving twice the revenue growth, digital maturity and new product/service delivery as their peers.
  • Ninety-three per cent of UK manufacturers believe building broad ecosystems across the manufacturing footprint can help their company to stay competitive
  • Sixty-seven per cent of manufacturers surveyed agreed to the growing importance of ecosystems to fully realise their smart manufacturing and digital goals
  • Based on current economic conditions, forty-seven per cent of respondents are continuing their smart manufacturing investments
  • Forty-two per cent of overall factory budgets are being allocated to smart manufacturing initiatives.

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COVID-19 disruption and meeting profitability goals remain the two biggest concerns

More than 70 per cent of manufacturing leaders surveyed are moderately or extremely concerned over the pandemic’s ongoing impact on operations, supply and demand, as well as meeting profitability goals. In many ways, this uncertainty emphasises the growing importance of adopting smart manufacturing initiatives that can drive agility, speed and performance.

Investment in smart manufacturing is expected to rise, taking a greater share of budgets

In a separate MAPI CEO survey, 85 per cent of leaders agreed or strongly agreed that investments in smart factories would rise by June 2021, and similarly the “2020 Deloitte and MAPI Smart Manufacturing Ecosystem Study” found 42 per cent of UK respondents are committing to continue or accelerate investments. Those forging ahead also indicated they are on average allocating 42 per cent of overall factory budgets to smart manufacturing initiatives.

Ecosystem-focused manufacturers outperformed across multiple performance metrics

Overall, the study found manufacturers reaching outside their organisation to deliberately connect with vendors and service providers are outperforming others and expediting their digital transformation.

  • Eighty-eight per cent of surveyed manufacturers agreed that it is important to work with outside partners, vendors and other companies to fully realise their smart manufacturing and digital goals.
  • In fact, an analysis of Fortune 500 manufacturers identified that companies with more than 15 strategic alliances registered twice the revenue growth, compared with companies with fewer than 15 alliances.
  • The study also revealed that ecosystem-focused manufacturers experienced twice the pace of digital maturity and delivery of new products and services; and had operationalised 31 per cent of their projects versus 15 per cent of projects for those still focused internally.

Business leaders widely endorsed ecosystems, highlighting their transformative potential

The study identified four primary ecosystems that support smart manufacturing initiatives: production, supply chain, customer and talent. Analysis of survey responses found the share of manufacturers pursuing or implementing these ecosystems is 68 per cent, 69 per cent, 51 per cent and 41 per cent, respectively. Overall, respondents acknowledged that they valued working with outside partners and having an ecosystem focus:

  • Eighty-five per cent of executives surveyed believe production ecosystems are important or extremely important for competitiveness of their business.
  • Eighty-five per cent of respondents said ecosystems will transform the way manufacturers deliver value and will lead to higher revenue growth and output.
  • The top benefits cited were “increasing the pace of new products/services delivery” and “increased revenue from products/services.”

A playbook to maximise value and minimise risks of ecosystems

Creating an ecosystem for smart manufacturing initiatives is not easy. There are many factors that could hinder companies’ efforts to connect with a broader network to advance their key smart manufacturing initiatives, such as coordination difficulties, data protection and cybersecurity concerns, risk of intellectual property theft and highly variable skills and capabilities across factory footprints. The study explores potential approaches to address each challenge and offers a playbook for adoption and implementation.

Visit the 2020 Deloitte and MAPI Smart Manufacturing Ecosystems Study page to see additional results from the survey and learn more about the research methodology. Connect with us on LinkedIn.

While COVID-19 has caused major disruption, many businesses achieved a step-change in their use of new digital technologies. Digitisation has had an impact far wider than just production: many companies are now getting better at managing supply volatility and predicting customer demand. Contact Nick Davis, Deloitte UK’s Industry 4.0 Leader to discuss lessons learnt from manufacturers who have implemented a Smart Factory network.

If you’re looking for a new podcast that brings you insights from opinion leaders, business leaders, academics and researchers on key developments and their experiences across the manufacturing sector, subscribe to the Industry 4.0 Ready podcast series. This podcast explores the importance of digital transformation across the manufacturing sector – and its impact on how businesses design, make and service their products.