Are you ready for a paradigm shift in manufacturing?

Posted on 3 Dec 2021 by Tom St John

At this year's Digital Manufacturing Week, John Robinson of SAP spoke with Tom St John about the need to move away from some of the traditional business models in global manufacturing – “we've got to break the paradigm.”

Speaking to The Manufacturer after his keynote speech at Manufacturing Leaders’ Summit, John stated his belief that technologies won’t flourish to their full potential and sustainable targets may not be reached while these systemic problems exist.

Watch the full interview here

Interview highlights

Explain some of the failings behind the traditional global manufacturing business model

If you look inside manufacturing businesses then board level decisions involve driving strategy, IT, driving business systems, OT, investing in the factory and manufacturing operations – trying to drive performance in the business.

Essentially, you have four silos of capability, but like cogs in a machine they’re not quite fully in sync with each other. And then in the external ecosystem of suppliers, is a mirror image of the same problem.

You end up having consultancy selling to the board, IT vendors selling to the CIO, OT vendors selling to engineers. You’ve got internal and external silos that all bring great value, but they’re not quite fully aligned. That’s the reason why we’ve struggled to achieve the manufacturing performance that we have historically.

How is this old model holding back the large-scale adoption of Industry 4.0 technologies?

In the last five to six years there has been a lot of hype around Industry 4.0. Industry 4.0 is in pilot purgatory, as McKinsey call it. Manufacturers can’t get out of doing interesting POCs in a way that really impact the bottom line.

My personal point of view is it’s the same reason that Industry 3.0 never took off. Those four silos still exist and nobody has ever broken them down, so the systemic problem is still there. Whether it’s Industry 3.0 or Industry 4.0, the business model doesn’t work to enable the technologies to flourish and deliver the value that we’re desperately after.

How do best go about implementing change?

The change has to be driven by the manufacturers at the board level. The supplier ecosystem and the internal silos of IT and engineering are so established and ingrained. Someone made a really good point on the panel discussion, (at Manufacturing Leaders’ Summit) having spent 10 years in China, about the Chinese business model.

It isn’t the same as ours; they rotate their people around so the CIO could be the CFO, and then a few months later they could be the head of engineering, a few minutes later – a plant director. They rotate the leadership around and it gives them a holistic view of each other’s problems and pain points. So then when it comes to solving the problem, they do it more in a collaborative manner.

From the 1950s onwards, we built up these silos of competence, meaning we work in a very vertical structure. The manufacturer has got to break that down internally, first of all, and it has to be a board level decision. It won’t come from a department or a silo, it has to be a board level decision. Then the board also have to demand that change from the supplier ecosystem.

What is the value of the proposed shift to a new model?

Again, I think this is across the piece. KPIs change; at the moment climate change and sustainability is a hot topic, no pun intended. 12 months ago, we were in the middle of the pandemic. Before that we had Brexit, before that, going back a few more years in my career, we had the financial crash in 2008. It doesn’t matter, the KPIs change over time.

The way to solve any KPI is through collaboration. That collaboration will improve any KPI the CFO wants to throw at you. There is no one vendor who has the magic bullet, they all have the value piece of the jigsaw to bring, but you have to make them build the jigsaw together, otherwise, the pieces don’t fit. It doesn’t quite work, it takes longer, it costs more, the value is not there – we’ve got to break the paradigm.

Read back over a recap of day 2 of this year’s Manufacturing Leaders’ Summit