Despite pandemic, manufacturers continue to invest in digital factory plans

Posted on 29 Oct 2020 by Karen Queen

Despite pandemic-related market shocks, 62% of global manufacturing leaders say they are investing in digital factory plans and even beefing up that spending by 20%, according to a study by Deloitte and MAPI.

In a separate MAPI survey, 85% of leaders agreed or strongly agreed that digital factory investments would rise by June 2021.

Still, more than 70% remain concerned about the ongoing economic impact of COVID-19 and about meeting profitability goals, according to the study released in late October.

Nearly 40% of all respondents have stopped smart manufacturing investments as they assess the impact of the economic conditions. One-fourth expect to resume digital factory investing within three to six months; nearly half expect to resume smart factory spending in seven to 12 months; nearly one-fifth say it will be at least a year; with 9% unsure.

“The companies that are able to make the right kind of strategic investment at the time when their competitors might be retrenching, are the ones able to come out on top,” said Paul Wellener, vice chairman of Deloitte and leader of Deloitte’s U.S. industrial products and construction practice. “Even though they were going through market shocks back in the spring, a lot of organizations are committed to smart factories and investing at increasing rates.”

Trailblazers in digital factory investments are seeing greater benefits in operational improvements, responsiveness and in other areas, he said. An ecosystem approach leads to a 58% acceleration in both digital maturity and introducing new digital products and services; a 53% acceleration in expansion of innovation capacity; and a 42% reduction in operational costs through greater efficiencies, the study said.

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Quality in sensing, factory asset intelligence/performance management, synchronized planning/supply chain, connected customer and after market, smart connected products, and plant consumption and energy management, were the top five use cases, with more than 80% of respondents investing in those areas, according to the survey. In terms of operational use cases, the top four performers were energy management, supply chain, quality sensing and detecting, and smart connected products. Other use cases were customer collaboration for product ideation and design, factory synchronization and dynamic scheduling, and augmented workforce efficiency.

“Managing energy consumption was the leader in terms of the highest number of people (36%) said they were able to operationalize those benefits,” Wellener said. Factories sought to reduce energy consumption and to shift from coal to natural gas or even to renewable energy.

“As a firm, we’re investing our own smart factory at Wichita State University, putting in place a smart grid to get power from a local power company, rooftop solar or potentially from wind, using our factory to demonstrate some of energy saving capability from using mixed sources of energy,” he said.

Developing partners key to digital factory transformation

Adaptive Manufacturing Enterprises - Digital Factory, Digital innovation Logistics supply chain digital technologies transformation warehouse iot connectivity data - shutterstock_1144447313More than 8 out of 10 (85%) of leaders, believe that developing ecosystems – transitioning vendor and customer interactions to partner-style, goal-focused, ‘we’re on the same team’ relationships – is important or extremely important to their competitiveness. The same percentage said ecosystems will transform the way manufacturers deliver value and will lead to higher revenue growth and output.

Deloitte defined ecosystem relationships as: “When different entities come together in meaningful ways to solve shared challenges and meet shared objectives,” as opposed to a traditional vendor relationship when one entity buys a product or service at an agreed upon price, quantity and quality, Wellener said.

Ecosystem partners might include cloud providers, 5G providers, logistics providers, infrastructure suppliers, material suppliers and more, he said.

The top benefits of an ecosystem approach were increasing the pace of delivering new products and services and increased revenue from those products and services, the survey said.

“All players need to believe in the value of coming together,” Wellener said.

Instead of attempting to create these ecosystems across all eight smart factory use cases, leaders should identify their most important smart factory capabilities and focus on those, Wellener said

An ecosystem approach does pose risks including cybersecurity concerns, data protection, theft of intellectual property. Other challenges include coordination difficulties and highly variable skills and capabilities. To mitigate the risks, companies need to ensure all of the ecosystem partners have shared business objectives, deliberate coordination, measurable metrics and accountability, Wellener said.

“We have seen only 15% of respondents have gotten there with a complete ecosystem using a standardized approach,” Wellener said. “Lots of people are working along the continuum.”

Deloitte and MAPI surveyed more than 850 executives from 11 countries in North America, Europe and Asia representing a factory footprint of about 11,000 facilities.