In the first of this series of two articles on obstacles to companies adopting digital technologies, we focused on corporate culture, and the internal structural changes required to achieve digital success.
Here, we look at the investment case for adoption: understanding the full range of value that digital technologies can bring to your business and passing that understanding across the organisation, from top floor to shop floor.
Any business investment requires a full understanding of the added value it will bring to the business, and investment in digital manufacturing technologies is no different.
Even though we at The Manufacturer, and many other entities in the sector, have been proclaiming the vital need for manufacturers to ‘go digital’, not everyone grasps what it might mean to their business.
“It is essential to understand what this new technology is capable of,” Jeremy Phelps, Business Advisor at SAP, tells me. “It has moved far beyond an integrated supply chain, to one that creates an ‘Intelligent Enterprise’.
“By this we mean not only a real-time connectivity across the internal and external supply chain network, but also what we call real-time transparency of top floor to shop floor, connecting executives to an end-to-end, dynamic view of business operations.”
Too many boards, in Jeremy’s experience, fail to move on from debating the technology towards this important next step.
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READ THE FIRST ARTICLE IN THIS SERIES – THE DIGITAL STORM IS UPON US – ARE YOU GOING TO RIDE IT OR GET BLOWN AWAY?
At the Manufacturing Leaders’ Summit 2019, Jeremy hosted a series of roundtables with manufacturers on this topic and found the level of questioning he received to be less about realising strategic opportunities and value and more about the specific virtues of digital adoption.
“People were still asking very basic questions and still making basic enquiries, and this is why they haven’t moved forward.” he comments.
“A great many manufacturers have yet to grasp that the crucial constraint is not the technology. What really matters is what they want for their business. Whatever that looks like, the technology can deliver it.
“Many companies are still hung up on the way that complex legacy technologies required time consuming activities, such as data entry, report running and to support operations. All that is either simplified or automated, in real-time, by digital technology such as SAP.”
According to a report by Boston Consulting Group, when organisations have defined business needs before deploying digital technology and begin to engage fully with its potential, growth in the order of 15 – 25% is possible.
“Businesses have been using technology to achieve incremental productivity growth of 1 – 2% for decades, but by combining digital technologies they can now achieve a significant productivity boost, blowing the doors off business-as-usual.
“For this to happen, companies must first identify the scenarios that will drive significant change in productivity, prioritise them based on value, and then determine the right technologies and solutions.”
Becoming an Intelligent Enterprise
It can be a complex process to visualise. SAP encourages business leaders to think beyond their own boundaries and consider how connected they already are – and how much better connected they can become – considering factors such as product origin or manufacturing and delivery cycle performance.
Few businesses do everything alone. They rely on a series of partners across the end-to-end process from design to customer, so now more than ever they need to be networked with their business partners, such as:
- Design networks – Companies collaborate with third-party companies to purchase subcomponents they need to design and build prototypes.
- Manufacturing networks – Many companies, particularly in high tech and electronics, outsource manufacturing to third-party manufacturers.
- Logistics networks – Most companies outsource transportation to third-party providers but still want visibility of the shipment. Companies need to allow their supply chain participants to bid or use long-standing agreements with approved or certified logistics service providers.
- Supplier networks – Businesses rely on multiple tiers of suppliers to purchase raw materials, packaging, intermediates, components, and other direct materials.
- Asset networks- Companies need to share equipment. Increasingly, operators use equipment as a service offered by the equipment manufacturer.
- Worker networks – Companies share resources and need to adapt quickly to market conditions with a qualified contingent workforce.”
*Courtesy of SAP’s Digital Supply Chain Strategy: Connect Digitally to Perfect Reality
SAP encourages companies to establish business networks, built on an open platform of interconnected systems. This enables the development of the ‘digital twin’, a way to use the transparency now available across all networks to gather and share information about business assets, in real time.
This is one of the benefits of the fully networked and intelligent enterprise.
Figure 1: Capabilities of a Digital Twin
Customer is king
Once leaders and executives master what these technologies are capable of, they must move on quickly to map that potential to their ambitions for their business.
Board level understanding of new technology and understanding of the strategic step changes involved should factor in the following, all of which have implications for business operations:
- Customer expectations are rising – They demand high-quality, individualized products and same-day delivery. This behaviour, first seen in business-to-consumer industries, has migrated to business-to-business markets, and the direct-to-consumer channel is bringing this behaviour to manufacturers.
- Cross-company collaboration in the supply chain is the norm in design, in distributed manufacturing, and across logistics networks. Yesterday’s suppliers are turning into today’s operators. This blurs company boundaries and drives an expectation of more-sophisticated collaboration between supply chain networks all the way from suppliers to manufacturers and logistics providers, then on to retailers and consumers.
- As companies realise that a great customer experience hinges on a perfect order, product, delivery and service, the boundaries between R&D, manufacturing, and logistics and operations are dissolving within the enterprise and across supply chain collaborators.
- The rise of industrial Internet of Things (IoT) technology, blockchain, and machine learning infused in business applications allows companies not only to break silos, gain visibility, and drive customer centricity but also to achieve much higher levels of efficiency, optimisation, and, ultimately, new business models. Businesses that harness these trends and technologies are increasingly becoming intelligent enterprises.
*Courtesy of SAP’s Digital Supply Chain Strategy: Connect Digitally to Perfect Reality
Act fast, win more quickly
No matter how logical and attractive these arguments may be, it is still possible to detect some ‘digital resistance’ among boards, and that carries potential risk.
“With current economic uncertainty and market volatility,” Jeremy says, “it is essential that supply chains utilise data to become more lean and agile, protecting their business from excessive working capital, accelerating time-to-volume and optimising asset utilisation.
“The need for UK operations of foreign-owned companies, in particular, to begin to drive the change is essential. We often see organisations waiting for strategic direction before they begin to move forward. The revolution is happening in an international head office somewhere else and the organisations in the UK are waiting to hear the ripple effect of what strategy they’re being expected to deploy.”
“In my opinion, organisations should first use their own data to create the business case, the benefits-driven reasons for actually getting some investment in this technology now.
“Don’t wait for parent organisations to set the direction, otherwise UK organisations will be part of a gradual evolution as opposed to the game-changing revolution that international competitors and disruptive new market entrants are already embarked upon.”
If you would like to discuss any of these issues directly with SAP’s Jeremy email him at: [email protected]
*Images courtesy of Depositphotos
