Digital Transformation in Manufacturing
DIGITAL TRANSFORMATION IN
MANUFACTURING
A Whitepaper by RapidValue Solutions
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Digital Transformation in Manufacturing
index
01 Executive Summary
02 Busting the Myths of Digital Transformation
04
06
08
What is Digital Transformation?
Robotic Process Automation (RPA)
Critical Success Factors
Machine Learning
Top Technologies Driving Connected Manufacturing
Humanized Big Data
Internet of Things (IoT)
10 Conclusion
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Digital Transformation in Manufacturing
Executive
Summary
Today, digital transformation is imperative for all businesses, be it
small or large. As the world becomes increasingly digital, businesses
need to learn how to remain competitive and relevant in this new
ecosystem. Digital transformation has become one of the most used
buzzwords these days and everyone has heard about it. However,
many business leaders still struggle with questions like what digital
transformation really means? How do we achieve it? What are the
steps to transform? Is it really worth the efforts?
This whitepaper aims to answer some of the common questions
around digital transformation specifically for the business leaders in
the manufacturing industry. Because of the role that technology
plays today in transforming a business, CXOs must lead their
organizations through this era of digital transformation. Keeping this
in mind, this whitepaper is divided into the below sections aiming
at bringing clarity to the business leaders contemplating digital
transformation:
Section 1: Busting the Myths of Digital Transformation
Section 2: The Three Areas of Digital Transformation in Manufacturing
Section 3: Top Technologies and Use Cases
Section 4: Critical Success Factors
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Busting the Myths of Digital Transformation
The astonishing pace of change in the tech world is making it difficult to clearly understand
digitalization and fully grasp its implications in business. It has also led to several myths which are
not only misleading but damaging to the overall vision of an organization. Before we delve into the
topic and learn what is digital transformation, let us first debunk few myths. Below are some of the
most misleading ones, which have to be invalidated before an effective strategy for digitizing any
enterprise can be developed.
Myth 1: Digital disruption is bankrupting established businesses.
Reality: For established businesses, who have been industry leaders before the tech evolution
and are still in a leading position, the cautionary tale of Kodak’s bankruptcy, is frequently cited.
Kodak failed to react to the disruptive impact of digital photography. During 2015, around 70
startups achieved unicorn status, attaining valuations of $1 billion or more. Hundreds of startups
are now attacking traditional markets. This is a signal to the established businesses to act. They
have significant resources such as hard assets, brands, global distribution, customer relationships,
data and decades of institutional know-how in the industry. Given they harness these assets for
their digital transformation, on time, the story is far from over.
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Myth 4: ROI for digital transformation cannot be calculated.
Reality: Typically, investments are compared and analyzed using a combination of payback period,
internal rate of return (IRR) or break-even analysis. However, the ROI calculation of digital
transformation cannot be justified by just using traditional methods. Digital transformation might
appear to be a bad investment if we only look at short term gains. The reality is that the investment
in digital transformation will bring in new revenue streams, save your money directly on existing
processes, restructure your costs, transform the way IT services are consumed, increase your asset
cycles and bring a lot of indirect/intangible efficiencies. Once an organization’s processes have
been digitized, the transformation and cost savings continue to increase perpetually removing
inefficiencies and automating steps in the process, throughout the transformation journey.
Myth 5: Digital is IT agenda.
Reality: Nothing can be far from reality as thinking about digital as a standalone IT agenda without
active business involvement or business stakeholder participation. The intersection of business and
technology is the key to digital transformation. Only when business executives understand and
work with technology executives, digital can truly add value to an organization. There is no one
approach for digital which can work de facto for all organizations which can be plugged and
played by the IT team alone. Digital transformation requires careful planning and cross functional
involvement for successful execution.
Myth 3: Digital Transformation is best suited for companies with deep pockets and not for small
and medium size businesses.
Reality: It is a myth that digital transformation is not for small and medium sized businesses. The
reality is that all businesses fall into the radar of obsolescence without digital technologies. Of course
the scale of applicability and adoption will vary with the size but overlooking digital technologies
is a sure shot way to become extinct in the near future. Companies irrespective of size should start
analyzing how best they can plan for accommodating digital technologies instead of just keeping
the lights on.
Myth 2: Digital is a support function focused on achieving marginal efficiencies.
Reality: Many businesses are moving beyond looking at technology as merely a supporting function
and instead leveraging it as an enabler of revenue generation. Companies which have implemented
digital technologies across their business have been successful in not only improving efficiencies,
but also enhancing revenue sources, competing against digital natives and outperforming peers.
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What is Digital Transformation?
Now that we have debunked the myths, let’s dive deeper into the subject of digital transformation.
Digital transformation is the integration of technology into all verticals of a business, fundamentally
changing how it operates and delivers value to customers. It’s also a cultural change that requires
organizations to continually challenge the status quo and be open to innovation.
Three Areas of Digital Transformation in Manufacturing
Any transformation is successful only after a considerable thought has gone into identifying
appropriate transformation areas and embracing a strategy where technology enhances business,
increases revenue and optimizes costs. The entire journey can be divided into three wide areas as
below:
Legacy
Modernization
Data
Unification
Connected
Manufacturing
Legacy Modernization
Legacy systems are another aspect of what is holding back many organizations today. Legacy
systems are a single point of failure. They are not only non-scalable, limited business functionality
systems, they are also highly cost-intensive in terms of operations and have long development
cycles. Organizations need to take a hard look at their IT systems and conduct a thorough
cost-benefit analysis to understand which technologies are efficient and which are holding them
back. They can choose to tolerate, eliminate or modernize them based on their modernization
drivers. For example, their drivers can be either cutting costs, improving efficiency or complying
with regulations. Once the cost-benefit analysis is completed, these drivers would influence their
priorities in the phase-wise modernization journey, so that the benefit is maximized, and the risk
is minimized.
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Data Unification
Many organizations today face the roadblock of data silos when it comes to digital transformation.
Imagine an organization that collects data from several sources, and then stores that data separately
depending on function and relevancy. This is no secret; many organizations have been doing it
for a long time and that made no impact until now when everyone is leveraging analytics. It
is impossible to draw meaningful insights and see the bigger picture unless all data is linked
and unified. Data unification is the first stepping stone towards moving from a very reactive and
intuition-based decision-making system to a more proactive, even predictive data-based decision-
making system powered by AI.
Connected Manufacturing
Perhaps the most exciting and rewarding of all the transformation initiatives discussed so far is the
connected manufacturing or connected factory. This is the stage where you enter a cyber-human
space, where devices become your employees, they work for you to monitor status, analyze patterns
and predict intelligent insights for the business in real-time. Digital technology solutions can help
manufacturers become more responsive and predictive than reactive, by turning real-time data
from sensors and devices into actionable intelligence. Such is the power for digital transformation.
Today, everyone is riding with the tide, no exceptions. Few are thinking about it, few are already at
the top, but everyone is in the technology business.
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Top Technologies Driving Connected Manufacturing
Humanized Big Data
Few years back, in many businesses, it was recognized that the data being generated by connected
devices and consumer activity holds potential, however most conversations emphasized volume,
variety and velocity. There was little to no discussion around value. Big Data with no context serves
no purpose in the business world, and the recent developments in the field to “humanize” big data
or adding context is changing the game and helping the business people derive relevant insights
that affect business in the real world.
Internet of Things (IoT)
Internet of Things has become a reality for many industries already and it’s far from being just a
buzzword. Specifically, in manufacturing industry, businesses are leveraging Internet of things for
use cases like – asset monitoring, predictive maintenance, real-time field service management,
asset tracking and many more. With an upsurge of tech friendly “things”, drop in costs of internet
services and increase in data generation, IoT is a much more attainable transformation than it was
few years ago with a plethora of benefits.
Robotic Process Automation (RPA)
Manufacturing is a process-intensive industry and RPA can serve as a boon reducing costs,
increasing accuracy, cutting process times and lowering operational risks. High volume, routine and
repetitive tasks can be automated to improve efficiency. Also, processes which are speed-sensitive,
cross-functional and have low fault tolerance can be automated to decrease process time and
increase accuracy. The manufacturing industry is utilizing RPA to its fullest for creating error-free
and streamlined processes. Repetitive processes are inherently erroneous and they dramatically
increase the productivity risk. Smart leaders are embracing RPA to enhance their productivity and
outcomes.
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Machine Learning
Possibly, the most amazing thing in the tech world right now is machine learning. Machine
learning is an application of artificial intelligence (AI) that provides your system the ability to
automatically learn and improve from experience without being explicitly programmed. It enables
software applications to become increasingly accurate in predicting outcomes. Machine learning
applications and platforms are helping manufacturers find new business models, fine-tune product
quality, and optimize manufacturing operations to the shop floor level. It is enabling improvements
like modest reductions in equipment failures, better on-time deliveries, improvements in equipment,
and faster training times in the competitive world of industrial robotics.
Key RPA intervention areas across the value chain
SupportActivitiesPrimaryActivities
Administrative Finance Infrastructure
Product & Technology Development
Administrative Finance Infrastructure
Human Resource Management
Use cases : Ledger management, BOM, logistics data
management
Use cases : ERP Automation, data migration
Use cases : Requisition approval
Use cases : Employee history verification, hiring,
onboarding, headcount reduction, payroll automation,
absence management
Inbound Logistics Operation Sales & Marketing Outbound Logistics Post Sales
Use Cases:
Inventory
reordering,
procure to pay
process
automation,
vendor
management
Use Cases:
MRO
reordering
Use Cases:
Quote to
cash process
automation,
logistics data
management
Use Cases:
Invoice
management,
updating CRM
Use Cases:
email
automation,
customer
service
Value
Added
Less cost =
Profit margin
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Digital Transformation in Manufacturing
Critical Success Factors
The tsunami of digital technologies is disrupting many industries, particularly manufacturing.
Business leaders are being forced to learn and lead their organizations through this wave of digital
transformation and adopt technologies like cloud, mobile, IoT and analytics. Businesses need to
embrace digital technologies to survive in the new ecosystem. Below are few critical success factors
which would help them in this journey:
1. Strategy formulation
The first step to any success story is a well thought, prioritized and viable strategy. It is very important
to understand your organization’s vision and priorities, so that you could align your transformation
vectors according to these priorities. When you get into the phase of cost benefit analysis and take
a hard look at all your business processes, it may occur to you that there is a lot to be done. It could
become overwhelming and many people stop their effort at that point. The only way to come out
of that overwhelming feeling and turning it into an efficient roadmap for your organization is to
prioritize. This requires deep understanding of what your organization stands for and what are the
top business issues your organization is dealing with today.
2. Phase-wise journey with small wins
Digital transformation is not a one-time event with an end date. It is not an easy switch. Digital
transformation is an ongoing process, which requires adjustments to maintain success. Hence, it is
important to have a phase-wise approach towards digital transformation, to give your customers,
stakeholders and employees to adapt. Small wins keep people excited about the changes and
shows value earlier in the transformation cycle. It also helps in course correction. Deep change
across process, people, and culture is necessary to get the most out of digital transformation and
hence, it won’t happen overnight.
3. Strong execution team
When launching a transformation project, there should be a core team representing each aspect
of the areas of technology and business that will be affected by the transformation. This core team
should be made up of both business and technology members. Digital transformation is a big
opportunity and the very best and brightest in your company should be a part of the core team
to exploit this opportunity. Once the core team is in place, they should be given some level of
authority to make decisions. Here is where strong leadership and sponsorship needs to come from
the CIO or the CDO of the organization.
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4. Agile and Lean approach
Agile and Lean project management methodologies allow managers to break work into
more manageable, more measurable pieces, making it possible to deliver faster with higher
quality. As a result, more value can be added and waste can be eliminated at different steps
of transformation. This is a powerful combination for handling something as big as digital
transformation. Agile methodology can ensure company-wide process and methodological
alignment. In terms of business benefits, both provide:
Increased flexibility
Higher quality
transparency
Improved productivity
Decreased risk of
missed objectives
Enhanced transparency
Increased stakeholder
engagement and satisfaction
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Conclusion
Digital Transformation is changing the way business is done in every sector of the economy.
Businesses will need to transform themselves into digital enterprises to thrive, and this
transformation will need to be far more profound than merely investing in the latest technology.
Few companies need it for survival, and while others may not go bankrupt without these, they
will have to settle for a low-margin model for their business. Business leaders must debunk the
myths in the industry, learn about the technologies thereby, helping organizations to ride this tide
and develop a successful transformation roadmap to develop a competitive edge. This may be a
daunting task, but the time to start is right now.
Authors
Soumika Sarkar
Business Consultant,
RapidValue Solutions
Raakesh Rajan
Product Lead & Engagement
Manager - Digital Transformation,
RapidValue Solutions
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©RapidValue Solutions April, 2019