At first glance, manufacturing (with its foundation in raw materials, physical construction and hands-on factory labor) may not appear to be the most naturally “digital” industry, such as financial services or healthcare. Perhaps surprisingly, then, The Economist Intelligence Unit’s recent survey of more than 600 companies globally found that some of the most powerful effects of digital transformation are being experienced in manufacturing.
Manufacturers surveyed consistently rated the positive effects of digital transformation higher than our overall survey sample — from increasing employee efficiency and productivity to improved ability to meet customer demands to making better-quality information available to decision makers.
Manufacturers are making greater progress at implementing digital change as well. Every part of the organization — from production to supply chain to research and development (R&D) to individual business units — is more likely to be digitally enabled at the surveyed manufacturing companies than in the overall sample. Artificial intelligence (AI) and machine learning (ML), cloud computing and collaboration tools are more likely to be in use as well.
At the organizational level, too, manufacturers appear to be moving faster to integrate digital strategy into their planning and culture. Planning cycles for overall business strategy and digital strategy are more likely to be aligned at manufacturing companies than in our overall survey sample (85% vs. 72%). And 82 percent of manufacturing respondents say that a change in culture has been critical to implementing a successful digital transformation at their organization, compared with 72 percent of companies overall.
Product design push
Why is digital transformation such a high priority for manufacturers? One important factor is the internet of things (IoT), which many companies see as critical to their future competitiveness. Nearly half (48%) of manufacturing respondents say that the IoT plays a significant role in their organization’s digital strategy, compared with 39 percent of respondents overall.
While much of the attention to IoT in general has focused on consumer electronics, the greater motivational force for manufacturing may be coming from the industrial internet of things (IIoT). AI and ML enable the manufacturer to analyze historical data to predict issues that may affect its production schedule and execution. They also indicate how the manufacturer can improve materials management, asset utilization and personnel productivity by predicting and preventing bottlenecks.
Indeed, big manufacturers have been rushing to integrate digital elements into product design. In 2018 Boeing purchased a stake in Morf3D, a 3-year-old company that uses 3D printing to create parts for aerospace applications. Morf3D was already producing titanium and aluminum components for Boeing’s satellites and helicopters.
Other companies are taking digital technologies straight to the factory floor. Trelleborg, a Swedish engineering group that makes polymer products, uses robots to operate the computer numerical control (CNC) machines that control its machine tools: an innovation that enables one person instead of three to manage eight machines.
Cisco has entirely outsourced production to contract manufacturers. To keep control of the process, it created a “virtual” manufacturing execution system that allows it to monitor supply chain quality in real time.
These innovations appear to be yielding the expected improvements. Eighty percent of manufacturers surveyed said that their digital strategy has yielded cost savings, 77 percent that it has improved the quality of information available to decision makers, 86 percent that they can make more effective use of data sharing across functions/geographies, and 73 percent that R&D has improved.
External pressures propel change
External pressures are coming from some of the manufacturing sector’s biggest customers. For example, large engineering and construction companies that make major purchases from industrial manufacturers — sometimes over multiyear periods — are scrambling to increase their own productivity and efficiency. Manufacturers, as part of their supply chain and often their larger creative team, must move in lockstep.
McDermott International is looking to AI and ML to “deliver project capabilities in a more integrated manner,” says Akash Khurana, chief information officer (CIO) and chief digital officer (CDO). “That extends to the vendors and contractors we use and requires a seamless flow of information that extends to our customers as well.”
In its catalyst cell manufacturing line, McDermott “leverages AI and ML to provide enhanced visibility into the operational performance of the manufacturing equipment,” Khurana says.
“We can better forecast and allocate resources to the line, quickly identify where a possible bottleneck may occur, and make the necessary changes to the production process in real time to prevent or resolve it.”
Akash Khurana, CIO and CDO, McDermott International
“We can better forecast and allocate resources to the line, quickly identify where a possible bottleneck may occur, and make the necessary changes to the production process in real time to prevent or resolve it,” Khurana continues. “This is in addition to improving the reliability and productivity of the manufacturing equipment by applying predictive analytics to reduce unplanned downtime.”
Cultural change pays off
To capture these advantages, however, manufacturers and their clients need to be able to react more quickly, in both the design and the production stages.
McDermott is working on providing its clients with a “digital twin” of the product it designs for them — a virtual 3D replica that allows them to follow the design process as it moves forward. They can provide feedback throughout the process, which the manufacturer can then incorporate into the design phase to enable continuous improvement.
Manufacturers emphasize the cultural shift that’s needed to make digital transformation succeed. If a more agile, responsive process is required, top management “has to be close to their operational side,” says Simon White, CDO of VolkerWessels UK, “so that there’s a short time lag between decisions and implementation.” More traditional, hierarchical organizations may not succeed in the new competitive environment that digital transformation is creating.
Thus far, however, most manufacturers agree that the change has been worth it. In our survey, 75 percent of manufacturing respondents said that their organization’s digital strategy heightened their competitive positioning, 81 percent that it’s increased employee efficiency and productivity, and 81 percent that it’s improved their ability to meet customer demands.
As manufacturers grow accustomed to the efficiencies and greater predictive power the IIoT affords them, they are likely to anticipate more competitive advantages to come.