Digital Transformation May Not Mean What You Think It Means

There has never been a more extensive range of technology
available with the ability to significantly improve manufacturing systems.
Unfortunately, it is often unclear which systems these technologies can
benefit, and there is infrequently a clear path showing how to reap the
benefits of their application. So what is an enterprise to do? 

Manufacturing technology trends over the last several years have focused on distinct projects covering back-office productivity, improved planning, and plant-level automation. Improving individual processes is fine but the connection points between operations and business planning systems, despite endless articles written on the convergence of Operational Technology (OT) and Information Technology (IT), continue to be one of the most underserved areas of investment. All too often, “convergence” means a spreadsheet at the connection point that fills a gap but falls well short of providing true organizational collaboration.

Digital transformation one digit
at a time

For the last several years, the term “Industry
4.0” has echoed loudly across the plant floor, the supply chain, the warehouse,
the IT department, and the offices of manufacturing executives. It even reached
the ears of distributors and customers. Industry 4.0 noise has subsided somewhat, but it has been replaced by a
similar level of excitement around the term “Digital
Transformation.”

Not all Digital Transformation strategies and efforts are equal. Digitization and digitalization are often thought to be, inappropriately, interchangeable, but they are entirely different concepts. Digitization is defined as the automation of a process using a computer or other related technology. Digitization refers to the transition of a set of manual activities to a less labor-intensive, more efficient, and more repeatable approach. Alternatively, digitalization includes the rethinking of processes and strategies in a way that makes them more effective and adaptable. Digitalization is the changes that deliver both immediate results, while also driving actual change in the enterprise.

Digitization should not be discouraged as it may deliver a solid
ROI. Entire technologies have evolved to find ways to improve the status
quo. Robotic Process Automation (RPA) is, at its core, a powerful tool that can be used to ease
the burden of employees whose jobs include a high amount of repetitive manual
activities. Who wouldn’t want to eliminate the current endless paperwork of
processing invoices that requires the opening of multiple systems and
transcribing data back and forth? RPA can be used effectively to deliver
improvements in the execution of specific processes without substantially
changing those processes at all. To be fair, RPA may at some point use AI
and other techniques that may move it well into a digitalization project, but
most current RPA endeavors are strictly digitization.

The transition of processes necessary for
digitalization is by its nature a more challenging endeavor. There never seems
to be time for a redesign. There are always restrictive objections to the
change. The transition from existing to new processes usually introduces risk
in terms of potential interruption of business execution. Given stretched
capital investment budgets, short-staffed IT departments, and the cooling of
the manufacturing economy, manufacturers have to ask themselves whether the
time is now to take on digitalization challenges.

As is the case with so many questions, the answer is “it
depends.” Some manufacturers, those with highly insulated business models and no looming threat of disruption, can
probably get by with an incremental digitization approach. The “just a little
better” approach may not work forever, but it might for a while. Manufacturers
trying to survive and thrive in sectors experiencing high levels of disruption
should be considering a more in-depth digitalization approach.

Opportunities that are hidden in
plain sight at system intersections

The majority of manufacturers seem to be somewhere in
between. Most have at least a general understanding of the benefits that real
Digital Transformation can bring. Over 90% of all businesses claim they are
pursuing Digital Transformation in some form. While the
pursuit of business and digital transformation is different for every manufacturer, there are undoubtedly
some common themes, best practices, success stories and failures; and lessons
to be learned.

There is typically no shortage of supporting
systems that have aged beyond sustainability and are being held together with
heroic efforts and crossed-fingers. These systems will eventually individually
elevate to the top of lists and their shortcomings will be addressed. However,
how does a manufacturing entity prioritize the myriad additional Digital
Transformation opportunities available for systems that may not be as obviously
out of date? 

The friction points between systems can present
attractive opportunities for true digitalization. Poor
collaboration between the planning and operation disciplines restricts a
manufacturing organization’s ability to meet customers’ needs. Manufacturers
often lack timely and accurate insight into the operational status of planned
production. This lack of insight interferes with production’s ability to
respond effectively to unpredictable customer situations, inventory shortages,
equipment failures, and supply chain interruptions.

Despite the noise about OT/IT convergence, few
companies have done much to optimize collaboration between business-level
systems and operations-level systems. Coordination with the execution side of
manufacturing will arguably be the most significant near-term winner of Digital
Transformation investing.
Filling these gaps with spreadsheets may feel like progress, but it can actually keep real progress from occurring.
Spreadsheet gap-fillers are system customizations that fly under the radar and
do not foster actual coordination between planning and operations.

There is good news on the Digital Transformation front that can potentially help all kinds of manufacturers, regardless of where they stand in terms of transformation. Given the maturing nature of the current underlying technologies and solutions associated with Digital Transformation, there are plenty of successful projects and business use cases that offer a fast ROI yet don’t require massive investments. When you start to draw together information or data from both components of the value chain and expose it to the shop floor, your operations team gets actionable insights that drive better decisions and lead to higher efficiency, lower costs, happier customers, and fatter margins.

Some examples of digitalization projects that can be
initiated to deliver real results:

• Integral Extension of Enterprise Resource Planning (ERP) into Operations – Production Execution systems based on widely available operator-centric shop floor interfaces and built-in IoT can provide insights at the pace of production. This solution replaces a myriad of manual data collection systems and complex, overly-rigid interfaces to Manufacturing Execution System (MES) or other shop floor solutions.
• Enterprise Quality Management System (QMS) – Too often, the systems supporting manufacturing quality efforts consist of numerous other disjointed systems that have evolved over time. A more integrated approach to quality planning and quality operations can reduce the manual effort across the organization, driving toward real root cause analysis and ultimately reducing the actual cost of quality.
• Coordinated Material Management from Warehouse to Shop Floor and Back Again – Automated solutions that allow for the coordinated delivery of needed component material, the identification of the material as consumed, and the labeling of finished goods for final delivery have become imperative for the adaptive manufacturing enterprise. Operational improvement in the management of materials is the baseline opportunity but this capability is critical to the growing need for traceability and product genealogy.

Many
early efforts that could be deemed as digitization revolve around the
automation of some existing functions or processes. It could be the
evaluation of volumes of data that couldn’t be evaluated with previous
approaches. This digitization effort may actually be the necessary foundation that allows for the
following acceleration of digitalization
activity. It is essential to move forward with the greater vision of the
real revolution that will come from applying the same energy and techniques to
solutions that have never been previously considered. Real process change
and disruptive business model changes will ultimately be the reward. Regardless of whether it’s a digitization or
digitalization effort, there are real opportunities for progress at planning
and operational connection points. Manufacturers who take action without
major disruption might find benefits that include multiple digit returns.

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