COVID Environment Illustrates the Importance of Digital Manufacturing

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The impact of COVID-19 continues to challenge manufacturers with sudden work remote policies, extreme demand swings, unexpected supply disruptions, new health safety procedures and other factors. In this rapidly changing environment, the importance of digital manufacturing has increased as manufacturers scramble to maintain business continuity while anticipating and reacting to seemingly never-ending disruption to their businesses.

Digital manufacturing can be considered a fully integrated approach to planning, scheduling, quality, cost management, material movement and shop floor control. It allows manufacturers to leverage digital and advanced technologies to better communicate, analyze and use real-time information to meet cost, quality, production and other performance objectives. As manufacturers advance through digital transformation, many first look to ERP providers to leverage new technologies like robotic process automation (RPA), machine learning, digital twins and others to bring more actionable insights, more rapidly adapt to change and innovate for competitive advantages.

With the pace of change accelerating worldwide, speed and responsiveness is everything.  The ability to recognize business disruption, pivot quickly and turn that disruption into a competitive advantage is crucial. The importance of digital capabilities in mitigating abrupt business change has been accepted for years. For example, manufacturers have relied on ERP solutions as a digital foundation for quite some time, and they know the extensive role ERP plays in addressing business changes like mergers, acquisitions, globalization, port strikes and other events. But, in today’s pandemic environment, companies are realizing the extensive role ERP and digital transformation plays in maintaining global manufacturing operations,

The current pandemic-related spikes and shortages are a harsh reminder that when a market disruption occurs, connectivity with and visibility into customers, suppliers, carriers and other trading partners matter more than ever. While the coronavirus is the most widespread and impactful business disruption manufacturers have recently experienced, during the ordinary course of business, leaders consistently prepare for unplanned events like labor shortages, natural disasters, geopolitical issues and other events. Increasingly, we see manufacturers placing less emphasis on cost savings and more importance on digital connectivity, agility and collaboration. In fact, a BDO Industry 4.0 Benchmarking Survey found that optimizing business processes and driving operational efficiencies was cited as a top business objective, and has become essential in light of COVID-19. The survey goes on to cite Harvard Business Review research noting that “companies that focus on operational efficiencies over layoffs to manage costs are more likely to experience ‘breakaway performance’ coming out of a downturn.”

In an era of constant disruption, manufacturers need to start thinking about ways to effectively boost digitalization and confidence that their ERP can meet next-generation requirements – if they have not already started. While the adoption of digital technologies varies from company to company, many manufacturers are implementing or reviewing new technologies they hope will boost operational connectivity, flexibility and responsiveness. Pragmatic manufacturers begin with smaller prototype projects like employing some form of machine learning to improve forecast accuracy, IoT techniques to increase shipment visibility or advanced analytics to enhance decision-making. Only to the extent that advanced technologies make a meaningful impact on performance, can manufacturers fully support the investment. As a result, manufacturers must decide which new technologies can provide competitive advantages for their business. Let’s consider just four areas where manufacturing ERP and digital transformation can stimulate operational efficiencies and business agility.

Boost Demand and Supply Chain Planning

Many situations other than COVID can affect future product demand and supply planning including seasonal trends, customer buying patternsunexpected weather events and competitive product innovation. Historically, many manufacturing firms have created forecasting and planning processes that rely on information that includes outdated demand patterns. In the era of digital transformation, it’s essential that firms can access real-time customer behavior, which can illuminate changing patterns and be used by management to adjust supply chain responses in accordance with customer expectations. With the digital technology available today and quicker access to real-time information, more precise demand tracking and monitoring allow for appropriate and timely supply chain adjustments to better meet customer demands and lower inventory levels.

Increase Supplier Collaboration

Improved connectivity and collaboration with raw materials, transportation, packaging and other suppliers can help to maximize supply chain performance. According to BDO’s Benchmarking Survey, “Real-time transparency can help companies more proactively identify specific areas of risk early on, or more quickly notice and respond to disruption that occurs.” Quicker access to possible supply chain disruptions can determine critical component availability for operations and product availability matching customer demand. Additionally, supplier relationships can be intelligently strengthened by digitally collecting and sharing information like inventory availability, quality standards, regulatory requirements and shipment status. Real-time data access and transparency allow supply trading partners to gain decision insights, collaboration and analytics resulting in greater agility to respond to uncertainties and disruptions involving suppliers.

Tighten Shop Floor Connectivity

Manufacturing organizations continuously complain about the lack of information between the shop floor and planning activities. Direct connections to production equipment and simplified shop floor data capture result in the influx of live production status for operators. As collaboration increases, manufacturers improve production decision-making, reduce inventory levels, increase customer responsiveness and boost enterprise agility.

With the business disruption of COVID, it is one type of challenge to have front-office personnel working from home, but it’s an entirely different challenge trying to run a factory floor from home. For many manufacturers, it is not an option as machine operators and material handlers are required to maintain operations. The question for manufacturers now becomes one of how many personnel are needed to maintain production.

By leveraging digital and next-generation ERP capabilities, manufacturers gain the production insights required to meet customer expectations with the comprehensive collection of operational data. Employees gain quicker access to the information needed to cost-effectively manage shop floor operations. This specific and integrated information improves production efficiency, delivers actionable analytics and serves as a critical component for minimizing on-site workers while ensuring production continuity.

Gain Timely Business Insights

Business visibility is a hot topic for many manufacturers, especially those that currently rely on outdated processes or have overlooked the importance of rapid access to data for delivering performance improvements. Decision-makers require instant access to information in a personalized manner that allows manufacturers and their trading partners to make decisions based on the same set of data. This improves on the scenario where manufacturers rely on manually intensive efforts to access and share information, or where data resides across multiple technology systems. In both cases, more agile and effective collaboration strategies result in accessible and actionable intelligence across the business network. With greater access to real-time data, manufacturers and their trading partners are in a better position to deliver innovative products, drive critical supply chain processes and ensure a positive customer experience.

The short-term outlook promises to be an ever-changing environment for manufacturers as they regain their footing amid COVID and continued volatility. While uncertainties remain in the foreseeable future, manufacturers should increase their operational resiliency and take a hard look at their current digital manufacturing and next-generation ERP capabilities. This includes reviewing current supply chain networks and production operations to foster more agility throughout the business. It also includes adding digital manufacturing technology for intelligent insights and to drive increased ability to flex production and resources as needed. With a pragmatic approach, manufacturers can exit the COVID environment with a stronger organization that reaps financial benefits and improves market competitiveness.