By Terri Hiskey
Digital transformation has a profound impact on the manufacturing industry and it shows no sign of slowing. Remaining competitive means being able to improve visibility and responsiveness and put customers first; this requires manufacturers to embrace digital transformation.
The digital model fuels key competitive differentiators, including the ability to extend transactions into experiences to connect with customers and suppliers anytime and anywhere, and to translate data into strategic insights.
Manufacturers that embrace digital transformation now are set to pave the way for business growth tomorrow, but manufacturers still struggle with how to get started with smart factory initiatives. Preparing for a digital future is no easy task. It means developing digital capabilities in which a company’s processes, people, culture, and structure are all aligned toward a set of organizational goals—namely improved responsiveness, customer centricity, and growth.
Divots and Divergence
For manufacturers, digital transformation impacts every aspect of operations and the supply chain, from equipment and product design through to production processes, logistics, and service. Industry 4.0 trends require new, more sophisticated levels of collaboration across geographies in everything from product roadmaps and engineering specifications to production line management and information about parts.
No matter what manufacturing model in in place—engineering-to-order, make-to-order, or make-to-stock—manufacturers increasingly work with an ever-broadening range of software systems. The challenge is to ensure proper software integration and effective data sharing across all systems.
The most digitally mature companies are eight times more likely to gain market share than the least digitally mature, according to Bain & Company, which benchmarks companies ranging from digital skeptics on the low end of proficiency to digital differentiators at the highest level.
While most organizations recognize the digital dividends, many face an uphill battle with legacy systems. Many manufacturers have legacy systems and technologies that do not provide the functionality, integration, and upgrade capabilities required to support the move to a truly digital organization. For many manufacturers, digital transformation could mean struggling with digital debt that stymies business growth potential. Defined, digital debt embodies itself in IT cost burdens, due to decisions made with legacy technology years ago, but also in terms of unsupported old releases, or isolated systems that may hold a business back from its full potential.
In fact, a large percentage are spending excessive IT cycles on integration, which takes away from the ability to focus on innovation and competitive advantage. In a recent study by Accenture, it was found that the typical IT budget may allocate up to 90 percent to maintaining the current state and just ten percent on innovating—a technology debt that bankrupts competitive advantage.
To this end, manufacturing executives take stock of whether the business systems they have in place are ready to support the Industry 4.0 journey. Product lifecycle management, enterprise resource planning (ERP), manufacturing execution systems (MES), computer aided drafting/computer aided manufacturing, and customer relationship management (CRM) must be integrated to support the move toward increased digitization and customization. The boundaries between production and management must disappear, and ERP, MES, and other critical systems must form an integrated unit for businesses to realize growth opportunities in this new age of intelligent manufacturing.
Evaluating the existing IT environment is the first step to understanding Industry 4.0 readiness.
Putting Digital Priorities in Order
Here, per industry experts at Forrester, are three steps manufacturers can take to migrate from legacy systems in support of a customer-centric operating model that is responsive and insight-driven.
Consider Business Objectives
The first step for manufacturers is to understand the role of digital transformation and how it can help the business grow. To do this, manufacturers need to evaluate the current state of all systems in use across R&D, procurement, production, warehousing, logistics, and marketing, sales and service. Assessment should evaluate the effectiveness of business systems. How does the technology support the objective of putting the customer at the center of business operations? How does the technology support the objective of providing and acting on business insights, and working in real time, while connecting with other areas of the business? How does the technology support the objective of supporting other business goals and metrics?
Once the assessment is complete, manufacturers identify migration priorities in the journey towards digital transformation.
Be Strategic in Estimating Costs
Accenture suggests organizations updating legacy systems and processes establish spending priorities based on what will yield the best returns and help them keep pace with growth objectives.
For example, investing in the cloud expands collaboration along the value chain. For some systems, a complete and immediate replacement might be the best option, while in other cases a full rip and replace may not be necessary, as an update may be a more cost effective and immediate solution.
Map the Migration Journey
Manufacturers that attempt to retain complex, disconnected, networks of legacy applications and systems limit the ability to put customers first, constrain digital transformation, and innovation and restrict business growth. It is important to set clear goals for legacy migration and constantly re-evaluate progress.
Digital capabilities are vital, and ensuring the right foundation is in place to capture, analyze, and act is critical, as time and the Industry 4.0 tide wait for no man or manufacturer. SW
An accomplished marketing professional with broad experience in the manufacturing and supply chain sectors, Terri Hiskey is VP of product marketing for manufacturing at Epicor Software, a provider of ERP solutions for 20,000 customers worldwide.
Mar2018, Software Magazine