How to achieve and sustain the impact of digital
manufacturing at scale
Although
manufacturing leaders see the potential of digital, few have a clear strategy
to capture its value. Three principles can help turn optimism into action.
Several terms are used to
describe the combined impact of digital connectivity, advanced analytics,
artificial intelligence, and new cyberphysical systems in the production of
physical goods. But whether it’s dubbed Industry 4.0, the industrial Internet of Things, or digital manufacturing—as we use in this
article—expectations remain high regarding the benefits that disruptive
technologies will create for manufacturers and technology providers.
For some manufacturers,
the primary benefits relate to improved productivity and reduced cost, but
others expect more wide-ranging impact such as shorter time to market, more
agile operations, increased ease of product customization, and even the
opportunity to generate additional revenue streams through value-added services.
Many companies are
embarking on the journey to integrate digital and production, but approaches to capturing its value differ
significantly. A few companies have gained senior-management attention and
committed significant resources to driving progress, including the creation of
“lighthouse” facilities as a test bed and future showcase for a range of
solutions. The majority, however, seem to be adopting more of an incremental
approach, with individual plants or business units selecting pilots in a less
coordinated manner.
Gauging attitudes, documenting progress
To understand how
leaders in various manufacturing industries are thinking about digital
manufacturing and determine how far they’ve progressed in adopting it, we
conducted our Digital Manufacturing Global Expert Survey for a third time in
the first quarter of 2017. The survey engaged a panel of 400 industry experts
in China, Germany, Japan, and the United States and focused on potential
changes in attitudes on digital manufacturing, progress made in implementation,
drivers of and barriers to implementation, and organizational approaches to
scaling impact from disruptive technologies in manufacturing.
Growing optimism.
The buzz around digital
manufacturing continues, with respondents from all four countries showing a
higher degree of optimism than they did one year ago. In China, Germany, and
the United States, over 60 percent of respondents are more optimistic about the
potential of digital manufacturing than they were a year ago, with a particular surge in China, where more than 80 percent of respondents are more
optimistic. In Japan, only 40 percent are more optimistic—but in last year’s
survey, that figure was 8 percent. The main reasons for this global optimism
cited by respondents are greater opportunities, higher return on investment,
and less difficulty in capturing this value than initially expected.
Respondents from China,
Germany, and the United States expect this potential to translate into
double-digit revenue and cost improvements over the next three years, although
those from Japan are more cautious. While increases in machine and labor
productivity, in delivery performance, and in the customer base are some of the
more common drivers of improved financial performance, significant numbers of
respondents also cite reduction in input costs, improved quality, decreased
maintenance costs, and lower working capital as important factors.
Pilots are under way
but scale is limited.
As companies deploy
digital-manufacturing solutions, most are pursuing multiple use cases, with a
focus on a mix of efficiency gains (for example, digital quality and
performance management or remote monitoring) and business-model innovation (for
example, in situ 3-D printing and real-time supply-chain optimization). The
most common of these address quality, performance management, process control,
and remote monitoring, irrespective of geography and industry sector. What is
also notable, though, is that even among those who state that a particular use
case is relevant to their companies, less than a third report rolling out that
use case across the company.
Analysis of the survey
results suggests there is no strong correlation between reported progress on a
company’s digital-manufacturing journey and their industry sector. However,
there are indications that certain countries are seeing accelerated deployment
and value capture. For example, a significant number (75 percent) of
respondents from Chinese companies say they have a clear road map or explicit
targets. By contrast, only 50 percent of Japanese respondents report this level
of progress—and 37 percent say their companies have neither a clear view on use
cases nor a digital-manufacturing road map or associated business cases. In
addition, many companies have not set explicit targets for the value they
expect from digital manufacturing. Along similar lines, Chinese respondents
indicate that many formal, corporate-level programs have been launched with
dedicated resources and funding, which does not appear to be the case in Japan.
Addressing concerns, building capacity, achieving impact
The survey suggests
that a few challenges stand between industry players who see the benefits of
digital manufacturing and the ability of their organizations to implement the
relevant use cases and start reaping their benefits. Two challenges, in
particular, top the list as the biggest barriers:
Talent.
Digital manufacturing
involves, by definition, a technology transformation, but behind the
implementation is human talent. A fifth of the industry players surveyed state
that challenges in attracting, managing, and retaining the right talent are making the implementation
of digital manufacturing difficult.
Data management and
security.
Much of the benefit of
digital manufacturing comes from the ability to manage the massive amounts of data being generated. Management includes capturing,
aggregating, analyzing, and securing large amounts of data, and nearly another
fifth of survey respondents describe challenges in these areas as a barrier to
implementing digital manufacturing.
Despite the ecosystem
concerns and current lack of capabilities, our client experiences and industry
observations indicate that there is a path that manufacturers might follow.
Specifically, eight activities guided by three principles of transformation can help
companies prepare for digital manufacturing and successfully roll out the
appropriate use cases at scale .
Principle 1: Diagnosis to design
The principle here is
that it’s essential to take a close look at where along the value chain the
elements of digital manufacturing might have the biggest potential benefit.
Then, it’s critical to design a plan that uses the levers that will bring that
value. This element focuses on taking a business perspective to identify the
levers to boost operations and design the target digital ecosystem. Two success
factors are critical here:
Form a clear
perspective on how and where digital will create bottom-line value linked to a clear return on
investment.
It is critical that
each company completes its own diagnostic of the most important levers to drive
bottom-line value, how much value can be unlocked, and the investment required
to do so. The survey shows us that there is still a lot to do. Less than 20
percent of respondents report having granular business cases on the potential
use cases their companies want to pilot.
Develop a multihorizon
road map.
Companies need to think
about operational horizons to create a clear path to impact. This needs to take
into account implementation timelines and critical technological enablers (such
as connecting machines and creating data lakes), and ideally will create a
self-funding program. The pace of technological evolution is such that any road
map should be revisited every three to six months and revised using what’s
learned from pilots. A desire for perfection should not be allowed to get in
the way of pragmatic decision making and forward movement.
Principle 2: Data/technology to impact
Once a multihorizon
road map is in place, the real work of capturing value must begin with a focus
on sustainably implementing new technologies and ensuring benefits flow to the
bottom line. Three success factors are critical here:
Building an ecosystem
of technology partners.
The nature and breadth
of digital-manufacturing solutions means that companies will be unable to
capture the full potential benefit by only developing solutions in house or
relying on a single technology vendor. Manufacturers will need to develop an ecosystem of technology partners who can support them in their
efforts (while also ensuring adequate cybersecurity is in place). Partnership examples include
consortia or public–private partnerships that are bringing together
manufacturers, large technology suppliers, and smaller technology-based
start-ups.
Adopting an agile
approach to developing, piloting, and refining digital-manufacturing solutions.
We expect the rapid
development and testing of new applications and solutions to yield benefits in
manufacturing, particularly in relation to solutions that focus on improving
labor productivity and performance transparency. One global mining player, for
example, uses a two-week “agile sprint” methodology to develop and pilot
minimum viable products for specific use cases such as predictive maintenance
and workforce planning. The company continues to refine the solutions and
typically requires five or six more releases to achieve a “minimum mature
product” that can be rolled out across a broader set of sites.
Fully engaging the
workforce to ensure successful adoption and change management.
Employees need to
understand why new ways of working are beneficial, and those benefits need to
be consistent with financial incentives. Training on using new tools needs to
be provided, and leaders need to role model new ways of behaving. User councils
(comprising frontline operators and supervisors to provide feedback on early
versions of solutions) and showcase facilities (used to demonstrate successes
to operational leaders) are ways of institutionalizing a culture of change.
Principle 3: Capabilities to transformation
Capturing and
sustaining the full potential of digital manufacturing requires companies to
embark on a transformation that stretches across, and indeed beyond, all
aspects of the manufacturing process. In this context, we consider three
success factors critical to achieving sustainable impact at scale:
Securing active C-suite
sponsorship—and ensuring that the transformation’s success is wired into
individual KPIs.
Whether
digital-manufacturing efforts are led by operations, technology, or a new chief digital officer, a
few elements are non-negotiable. The effort must be driven from the very top,
the leader must have the power to bridge functional silos and information and
operational technology (IT/OT), and success must be wired into individual and
organizational incentives to ensure alignment and motivation.
Adapting business
processes so that they match the digital world.
Achieving a
digital-manufacturing transformation also requires companies to adapt their
business processes to a more dynamic and, to some extent, more uncertain
environment. Several companies are adopting more of a venture capital–type
approach to funding with initial “seed funding” for good ideas and then stage
gates to release additional funds. Procurement functions may also need to
evolve for better interaction with technology start-ups. Similarly, IT
functions typically need to improve their ability to more rapidly integrate
third-party solutions without compromising cybersecurity.
Developing a talent-
and capability-management plan.
The exact capabilities
required to scale fast and scale sustainably will vary but are almost certain
to include raising organizational capability around IT/OT convergence, data
analytics, advanced robotics, and agile solution development. Manufacturers
might draw IT/OT skills from the corporate IT team on an as-needed basis or
build capabilities through partnering or recruitment. Others may choose to
build up all the required capabilities in-house by establishing, for example, a
global center of excellence with a team whose responsibility it is to keep on
the cutting edge of technology and steer the business toward relevant use
cases.
The 2017 survey reveals
interesting realities about digital manufacturing. On the one hand,
manufacturing companies around the world are increasingly optimistic about
integrating digital and production, and the overwhelming majority have identified
use cases that are relevant to them. On the other hand, a relatively small
number of these companies have made sufficient progress toward implementation.
With a focus on design, data, and capabilities, these companies can close the
gap between awareness and action and position themselves for the efficiency
gains or differentiation by innovation that come with digital manufacturing.
By Andreas Behrendt, Andràs Kadocsa, Richard
Kelly, and Lisa Schirmers
http://www.mckinsey.com/business-functions/operations/our-insights/how-to-achieve-and-sustain-the-impact-of-digital-manufacturing-at-scale?cid=other-eml-alt-mip-mck-oth-1707&hlkid=b2e2f58377e046118010c46448b5e8d0&hctky=1627601&hdpid=c5317188-978a-445e-a963-d35663ef285b
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