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How Digital Transformation Will Change Your Discrete Manufacturing Operation

How Digital Transformation Will Change Your Discrete Manufacturing Operation


Aug 08, 2017
Manufacturing and Distribution

Digital Transformation Manufacturing 

Part 3 of our 4-Part Digital Transformation blog series provides an overview of the primary ways manufacturers can expect their organizations to change when they implement the right digital technologies.

Some verticals within manufacturing move slowly when it comes to reaping the benefits of today’s digital capabilities; others, like Energy, Automotive, and Oil & Gas, have leveraged the power of data and digital equipment with great success. Yet manufacturing—an industry in need of a shot in the arm—has lagged behind.

It’s time to catch up. According to a Keystone Strategy white paper, the leaders in digital transformation have operating margins eight percentage points higher than lagging organizations, which equates to about $100 million more in additional operating income each year.

Before your discrete manufacturing organization takes steps to become more digitally enabled, it’s important (and, for some readers, eye-opening) to understand the basic principles involved. Generally speaking, digital transformation encompasses these categorical changes:

It Transforms Products

Digital technologies are emerging at an incredibly fast pace and, more importantly, with greater practical application. Manufacturers should start their transformations by looking at existing products to identify ways to make them more valuable to customers...and to their end users. As an example, backpack manufacturers are taking GPS technology and adding it to their products, making it possible for parents to track their children and mitigate the risk of abduction. This same kind of approach is helping manufacturers extend the value of their products to customers with relatively low-cost enhancements that give the product added functionality. 

Taking a step back, digital is also changing the way discrete manufacturers design their products (and enhancing existing designs of current products). By connecting shop floor equipment purchased by customers to sensors, and those sensors to computers, it’s possible to use the data that’s generated to make modifications that lead to improved product quality and performance, reduced cost, or shortened production time.

It Transforms Pricing
Digital technology is making it possible for manufacturers to abandon the traditional break/fix approach to service and create new, more “acceptable” revenue streams with their customers. When a customer is forced to call the manufacturer to get service, the cost incurred (time and money) certainly doesn’t do anything to improve the relationship. What if, rather than getting paid when things are broken, you use the data generated by your product to predict when your product will need maintenance and create “productivity packages” tied to a percentage of uptime? Most any customer would rather pay for the promise of uptime than for service, and this approach can only enhance these important relationships. 

It Requires Strategic Partnerships
Manufacturers are going to be hard-pressed to take on a digital transformation alone. Even the most sophisticated organizations with skilled IT staff will find it difficult to embrace and implement all that’s needed to take their digital game to the next level. A transformation requires equipment connectivity, data analysis, and specialized software. What’s needed is a partnership with experts who can evaluate the entirety of the organization, then develop and implement a program that takes advantage of the opportunities present. The best partnerships for discrete manufacturers will be those with business management consultants who have significant experience with manufacturing; they’ll have the foundational insights needed in order to help gain efficiencies, help develop more agile internal operations, increase employee productivity, and improve customer engagement, retention, and acquisition.

If your discrete manufacturing organization could benefit from all that technology offers today, you need to talk with one of Wipfli’s manufacturing experts. We’d be happy to talk about the specific potential your organization has to embrace and benefit from digital capabilities.

 

Author(s)

Suzanne Koss
Suzanne Koss, CPIM
Partner
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