By Dave Evans, CEO, Fictiv
Many claim that manufacturing is undergoing a transformation to a digital model. For digital transformation to work, though, it has to deliver tangible dividends to all stakeholders. While the fourth industrial revolution has delivered many grandiose ideas, it has delivered few real examples in terms of achieving a tangible digital dividend. What’s more, Industry 4.0 has failed to spread innovation and access of manufacturing expertise to the masses.
For digital transformation to succeed in these dual goals of dividend and democratization the focus needs to be less on the factory and more on the entire manufacturing ecosystem. According to Capgemini report Smart Factories at Scale, “Organizations realize that success is hard to come by, with just 14% characterizing their existing initiatives as successful.”
Industry 4.0 defined
The term “Industry 4.0” was coined in Germany around seven years ago and promised a future of self-managed, heavily automated manufacturing, offering a “lot size of one” model that would deliver efficiency and agility. If it had delivered on its promise in its first five years the manufacturing world would have been much better placed to weather the perfect storm of disruption caused by COVID-19. The pandemic showed quite clearly that it had not delivered and the industry was largely still dependent on spreadsheets and paper trails.
Attempts to transform industry has resulted in confusion and has overwhelmed those attempting to shift. The result has been simultaneously filling column inches and occupying hours of boardroom discussions, but what has been achieved? Industry 4.0 has felt like too much talk and not enough action and we’ve not really seen any digital dividend.
Unfortunately, it took a pandemic to convince the world that traditional supply chains and manufacturing were a little too…well, old school. Outsourcing bids to the cheapest overseas vendor, managing relationships via archaic spreadsheets and late-night phone calls, and performing quality audits by sending teams of people for lengthy international visits all seem so quaint in retrospect. The pandemic has hammered home the need for digital transformation to mitigate this and future disruptions.
But with travel still at a virtual standstill and social distancing guidelines prohibiting teams from performing in-person inspections, the old ways of managing partners and supply chains no longer suffice. To survive, companies need to compress the next decade’s worth of supply chain innovation into a much shorter time frame.
The many challenges of 2020 and the coronavirus pandemic have forced a range of industries, including healthcare and education, to prioritize digital transformation to adapt to a more virtual world. That evolution is especially critical for those with complex supply chains or manufacturing needs. Fictiv recently released a report, 2020 State of Manufacturing Report, which found that 87% of companies are focused on digital transformation to revamp supply chain strategies and avoid future disruption. But while the majority of companies are looking to accelerate digital transformation, only a small percentage had well thought out, well-funded plans.
We see a need to shift the focus from bits and pieces of manufacturing to more of a Digital Manufacturing Ecosystem, a term we coined for our processes. Focusing on the entire ecosystem of manufacturing can make it possible for companies large and small to reap the dividends of digital transformation without huge upfront investment in internal solutions. It’s not just the machinery that needs transformation. Processes, including purchasing and supply chain management need to be changed, and often these provide an ideal leaping off point for brands wishing to accelerate their digital journey.
We have found that many companies are too inwardly focused when they explore digital transformation. The greatest opportunities for agility, resilience and efficiency come from looking externally, from exploring changes in the ecosystem in which they operate. Accessing digital manufacturing ecosystems can shorten time to market for innovators, while adding value and security.