The digital landscape is constantly changing for manufacturers. Change is propagated by rapidly changing consumer expectations, connected devices and technology improvements in neighboring industries in the supply chain. We are already seeing the effects that digital transformation in manufacturing has on businesses, their suppliers, customers, and other third parties.

This has numerous advantages, such as helping businesses adapt to changes faster, or even anticipate changes before they occur – all crucially important to manufacturing. From the start, most companies believed Industry 4.0 would help them to improve efficiency and reduce costs on the shop floor, rather than being just another tool. Manufacturers were talking about the digitisation of production sites targeting operations KPIs, but mostly with no broader concept.

By combining enablers like the industrial internet, IoT, and cloud, a whole new area for business has opened up — digital business models. Manufacturers themselves have started to transform from B2B to direct-to-consumer (D2C). For manufacturers, the new business models are more disruptive and much more complex with D2C than with the traditional B2B approach. Now we have remote asset condition monitoring and predictive maintenance utilizing the real-time data-based digital twins of the product, process, and assets.

What is Digital Transformation in Manufacturing Industry Today?

The state of manufacturing is constantly changing due to volatility in global, economic, and policy decisions. From trade policy to AI to IoT, 2019 has seen a number of developments that promise disruption in this sector. The 2020s will see a continuation of this trend, with numerous areas in manufacturing accelerated by network capabilities of 5G, the greater push for IoT, Industry 4.0, machine learning and predictive analytics.

Customer expectations and solving customer pain points are still the main drivers for digital transformation within companies. With eCommerce for manufacturers, CRM, and ERP platforms, customer data is more visible than ever and cannot be ignored by manufacturers in their transformation initiatives.

Challenges of Digital Transformation in Manufacturing

Just like in any industry, there are many things that can hold manufacturers back from digital transformation initiatives, whether it’s selling the idea to upper management, or fighting over fears surrounding business and personnel resources. Nevertheless, starting the discussion can offer manufacturers a candid look at their own inefficiencies, their resource allocation procedures, and open them up to new technologies.

  1. Any digital transformation initiative can place demands on the IT department’s technology stack and development structure. This may require the use of new release cycles, processes, APIs, or innovating in other areas of digital performance.
  2. Digitalisation in the manufacturing industry incurs costs on human resources: the workforce can feel disillusioned in the face of changing workplace realities. Employee reluctance and communication issues also pose a challenge to manufacturers.
  3. Being in a dynamic and cash-sensitive industry, manufacturers need to carefully address any budget and resource limitations. This can lead to reservations about sticking to their digital transformation strategy.
  4. Manufacturing operations are complicated with tight schedules and numerous resource constraints. As a result, management doesn’t take kindly to ill effects on operations before seeing any benefits from their digital transformation.

Examples of Digital Transformation in Manufacturing

In the manufacturing industry, digital transformation is not just about automating the assembly line or better analysing existing data. It involves a change in mindset, approaches and new ways of problem-solving. Here are just some ways that manufacturers transformed their businesses:

  • Selling to businesses is difficult and it can be counterproductive with a platform that doesn’t address the needs of today’s business buyers.
  • The impact of big data and real-time analytics in manufacturing cannot be ignored.
  • Automation of manufacturing processes can reduce inefficiencies and streamline common functions such as inventory management, order fulfillment, and order status
  • The impact of real-time ERP data of customer transactions, the location of an order, the location of stocks, and inventory of raw materials etc.can streamline production

Huge data gains and new business insights earned through digitalisation

Manufacturing companies constantly seek a better understanding of who their customers are, which has led many firms to create direct-to-customer business models that harness the power of the web. This represents another key area of manufacturing evolution – digital transformation.

The Internet and the potential to harvest large volumes of intelligent data online has revolutionised consumer-facing companies, and now we’re starting to see manufacturing firms building business-to-business ecosystems to get closer to their customers.

…and think out of the box to increase revenue

You only have to look at examples of US tractor manufacturer John Deere, which launched an online store selling everything from lawnmowers to fertiliser, or plane maker Airbus which now offers products ranging from watches to model aeroplanes online. These portals capture large volumes of customer data which in turns drives new revenue streams and helps companies better understand demand.

Digital transformation also enables manufacturers to collect data from “under the bonnet” of the company, and not just from the shop floor. Data on everything from sales and supply chains to human resources and finance creates a seamless data flow which can be integrated and analysed, yielding insights into how a company should be run.