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Setting a clear business case and conditions for success helps companies take incremental steps to deliver transformational value.

Manufacturers are under unprecedented pressure to produce high quality, low-cost products at pace. Compounded by the complexities of resource scarcity, complicated supply chains, and mounting legislation, efficiency is everything. The solution? Manufacturing 4.0 (M4.0), otherwise known as Smart Manufacturing.

M4.0 is regarded as the next industrial revolution and refers to the powerful combination of technological innovation, changing operational strategies, and new ways of working. At the heart of M4.0, and fuelling the transformation of the manufacturing sector, is digitization. Every transformative technology driving M4.0 relies on careful and programmatic digital integration. Bringing these technologies into existing models is proving to be an iterative process with a distant horizon. However, incremental steps, when done carefully, can deliver significant value.

The Devil’s in the Data

Technologies like robotics, 5G connectivity, Machine Learning (ML), and Artificial Intelligence (AI) provide access to valuable data that can streamline and accelerate material-efficient design and enable revolutionary digital production methods. Digital twin technology heralds the arrival of the metaverse in manufacturing, virtually representing existing functions such as production lines to help businesses assess the impact of specific scenarios without pausing processes or compromising safety.

Data is difficult to use in these scenarios without the right tools in place. It is typically fragmented, isolated, and can be ‘dirtied’ by a lack of data governance within organizations. With 73 percent of all data collected floating unused in the digital ether, it is no wonder that businesses struggle to maximize the value of their digital assets.

“To identify the most impactful technology, focus on where you have operational challenges or gaps in accurate and accessible information needed to make better business decisions. ”

Data is often localized in a range of systems along the operations planning, operations management, and operations execution landscape. These systems include ERP (Enterprise Resource Planning), MRP (Material Resource Planning), MES (Manufacturing Execution System), SCADA (supervisory control and data acquisition), for example. Integration of these trapped data sets, combined with basic analytics capability, can deliver important insights to key areas of efficiency leakage like quality; however, companies often struggle to justify the investment in data itself, without clear demonstratable business cases.

Other opportunities like low-capex solutions such as connected sensors – measuring vibration, temperature, vision, and more – may help to diagnose manufacturing operations issues and provide a tangible example of the M4.0 value proposition. For example, a vibration sensor may be calibrated to monitor and record machine cycles, detecting production disruption and correlating to machine failure to provide the basis for predictive maintenance capability. This maintenance event and resulting machine downtime can be integrated into the production schedule, which in turn can be connected to customer facing capabilities like Available to Promise (ATP) and Capable to Promise (CTP) that help drive revenue. These connected capabilities, enabled by M4.0 technologies, help drive quantitative improvements.

Manufacturers can also incorporate third-party data, such as trading party transactional information, to gain greater oversight of the end-to-end supply chain. Better visibility leads to improved risk management while pre-empting disruption and anticipating opportunities. Procter and Gamble, for example, uses digital twin technology to check product quality in real-time directly on the production line, maximizing equipment resiliency while optimizing energy and water use to avoid waste.

How to Get Started

The investment required to drive M4.0 cannot be justified in a simple manner. It is impossible to do it all at once, but is manageable when broken down into smaller pieces. The most effective way to do this is through a defined, carefully timed and executed roadmap.

Start by understanding what information is required to diagnose, anticipate, or report issues, and ultimately what is the desired outcome. This might be addressing the causes of production disruption, such as quality issues, safety, or obstructed views of planning or execution. Then, break down your strategy. What iterative steps need to be taken to solve the situation? What role will technology play in providing data where there are gaps? What is the most effective M4.0 method for your problem? Unilever, for example, is currently implementing a new digital roadmap fueled by automation at one of their largest ice cream factories in Caivano, Italy. The ambition is to free workers from repetitive, routine work, allowing them to upskill while reducing operating costs and improving the safety and efficiency of the factory.

“Avoid moving forward with a specific technology for technology’s sake, only pursuing the opportunities that will deliver real, measurable value.”

To identify the most impactful technology, focus on where you have operational challenges or gaps in accurate and accessible information needed to make better business decisions. This includes internal observation, but also looking outside of your organization at how competitors and partners navigate digital opportunities. Next, define your key focus areas and identify the gnarliest questions. Answering these critical questions will bring the most value. Then, examine your existing processes and infrastructure. Can they integrate with more advanced systems? Can you run systems in parallel? What are the initial costs of integration and migration? Build a transformation framework into your roadmap, with key milestones. Consider key dependencies and potential impacts.  Determine if external partners can play a role to advance the realization of benefits.

Build a Case for Change

You will then have defined your specific operations opportunity and created a roadmap to apply M4.0 technologies to these opportunities. Success now relies on two things: communication and unification. The entire organization needs to understand the processes you intend to embed, how, and most importantly, why. Clear, cross-department communication will help teams understand the opportunities that M4.0 will bring and recognize the rationale for digitization. Inspire your teams by creating a compelling case for change. Communication should include partners and suppliers, as they are likely to be impacted positively. Business alignment is vital. The process or technology you want to introduce should pursue a shared, overarching purpose.

“Manufacturing companies that understand the central role of data and its criticality to enabling value integration across people, process, and technology are leading the way in enterprise digitization.”

With full business and supply chain buy-in, and a clear rationale that reflects organizational objectives, you can move to the next stage. Test your chosen change, setting up pilots to assess the impact and finetune your approach. If you do not see the expected outcome, take a step back. Avoid moving forward with a specific technology for technology’s sake, only pursuing the opportunities that will deliver real, measurable value. At the height of the COVID-19 pandemic, for example, PA developed an AI enabled forecasting capability to predict 30-day forecasts of COVID-19 trends with 75 percent accuracy, supporting global manufacturing companies to manufacture and distribute their products in line amid demand fluctuations.

Nail Then Scale the Opportunity

The questions that often accompany significant developments, especially those requiring investment and a measured level of risk, are how quickly adoption will happen, and how easily will it scale? Our research into breakthrough innovation found that once a clear business case is made and the conditions for success are set, scalability will take care of itself.

Investment in M4.0 technologies provides greater visibility, aiding strategic and operational planning, and transforming reactive behavior into a predictive, proactive approach. Data-driven disruption in manufacturing improves order management, production monitoring, predictive maintenance, resource management, and inventory optimization, all while supporting cohesive feedback loops between sales, marketing, and manufacturing teams. The benefits are clear, bringing significant improvements that increase quality, efficiency, profitability, and customer satisfaction.

Manufacturing companies that understand the central role of data and its criticality to enabling value integration across people, process, and technology are leading the way in enterprise digitization. These outlier organizations are utilizing end-to-end digital integration to develop ‘shop floor to top floor’ capabilities, optimizing operations through better processes and people management.  M

About the authors:

Michael Platz is a Supply Chain and Manufacturing Operations Expert at PA Consulting.

Shanton Wilcox is a Partner and America’s Leader in Manufacturing at PA Consulting.

The NAM recently released its Top 8 Manufacturing Trends for 2023—a guide to the opportunities ahead and the resources that the NAM can offer. Here is what to look out for this year and beyond.  

Advanced and emerging technology: Manufacturers are investing in a multitude of new technologies, including artificial intelligence, virtual reality, machine learning and more. Automation and robotics are enhancing workers’ abilities but will also require many more high-skilled employees. Though the workforce shortage is a challenge, digital technologies will help manufacturers become more resilient, efficient and profitable.

• NAM resources: How do you maximize these opportunities? The NAM has resources for you, including the Manufacturing Leadership Council (the NAM’s digital transformation arm), the Innovation Research Interchange (the NAM’s innovation division) and the MLC’s Manufacturing in 2030 Project.

Supply chain resilience: As manufacturers face long lead times, increased costs and a scarcity of raw materials, they are taking steps to boost supply chain resilience through reshoring, cybersecurity, increased supplier pools and more.

• NAM resources: Manufacturers can benefit from resources like CONNEX Marketplace, which helps connect nearby manufacturers and suppliers; the NAM’s Supply Chain Hub—a continually updated collection of webinars and policy documents focusing on supply chain issues; and useful case studies highlighting best practices.

Talent disruptions and opportunities: Manufacturers are confronting a range of challenges around the workforce, including labor shortages and skills gaps, while also figuring out how to take advantage of previously untapped talent pools. 

• NAM resources: If you are searching for ways to enhance your employee benefits, The NAM Manufacturers Retirement 401(k) and Savings Plan offers manufacturing employees secure benefits for the future, while Innovation Management Workshops give manufacturing leaders the skills to build innovative and creative teams. Meanwhile, the Manufacturing Institute—the 501(c)3 nonprofit workforce development and education partner of the NAM—promotes a range of events and initiatives designed to expand and diversify the manufacturing workforce as a whole. 

Cybersecurity: The threat from bad actors is real, and strong cybersecurity has become critical to manufacturing operations up and down the supply chain. At the same time, manufacturers will have to be on the lookout for new cybersecurity reporting requirements.

• NAM resources: The NAM can help, with support like the NAM’s complimentary Cyber Risk Assessment. NAM Cyber Cover offers cyber insurance and risk mitigation, and you can check out these videos from manufacturing executives laying out best practices for cybersecurity defenses. 

Post-pandemic growth and expansion: Long-term goals shouldn’t be downgraded, despite an uncertain economy. Manufacturers should keep pursuing technological advances, navigate government incentives and stay open to mergers, acquisitions and other investments.

• NAM resources: The NAM Incentives Locator helps manufacturers find funds and tax credits to help their business, while the MLC offers networking opportunities for manufacturing leaders.

Tough economic outlook: There’s no doubt that manufacturers face economic headwinds. That means manufacturers need to look for ways to be nimble and responsive to changing realities and able to work more efficiently than ever. 

• NAM resources: Tools like NAM Shipping & Logistics give manufacturers discounts on shipping and freight, while NAM Energy offers conversations with energy advisers who can help adjust energy use strategies. IRI Coffee Houses promote virtual conversations with innovation leaders to discuss new developments and opportunities.

Sustainability: Manufacturers are committed to strengthening operations and maintaining a healthy planet at the same time. More than ever, manufacturing companies are looking for ways to reduce carbon emissions.

• NAM resources: The NAM provides resources that can help manufacturers with innovating for sustainability, as well as rethinking end-of-life technology value. Manufacturers can also learn about how digital solutions drive sustainability in manufacturing. 

Looking ahead to 2030: Changes in the manufacturing industry and in the world around us—from population growth to the rise of a new middle class to increased interconnectivity—have manufacturers planning for big changes in the next decade. 

• NAM resources: The IRI offers a forum for manufacturers to connect with R&D leaders, while the MLC’s Next Phase of Digital Evolution report shows how manufacturing leaders can plan their long-term futures.

 Learn more: Take a look at the full guide for more details and to find out more about the NAM resources that will help manufacturers deal with these key trends.

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To ensure adaptability, a smart factory should be part of a broader digital transformation strategy for a manufacturer.

The smart factory, with its digital production model, is gaining momentum, driven by a combination of forces that includes global disruptions and instabilities, supply chain disruptions, and heightened customer demands for digital-first experiences. Usually, when organizations think of their objectives for digital transformation, they tend to lean toward production optimization or cost reductions. However, the success of real factory transformation comes from transforming the way companies capture and provide value to their customers.

Organizations embarked on a smart factory journey that has scaled beyond the pilot phase have experienced unprecedented increases in operational efficiency as a result of greater agility in their operations. However, most companies appear to be stuck in “pilot purgatory.” There may be several reasons for this, ranging from lack of leadership, cultural aspects, workforce readiness, and legacy and disparate systems, to a lack of process standardization as well as cybersecurity risks.

Many manufacturers are already leveraging components of a smart factory in areas such as gaining visibility in production operations using Manufacturing Execution Systems (MES), planning and scheduling using real-time production and inventory data, and leveraging augmented reality for maintenance. But a true smart factory is a more holistic endeavor, moving beyond the shop floor toward influencing the enterprise and the broader ecosystem. The smart factory should be an integral part of a broader digital transformation strategy for an organization. That strategy should have multiple elements that manufacturers can leverage to adapt to the changing marketplace more effectively.

The strategic importance of the smart factory is undeniable as early adopters have reported greater agility in their operations, serving their customers better, and driving more to the bottom line. NTT DATA and Oxford Economics surveyed 528 business and IT executives recently. We found that manufacturing organizations of all kinds are prioritizing revenue growth, cost reduction, increased resiliency, and innovation for the three years ahead. In this article, we will discuss the following aspects of the smart factory:

• Key considerations for smart factories and enablers
• Maturity models, assessments, and framework; how to start, scale, and transform
• Use cases
• Conclusion

Key Considerations for Smart Factories and Enablers

1. Data Mastery and Analytics – A foundational pivot for smart factories is data mastery. Data mastery involves the use of data and analytics to find insights that help organizations become more efficient and pursue new business opportunities effectively. Data mastery is about more than building data lakes or empowering senior leaders to make better decisions. It is also about structured and unstructured data flowing through organizational processes to enable decisions at the edges of an enterprise.

In today’s manufacturing environment, accessing, aggregating, and analyzing data remain primary challenges. Manufacturing data come in many different formats (both structured and unstructured) and from many different sources: smart sensors, PLCs, DCSs, HMIs, MESs, motion control systems, vision systems, historians, completed work records, operator and maintenance logs, quality records, automation protocols, batch reports, energy meters, spreadsheets, databases, and a host of other sources. To meet these challenges, a well-orchestrated common data framework that is designed to ingest, aggregate, and condition the entire variety of data from the factory floor and then channel it to the company’s AI Data Pipeline for analysis is critical.

What’s essential to meet this critical need is a mechanism to manage data coming from the manufacturing shop floor. First, the data must be contextualized automatically using artificial intelligence, including an expert system, machine learning (ML) classifiers, and highly sophisticated ML algorithms. Next, a factory/plant digital twin must be generated and configured to mirror the actual manufacturing production lines. The digital twin, a dynamic, empirical mirror of the factory production systems, machines, equipment, and processes, produces a real-time semantic context for all product, production, and process data. Analytics can be performed on real-time data streaming from sensors, machines, and production systems to determine state condition and support best practices based on quality reporting, engineering diagnostics, and KPIs for asset performance Using analytics, users can design new reports and dashboards that address predictive maintenance, process optimization, root cause analysis, statistical process control, KPIs, and process deviation, among other data points. The analyzed data can be visualized as real-time, actionable information for every machine, line, and plant across an enterprise in contextualized dashboards that are designed to present the right information to the right people.

Cybersecurity – As more IoT devices are connected to networks, potential attack surfaces can increase, along with risk from compromised devices. These attack surfaces may not be exploitable or vulnerable today but may be easily exploited in months or years to come. Thus, leaving devices unpatched and connected to the network is not likely feasible. The responsibility of securing these devices should not lie solely with those who deploy the connected device; instead, the responsibility should be shared with the device manufacturers, who may be best positioned to implement the most effective security. Historically, OT networks have typically been implemented quickly without proper precautions being taken to electronically safeguard the industrial control assets they contain. Consequently, they are inherently full of risks, which are often not assessed, categorized, or even known and understood. Gartner reported that typical cybersecurity incident losses range from under $50K to over $100M with an average cost of roughly $3M and reported payments for ransomware incidents ranged from under $100K to more than $2M, with an average cost of roughly $520K. Additionally, organizations took an average of 170 days to detect an incident and an average of 66 days to investigate an incident. The time to remediate was on average about 80 days.

To mitigate the risk of cybersecurity, organizations must adopt a holistic approach across lifecycle assessment, implementation, and management.

Figure 1. Cybersecurity methodology

2  Digital Technologies – Smart factories typically integrate functions beyond the factory floor. While the Smart Factory focus mostly spans across operations, quality, sustainability, safety compliance and technology risk mitigation, it also integrates with the ERP, CRM, PLM, and other value chain applications. Ecosystem and sustainability are beginning to play a very prominent role in the evolving smart manufacturing priorities.

Figure 2. A variety of digital technologies are being leveraged to enable transformation in these functions:

Some of the technology considerations and capabilities to address smart factories from an IT and digital perspective are listed below.

Figure 3. Typical stack and technology considerations to keep in mind.

3  Leadership, Organization, Culture and People – Factory Initiatives need a higher level of engagement to manage change. When a factory becomes smart, and front line and management decisions are more data driven, product lines are getting smarter, the traditional corporate silos are being broken down and replaced with flatter, more collaborative organizational structures and monolithic entities are being replaced by more federalized, distributed, and agile value-chain ecosystems, it requires both a top down and bottom-up approach to manage change, culture, training, and communication across the enterprise.

Figure 4. Gartner found that the top three challenges for Chief Data Officers all had to do with concerns about the required culture and skills to achieve their goals.

Prioritize support at a leadership level as well as on the ground to gain organizational buy-in and ensure adoption. It also requires diverse teams with a broad variety of skill sets. The leadership or the chief digital officer must identify and deploy skill sets required to support the initiative such as engineering, master data management, analytics, edge, and data science to ensure the value extends beyond the four walls of an enterprise. Another key point to consider is upskilling resources, reskilling of employees, and ongoing support and learning. It requires development and assessment of skills required for the long term to ensure ongoing success as the smart factory evolves.

Building skills can pay major dividends such as driving acceptance and adoption of solutions and providing support for employees as they adapt and creating a culture of continuous learning. As smart factories leverage advanced digital technologies, roles within the factory will call for new and different skills than had been needed previously, making it challenging to upskill and train. Organizations should also look at some of the non-conventional models to deploy alternate talent models, collaborate with universities to build a pipeline of talent, and leverage the ecosystem of partners. This will also help attract and motivate young people starting their career in manufacturing.

Figure 5. A six-step approach to managing change.

Maturity Models, Assessments and Frameworks:

A Think Big, Start Small, and Scale Fast Approach

Smart factory investments often start with a focus on specific opportunities. It will be effective to start small, test out concepts in a manageable environment, and then scale once lessons have been learned. Once a “win” is achieved, the solution can scale to additional assets, production lines, and factories, thus creating a potentially exponential value creation opportunity. Moreover, achieving the ultimate true “Lights Out” operation requires a crawl, walk, and run approach as illustrated below. A company’s manufacturing strategy and environment will determine which specific issues to address and the way to unlock value through smart factory solutions. Customizing the approach to each scenario and situation can help ensure the resulting smart factory meets the needs of the organization.

Figure 6. A three-horizon approach to achieving smart factories.

Execution Approach – Pilot Site

Plant Maturity Assessment and Transformation Framework

Before an organization embarks on a transformation, it is important to assess and understand the maturity levels of people, process, and technology. While there is no globally accepted maturity assessment framework for smart factories, the World Economic Forum has taken a leadership role in shaping the future of global manufacturing. A vital component of this initiative is the Smart Industry Readiness Index (SIRI). SIRI is a suite of frameworks and tools that help manufacturers start, scale, and sustain their manufacturing transformation journeys. The assessment findings depend heavily on sharing relevant organizational practices and self-reflection on areas of improvement.

Figure 7. Smart Factory Maturity Assessment

The report should have a comprehensive roadmap that depicts current maturity across process groups and people; a readiness index and levers to improve; capabilities required to implement; the next logical step; and recommendations to start the transformation.

Use Cases

Smart factories encompass operations, quality, sustainability, safety compliance and technology risk mitigation. Use cases and process groups vary depending on specific customer and factory needs. Typically, smart factory use case benefits are focused on productivity increases, cost reductions, improved energy efficiency, inventory reduction, lead time reduction, and improved throughput.

The World Economic Forum has reported some of the top use cases implemented by the Global Lighthouse network companies.

Figure 8. Typical process groups and representative use cases in smart factories.

Key Value Realized by Organizations Implementing Smart Factories

Lighthouses are demonstrating how digitally infused operations go beyond productivity improvements to create sustainable, profitable growth. To be sure, the productivity gains are there, resulting from digital machines and management applications driving output increases at the factory level. Looking past productivity, two ways to drive growth stand out: by adopting new business models and unlocking capacity in the people and production processes. The results are encouraging. These measures optimize resources and infrastructure while enabling workers to realize their potential equipped with powerful digital applications – all without massive capital investment or negative environmental impact.

Figure. 9 Value realized

Conclusion

Though there are many different approaches to smart factory deployment, lessons can be learned from each approach that can lead to significant value creation. These range from people-centric experiences such as change management, putting humans at the center of capabilities, and managing skill diversity to broader operational and technological considerations. If leaders take just one lesson away, however, it is the importance of moving forward. All our recent surveys and research show that organizations broadly agree that the future of manufacturing is smart. The empirical results in global lighthouse factories reported by WEF demonstrate the value of the smart model. While it seems daunting, by starting small with specific program objectives that can produce tangible value, companies can get themselves started on driving sustainable value. For those who are in the journey, it is about accelerating and scaling the benefits. For those just contemplating how to start, now is the moment to begin — or risk being left behind.   M

About the author:

Baskar Radhakrishnan is Strategic Advisor, Manufacturing Industry Solutions at NTT DATA

AI is changing the way manufacturers do business—from the production line to the back office and across the supply chain. At the Manufacturing Leadership Council’s Manufacturing in 2030 Project: Let’s Talk about AI event last month in Nashville, Tennessee, panelists discussed how those sweeping changes would alter, and enhance, the manufacturing workforce.

A collaboration between the MLC (the NAM’s digital transformation arm) and the MI (the NAM’s 501(c)3 workforce development and education partner), the event provided key insights for manufacturers into how technology and workforce trends interact with each other. Here are a few key takeaways. 

Net positive: “The history of technology adoption is about improving the job quality of individuals on the shop floor. AI helps them to do the job better, provide them with better tools, gives them greater authority and ultimately increases the value-add of their jobs. All of that is a net positive for those individuals,” said MI Vice President of Workforce Solutions Gardner Carrick.

• By leveraging data and enabling greater efficiency, AI will improve communication, increase collaboration across disciplines and stimulate innovation, according to the panel.
• In addition, “AI can even inform the workforce’s creativity by working with it to design a new product or system,” said Jacey Heuer, lead, data science and advanced analytics, Pella Corporation.

Skills needed: While you might expect that implementing AI requires workers skilled in programming, data science and machine learning, manufacturers will also need to expand their bench of critical thinkers and problem-solvers. The panelists had a few tips to help companies along.

• Invest in upskilling programs to make the AI integration process at your company smoother and develop the talent you already have.
• Update job descriptions to reflect the skill sets the company will need in the next five to seven years.
• Consider recruiting for and teaching adaptive skills—skills that enable individuals to adapt easily to changing demands and environments—which can increase the flexibility of your workforce.
• Build partnerships with local schools, community colleges and technical and vocational schools to develop talent pipelines that will meet your needs.

The human-AI collaboration: While AI will take over monotonous, repetitive tasks, the panelists predicted that the industry will continue to center around human labor.

• “You can teach AI to do X. You can teach AI to do Y. [However,] combining the two may be really difficult for AI, while a human can do it better. You’re going to continue to see humans in roles that center on making decisions and telling stories,” said Asi Klein, managing director, industrial products and organization transformation, Deloitte Consulting.
• Meanwhile, AI adoption will likely lead to an increase in available jobs, as more skilled workers will be needed to guide and inform these new processes.

The last word: “Over the last 12 years, we’ve seen a lot of technology adoption, but we have not seen a lot of job loss. In fact, we’ve seen job gains,” said Carrick. “There is a lot of opportunity to reimagine jobs to add value that AI will help to illuminate.”

Digital Transformation (DX) is a broad business strategy to solve traditional business challenges and create new disruptive opportunities using digital technology – such as maximize revenue, reduce cost, improve quality, and increase flexibility. Use cases range from asset optimization to workforce productivity to industrialization.

Why Manufacturers Need Digital Transformation

To remain competitive, DX for manufacturers is a necessity. Global market intelligence firm IDC predicts that in 2025 global DX spend among manufacturing industry companies will total more than $816 billion. Forrester Consulting found that more than 90% of manufacturing leaders believe that DX is important for their success. Clearly there is a lot at stake and developing a DX strategy is critical to capturing the most value.

The range of opportunities for DX in manufacturing is both a positive and negative. On the one hand, for whatever challenges facing an organization, there is likely a solution out there to address it. But manufacturers are faced with dozens of challenges. Such initiatives are usually driven by a scattergun, technology-driven approach. Ultimately, this results in resources being misdirected and just a small set of initiatives driving true transformation. Instead, companies must employ a laser-focused approach, that emphasizes impact, speed, and scale.

Manufacturers that have successfully adopted DX strategies are more efficient than their competition. That efficiency may be generated by greater worker productivity, asset uptime, better cross-organizational collaboration, or other DX opportunities. Ultimately, regardless of how efficiency is gained, it can be leveraged to increase revenue and/or reduce costs.

Achieving Transformation with Impact, Speed, and Scale

Regardless of the many different challenges an organization faces and the many different solutions on the market, there are fundamentally four objectives for manufacturers that have not changed: maximize revenue, reduce cost, improve quality, and increase flexibility. Impact, speed, and scale are the three key success factors for delivering transformational outcomes, and each must be tied to at least one of the objectives. Here’s how:

Impact – Focus resources on the most important constraints to drive P&L. Based on the dynamics of an industry and strategic roadmap, manufacturers should determine which of the fundamental goals are most important to improve upon and which are most likely to impact these goals in order of their criticality to the business.

Speed – With impactful opportunities identified, attention should turn to speed and scale. Quick wins can make or break a good initiative by building early, positive momentum. A quick win will generate team buy-in and can be leveraged for greater executive support. This rapid time to initial value is best achieved with proven off-the-shelf solutions.

Scale – Scalability must be considered early. No initiative should take place without a comprehensive and actionable scaling plan. If a project is slow to scale it is more likely to lose support and fold. If it cannot scale, then it is not delivering transformational value. The most reliable way to build a scalable plan is to model it after approaches that have already proven to be successful. The key here is finding repeatable use cases, that check off the high impact requirement and can be deployed with off-the-shelf solutions.

Final Thoughts

A recent PTC survey found that there is a stark difference between the companies that succeed in DX and those that do not. Companies that meet ROI goals expectations beat them by an average of 50%; those that fail miss expectations by an average of 30%.

This insight underscores the requirement for strategic DX for manufacturing organizations, and the PTC Impact, Speed, and Value Framework described here creates a foundation for DX success.

Will Hastings is Director of Product Marketing, PLM for PTC.

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To get to where they’re going, manufacturers must first make an honest assessment of where they are. 

Investing in smart factory technologies will become a key area of opportunity for middle market manufacturers looking to differentiate themselves, improve operating costs and stay ahead of the competition. Before ramping up their investment in and implementation of those technologies, though, companies need to have a digital transformation framework and roadmap in place to ensure a thoughtful and prioritized plan. This will allow those advanced tools and processes to work to their full potential.

Having such a roadmap will also help chief financial officers, chief technology officers and other executives identify key priorities amid a high price environment and looming recession, ultimately helping to improve efficiency and save money.

Key elements of a digital transformation framework include an understanding of where the company is in its digital maturity journey, as well as an understanding of M4.0 factories’ implications on the workforce of the future.

Building a Foundation

For many manufacturers, upgrading legacy systems is a central step to becoming a truly digital organization. This may involve upgrading enterprise resource planning systems and inventory management systems, which can enable more precise supply chain visibility. A broader shift to cloud-based IT systems can also allow manufacturers to realize lower risk and lower cost of ownership of the data that lives there.

Overall network architecture is another crucial part of the foundation. Companies will need to integrate historically siloed IT and OT infrastructures, as we wrote recently in this article. This will enable “more circular connectivity throughout operations, better security, continuous improvement in efficiency and, ultimately, growth.”

“Key elements of a framework include an understanding of where the company is in its digital maturity journey, as well as an understanding of implications on the workforce of the future.”

There are significant opportunities for middle market manufacturers to evaluate whether their current digital foundation will suffice in the increasingly connected future. Here are what the stages of a digital maturity model might look like, as RSM lays out in its digital strategy guide:

• Non-existent: “There’s little to no use of technology to facilitate daily operations.” Many processes and systems are manual and production is run largely by paper work orders. The use of automation is not widespread throughout the organization, and very little production data is available for relevant analysis.
• Basic: “There’s a limited use of digital solutions to perform specific tasks.” Some aspects of operations have been automated and/or digitized, and teams are using some operational data to inform decisions. The production floor is still highly manual. The foundational ERP system hasn’t been optimized for all processes but provides basic production data that can be used for retroactive production volume analysis.
• Market contender: “Most day-to-day tasks are facilitated through technology and managed through current systems.” Teams use technology to streamline and improve operations. A foundational ERP system and/or other advanced solutions allow teams to manage supply chain and operations more efficiently. The company can extract relevant data from multiple systems for analysis, but that analysis is still manually intensive and mostly retroactive. Predictive capabilities are still somewhat limited.
• Industry leader: “Competitors and similar organizations view your organization as the benchmark for digital maturity.” Teams leverage advanced software and solutions for shop floor automation and data gathering. Data is automatically integrated across systems and platforms and fed to the business via predictive capabilities, which steer operational performance and inform decision making.
• True innovator: “Your organization is on the cutting edge of technology and recognized as a digital pioneer.” The organization has implemented and trained its workforce on the use of predictive data analytics, machine learning and automation capabilities that allow for continual improvement throughout the operation. The company also has advanced supply chain visibility that allows precise supply and demand synchronization.

A third party can help in assessing where teams across the organization and across business functions fall along this digital maturity spectrum.

Security and Controls

Cybersecurity is another crucial foundational area for industrial companies looking to further their digital capabilities; organizations adopting advanced technologies need to raise the bar for how they protect their information. In the context of digital production and M4.0 factories, where more devices and operations are connected via one or multiple networks, the importance of cybersecurity is even higher.

“Today’s manufacturers need ‘new-collar’ workers who have more technical, advanced skills than traditional white-collar office workers or those in blue-collar jobs.”

When it comes to building cybersecurity for industrial control systems, companies should understand where there might be gaps in the four key areas of oversight, people, processes and technology.

• Oversight: Organizations need to have clear governance and strategies in place around the security of their industrial control systems and ensure that processes incorporate board and executive oversight on everything from understanding cyberthreats to navigating cyber insurance to coordinating with law enforcement in the event of a breach.
• People: People should also have a thorough understanding of the company’s protocols and security organization structure at the enterprise level.
• Process: Companies need to have consistent cybersecurity considerations built into all their processes to ensure not just physical security but also business continuity in the event of breaches.
• Technology: This includes security monitoring, threat modelling, intrusion detection and protection, endpoint security, data loss prevention and security architecture and design.

Labor Impact: ‘New-Collar’ Workers

There may be concerns from employees at all levels of the organization about how advanced technologies will change what day-to-day operations look like. But the main issue here isn’t technology replacing humans throughout the organization. Rather, it’s about how manufacturers should adjust the digital skills they seek out in potential employees, and how best to train existing employees to ensure they keep up with those skills, especially in the areas of analytics and automation.

“For true success, businesses need to evolve constantly and regularly question where there may be opportunities for improvement.”

“Today’s manufacturers need ‘new-collar’ workers who have more technical, advanced skills than traditional white-collar office workers or those in blue-collar jobs, especially in the areas of automation, analytics, robotics and the Internet of Things,” we wrote in early 2022. “While proficiency in machinery is essential, dual knowledge of analytics or advanced robotics is in high demand.”

Organizations will need to understand how this affects their recruitment and training strategies, as well as their investment priorities.

Questions to Frame the Path Forward

There are a few key questions that can help manufacturers chart a path toward ensuring they are M4.0 ready and will be able to use smart factory technologies to their full potential:

• What value do you believe these technologies could drive for your organizations?
• Where does your organization currently fit in the digital maturity journey laid out above? What are the reasons for its current position along that journey?
• What investments or plans will be needed to make this progress?
• What will the changing workforce landscape—and the increasing importance of digital skills—mean for your organization?

In many ways, endeavoring to become a truly digital organization is a never-ending project. For true success, businesses need to evolve constantly and regularly question where there may be opportunities for improvement.  M

About the authors:

Jason Alexander is partner at RSM US LLP.

Daniel Wheadon is partner at RSM US LLP.

Jake Winquist is director at RSM US LLP.

The Manufacturing Leadership Council recently partnered with EY for a two-day event focused on preparing for the future of manufacturing. Hosted at MxD in Chicago, Ill., the event focused on data-driven manufacturing and included a tour of EY’s Digital Operations Hub, several discussion panels and presentations, and a collaborative workshop.

Diving deep into manufacturing at EY’s Digital Operations Hub: Day one featured a round-robin visit to a selection of experience modules within the EY Digital Operations Hub. Participants had the option to visit five of the hub’s 31 modules where they heard about topics including workforce upskilling, intelligent demand forecasting and planning, digital performance management, digital worker enablement, edge computing, and more.

As participants made their way around the Digital Operations Hub, led by EY’s Mark Heidenreich, who leads the Digital Operations Hub, EY’s expert team and partners shared a deep dive into each topic, demonstrating the latest technologies and thinking on this important array of manufacturing topics.

Focusing on the future: The second day of programming kicked off with a conversation between David Brousell, MLC’s Co-Founder and Executive Director, and Scott Dixon, EY’s Managing Director – Advanced Manufacturing Technology Leader. The topic at hand was MLC’s latest white paper, The Next Phase of Digital Evolution and what it tells us about the future of manufacturing.

The two focused on data and its important role in manufacturing. While data may be difficult to get to – particularly on-demand – it is an important driver of decisions and value. However, they cautioned that data collection doesn’t equal success. Instead, Brousell and Dixon urged organizations to balance resilience while adding complexity. Brousell recommended that organizations not focus on data’s ability to “knock down silos.” That phrase, he warned, can be scary for subject matter experts. Instead, he recommended weaving silos together so that systems are integrated and domain expertise can be maintained.

Becoming data-driven: Next up, the event covered the top challenges for data-driven manufacturing with a presentation by EY’s Sachin Lulla and Amy Burke, the Americas Consulting Sector Leader – Advanced Manufacturing & Mobility and Advanced Manufacturing & Mobility Markets Leader, respectively. With a survey of 400 manufacturing companies as its basis, the presenters shared how only 10% were experimenting with digital, while only six percent were tackling digital at scale.

Throughout the conversation Lulla and Burke emphasized the need to put humans at the center of any transformation, building digitization and operational excellence around that core. For Lulla, the purpose of technology is to augment human intelligence. The pair agreed that starting with an end goal in mind is important when formulating a data strategy. The organization and employees need to know “the why” behind the data collection and use.

Further, Burke and Lulla recommended that organizations should not just look at gaps in their current workforce, but at what employee skills exist on the team and how upskilling and a learning environment can cultivate a fertile ground for data to be used successfully.

Driving digital with data: Pfizer’s Vice President of Digital Manufacturing, Mike Tomasco, was on hand to share how the pharmaceutical and biotechnology company uses data-driven decision making to create value. Tomasco shared how the company’s initial failures with capturing and using data led to significant successes and allowed Pfizer to move beyond pilot purgatory to large-scale transformation.

Moving beyond: The idea of moving beyond pilot purgatory was explored further to start the final panel discussion moderated by Brousell. Panelist Jim Fledderjohn, Dell’s Manufacturing Vertical Field Director, advised organizations to align pilots to the bigger strategic vision and fail fast. According to fellow panelist Terry Davenport, Rheem’s Executive Vice President, Global Operations, leaders should use the scientific method to learn from pilot projects and prove the value before scaling. From a collaboration standpoint, Microsoft’s Americas Regional Business Lead – Manufacturing, David Breaugh suggests that cross-functional teams help keep an eye on the big picture and unlock insights faster. Meanwhile, James Zhan, PTC’s Vice President, Market Development, IoT Solutions cautioned the audience not to focus solely on pilot purgatory and to be sure to keep an eye on workforce skills purgatory.

The panel also tackled the topic of data measurement, with Fledderjohn urging organizations to be selective about what data they collect – a proactive strategy that will help ensure the data is used and useful. Any process should have a metric that makes things faster, safer, eases worker burden, and offers higher quality and cheaper outputs, added Davenport. To that end, panelist Steve Pavlosky, GE Digital’s Vice President of Product Management, shared that GE shifted its technology roadmap to help customers move data into a single system so operators could make decisions quicker.

Capping it off with idea sharing: The event was capped off by a series of collaborative breakout sessions during which participants brainstormed go-forward ideas and feedback around the topics covered throughout the course of the entire event. Beyond the content that participants absorbed throughout the event, the breakouts gave them a chance to add their own two cents to the discussion, share their own experiences, and take away new perspectives that can be applied to their organizations.

Visit https://www.mxdusa.org/partners/ey/ to learn more.

All photos courtesy of EY.

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