Digitization is on everyone’s lips these days. If you have not taken steps to implement and improve digital data flow, you are probably already behind. I receive information regularly from PwC and here is a new report on how digitization is reshaping the manufacturing industry. The report takes a look at 8 companies and showcase how they improved their efficiency, productivity and customer experience by ensuring they have the right capabilities central to their operating model and by matching them with strong skill sets in analytics and IT.
Pressure from the consumer, new regulations and advances in information technology are all reasons that are pushing manufacturing organizations to digitize so they can avoid falling behind the new breed of market-leading ‘digital champions.’ The report identifies 4 significant changes CEOs must implement to maximize the benefits of digitization.
1. Drive organizational changes that address new digital capabilities and digitalized processes – e.g., product and process design and engineering, end-to-end procurement, supply chain/distribution and after-sales – right from the top, because these are so new and different
2. Hire more software and Internet of Things (IoT) engineers and data scientists, while training the wider workforce in digital skills
3. Learn from software businesses, which have the ability to develop use cases rapidly and turn them into software products
4. Extend digitalization beyond IT to include significant operational technologies (OT) such as track and trace solutions and digital twinning
From the report, “Already, digitally ‘smart’ manufacturers are gaining a competitive advantage by exploiting emerging technologies and trends such as digital twinning, predictive maintenance, track and trace, and modular design. These companies have dramatically improved their efficiency, productivity, and customer experience by ensuring these capabilities are central to their operating models and by matching them with strong skill sets in analytics and IT. “
During 2018 and early 2019, PwC conducted in-depth digitisation case studies of eight industrial and manufacturing organisations in Germany, the US, India, Japan and the Middle East. Drawing on discussions and interviews with CEOs and division heads, we explored the key triggers for change these companies faced, assessed how digital solutions are being implemented and how digitisation is affecting key aspects of their operating models. We also compared our eight organisations with other publicly cited digitisation case studies, and leveraged PwC’s 2018 study Digital Champions: How industry leaders build integrated operations ecosystems to deliver end-to-end customer solutions and other ongoing PwC research.
This paper is the result of ongoing collaboration between PwC and the Global Manufacturing and Industrialisation Summit (GMIS). GMIS provides a forum for industry leaders to interact with governments, technologists and academia in order to navigate the challenges and opportunities brought about by the digital technologies of the Fourth Industrial Revolution. PwC has been a knowledge partner with GMIS since 2016.
The eight case studies in this report make clear how far the role of digital technology goes beyond traditional IT systems. It also encompasses OT and data and analytics technologies. Full integration and linkage among these different technologies, and the ecosystems they are part of, are essential to a successful digital transformation. Yet success is impossible without a digitally smart workforce that is familiar with Industry 4.0 skills and tools.
These challenges are the subject of the second part of the report Digital Champions: How industry leaders build integrated operations ecosystems to deliver end-to-end customer solutions, which will be published in January 2020.
The report will elaborate further on the emerging theory of digital manufacturing and operations, in which successful, digitised industrial organisations will increasingly have to act like software companies in response to four key factors:
- The connected customer seeks a batch size of one, necessitating greater customisation of products and delivery time, improved customer experience, use of online channels and outcome-based business models.
- Digital operations require both engineering and software abilities to enable extensive data analysis and IoT-based integration, as well as digitisation of products and services.
- Organisations need augmented automation, in which machines become part of the organisation via closely connected machine–worker tasks and integrated IT and OT.
- Future employees will be ‘system-savvy craftspeople’ with the skills to use sensors in order to collect and analyse accurate data, as well as design and manage connected processes.
About the authors
Anil Khurana is PwC’s global industrial, manufacturing and automotive industry leader. He is a principal with PwC US.
Reinhard Geissbauer is a partner with PwC Germany based in Munich. He is the global lead for PwC’s Digital Operations Impact Center.
Steve Pillsbury is a principal with PwC US and the US lead for PwC’s Digital Operations Impact Center.
Digitally integrating and aligning manufacturing operations with the rest of the enterprise has been an elusive goal for perhaps 20 years. It was a promise of ERP. Easy to say; hard to accomplish. Then we went through all the IT/OT stuff. Here’s another take–aligning sales and operations. Speaking from bitter experience, have faster and more accurate feedback from sales would have made our lives better in operations.
Salesforce just announced Manufacturing Cloud, a new industry-specific product for manufacturers. Manufacturing Cloud brings sales and operations teams together around a unified view of market and customer demands to more accurately forecast, plan, and drive predictable business performance. With Manufacturing Cloud, companies can now better meet commitments and run a more streamlined business while improving customer satisfaction.
Here is the rationale from Salesforce: The manufacturing industry depends on predictability, as its capital-intensive businesses often have complex physical operations that cannot be quickly or inexpensively modified to meet changing customer demands. Unfortunately, operations teams aren’t always aligned with sales reps to ensure they have a single, real-time view of all aspects of their customer relationships.
Critical customer insights are siloed across spreadsheets and multiple ERP systems, which can negatively affect account performance and ultimately the ability to accurately predict demand. The resulting inventory stockouts, buildups and warehousing costs reduce operating margins and negatively impact revenue. In order for manufacturers to provide a seamless customer experience, they need a solution that helps them better understand customer needs while improving visibility across the entire value chain.
“In the manufacturing industry, changing customer and market demands can have a devastating effect on the bottom line, so being able to understand what is happening on the ground is imperative for success,” said Cindy Bolt, SVP and GM, Salesforce Manufacturing. “Manufacturing Cloud bridges the gap between sales and operations teams while ensuring more predictive and transparent business, so they can build deeper and more trusted relationships with their customers.”
Introducing Manufacturing Cloud
Manufacturing Cloud, the newest industry-specific product from Salesforce, delivers a new level of business visibility and collaboration between the sales and operations organizations of a manufacturing company. This allows them to have a better view of their customers through powerful new sales agreements and account-based forecasting solutions, providing visibility into their customer interactions while enabling them to generate more robust sales forecasts.
Salesforce has collaborated with major manufacturing and sales companies through the product pilot program, including Kawasaki Motors Corp., U.S.A. – Engines Division, Hitachi Chemical, CF Industries, Mipox, GELITA and more.
Manufacturing Cloud features include:
- Sales Agreements allow manufacturers to unify their run-rate business with data housed in ERP and order management systems with the contract terms negotiated—including planned volumes and revenues—so both operations and account teams can have a 360-degree view of the customer. If any changes to the agreement are needed, they are immediately incorporated into the existing sales agreement, ensuring there is always a single source of truth. This allows account teams to manage the full sales agreement lifecycle and have visibility into committed and actual order volumes, the performance of the agreement against the forecast and other time-phased custom metrics. This also simplifies the renewal process, ensuring account teams continue to bring in revenue while increasing margins.
- Account-Based Forecasting provides manufacturers with a complete view of their current business alongside future opportunities. This allows sales, finance and operations teams to develop more accurate forecasts while breaking down internal silos. Account teams can also add updates on changing customer needs or market demands, allowing the team to collaborate and adjust forecasts in real-time, helping to make business transactions, profits and revenue margins more predictable.
In addition to Manufacturing Cloud, Salesforce is also releasing new manufacturing-specific innovation across the Salesforce Customer 360 Platform to help manufacturers deliver greater transparency, streamline collaboration and grow their businesses.
- Einstein Analytics for Manufacturing provides account managers with access to an intelligent experience with out-of-the-box KPIs into account health, demand insights, product penetration and sales agreement progress. By centralizing and analyzing key data sources, account managers can proactively engage clients that are at highest risk for churn. In addition, by identifying key trends within an account, account managers can proactively grow their relationship by recommending relevant upsell and cross sell opportunities.
- Community Cloud for Manufacturing will deliver a new pre-built template specific for manufacturers that extends sales agreements to channel partners, allowing them to easily collaborate together on leads and opportunities.
- MuleSoft Anypoint Platform unlocks data from any application, data source or device—whether that data is on-premise or in the cloud. By enabling organizations to connect Manufacturing Cloud with other systems, sales and operations leaders can automate the complete order-to-cash process, create a comprehensive forecast view and drive business process automation across all sales channels.
Partners Accelerate Expansion
Salesforce has a comprehensive ecosystem of partners that will extend the power of Manufacturing Cloud. Key partners were instrumental in the development of Manufacturing Cloud, and will power digital transformation for customers in the manufacturing industry.
- Accenture: As a pilot partner, Accenture’s global experience with industrials is providing new ways to apply Manufacturing Cloud to deliver transformational value through practical, connected, cloud-enabled solutions.
- Acumen Solutions: As a design and pilot partner for Manufacturing Cloud, Acumen Solutions collaborated with Salesforce to identify personas, use cases and requirements of customers in the manufacturing space to inform product development.
- Deloitte: Cloud4M, an ISV Managed Package, was built on Manufacturing Cloud by Deloitte Digital, Deloitte’s creative digital consultancy and a Manufacturing Cloud pilot partner. Cloud4M is a pre-configured, multi-cloud software solution designed to simplify decision making in B2B sales agreements and throughout the end-to-end customer engagement process, tailored for manufacturers and industrial product companies.
- Rootstock: Rootstock’s ERP system, built on the Salesforce Platform, feeds actuals from its ERP to Manufacturing Cloud to track compliance against sales agreements. Additionally, Rootstock’s planning engine consumes sales forecasts from Manufacturing Cloud to improve the quality of production, procurement and distribution plans.
Manufacturing Cloud, Einstein Analytics for Manufacturing and Community Cloud for Manufacturing will be generally available in October, 2019.
The popular saying holds that the future is here just unevenly distributed. According to a survey released by PWC and The Manufacturing Institute, that thought is certainly true about the Fourth Industrial Revolution (which PwC labels 4IR but many others label Industry 4.0). This research confirms my observations that many manufacturers have projects at a variety of stages, while many others have adopted a wait-and-see attitude.
The report notes that fourth industrial revolution has been met with both enthusiasm and fence-sitting. While sentiments and experiences have been mixed, most business leaders are now approaching 4IR with a sense of measured optimism. Indeed, larger systemic changes are underway, including building pervasive digital operations that connect assets, developing connected products and managing new, real-time digital ties to customers via those products.
While manufacturers recognize the potential value of advanced technologies and digital innovation—particularly robotics, the Industrial Internet of Things (IIoT), cloud computing, advanced analytics, 3D printing, and virtual and augmented reality—they are still deliberating how and where to invest and balancing the hype with their own level of preparedness. Meanwhile, they’re also well aware of the significant changes 4IR will bring to a new manufacturing workforce—that is, one that is increasingly symbiotic and increasingly beneficial for many workers and manufacturers alike.
This narrative is reflected in a new survey of US-based manufacturers carried out by PwC and The Manufacturing Institute, the workforce and thought leadership arm of the National Association of Manufacturers. We see a definitive—and, indeed, inevitable—shift to 4IR as companies seek to integrate new technologies into their operations, supply chain, and product portfolio. At the same time, they acknowledge that scaling, justifying 4IR investments, and dealing with uncertainty surrounding use cases and applications usher in a new set of challenges.
Some key survey findings include:
• While the sector as a whole is making assertive forays into 4IR, many manufacturers still inhabit the awareness and pilot phases. Nearly half of manufacturers surveyed reported that they are in the early stages of a smart factory transition (awareness, experimental, and early adoption phases).
• Manufacturers do expect the transition to accelerate in the coming years—73% are planning to increase their investment in smart factory technology over the next year.
• While we see a number of fence-sitters, the bulk of manufacturers are indeed prioritizing 4IR, the digital ecosystem, and emerging technologies. 31% report that adopting an IoT strategy in their operations is “extremely critical” while 40% report that it’s “moderately critical.”
• About 70% of manufacturers say the biggest impacts of robotics on the workforce in the next five years will be an increased need for talent to manage in a more automated, flexible production environment and the opening of new jobs to engineer robotics and their operating systems.
…While adopters have identified clear signs of success. Though most manufacturers are still climbing the 4IR adoption curve—albeit at different speeds—those that have made progress are reporting a modicum of performance boosts measured by productivity gains, reduced labor costs, new revenue streams from IoT-connected products and services, as well as improved workforce retention and worker safety. Those that have effectively defined their use cases with a focus on outcomes rather than technology are seeing early wins, and are looking for ways to generate even more value.
Manufacturers are seeking to balance 4IR hype and reality. And most acknowledge that sitting back and waiting for the inevitable may not be an option.
The road may be longer than the hype would have companies believe, but preparing for and embracing change is a muscle many of today’s manufacturers are ready to flex. Those that can build on their ad hoc pilots and prioritize investments and strategies with their long-term desired business outcomes will be better positioned to create lasting value for their organization.
Industry and manufacturing leaders recognize the trend to the next step in the evolution of enterprise effectiveness and success. The industrial digital revolution is an overnight sensation that has been 30 years in the making. We began with digital controls then adding human interface and then information handling.
Internet of Things with its proliferation of sensors and other smart edge devices, IP networking, data science, and advanced analytics (business intelligence) combined take us to a whole new level of enterprise effectiveness.
The trite question from marketing people often goes, “What’s keeping our customers awake at night?”
Well, are executive worried about the capability of technology?
Two research reports just came my direction recently from a couple of my go-to sources for what’s happening with the thinking in the industrial/manufacturing executive suite. One is from PwC, What’s Next in Manufacturing: Building an Industrial Digital Ecosystem, and the other from Accenture Digital Skills Gap Slows Manufacturers’ Push to Build Digital Factories.
No, it’s not technology that worries them. First it’s people and culture. Are there sufficient people with digital skills? Will the culture make the transition? Then, of course, they worry about how large the investment might become and what the return will be. It’s people and economics.
PwC Digital Industrial Survey
In this report, PwC shares results from a survey of global industrial products companies, shedding light on what manufacturers are doing now to build out their digital operations and what bottom-line benefits they expect to yield through those efforts.
Buying into digital: manufacturers plan to ramp up investments
In the last two years, US manufacturers invested an average 2.6% of their annual revenue in digital technologies. In the next five years, they expect to lift that investment to 4.7% of revenue—for an estimated $350 billion in investments in digital operation technologies across automotive, industrial production and manufacturing industries alone.
Venture capital funds flowing, too
Since 2011, some $3.6 billion has poured into VC-backed start-ups across a selection of digital technology sub-sectors, with investment rising at a 47% clip–more than double the annual growth of total VC funding (18%) in all sectors over the same period.
“Digital deals” have comprised 15% of all US M&A activity since 2012
According to a PwC/Strategy& analysis, more than $6.0 billion has been invested on “digital deals” in North America alone since 2012, comprising some 15% of all M&A deals over that period.
The greatest challenge to a “digital vision” is cultural
In the context of embracing digital operations technology, three of the top 10 challenge areas identified by surveyed companies relate to organizational readiness and financial concerns. Some companies anticipate high investment requirements with unclear return on investment, and lack of digital standards and issues related to data security and intellectual property are also noted.
Monetizing digital operations sought through cost reductions, revenue generation
Nearly two-thirds of manufacturers expect that adopting digital manufacturing technologies will translate into lowering operating costs by at least 11% mostly via efficiencies through automating processes and production. Meanwhile, over half of these manufacturers expect such adoption to boost revenues by at least 11%.
How digital technologies drive bottom-line results Manufacturers are just scratching the surface of monetizing digital manufacturing. Some key drivers to achieving cost-cutting and revenue uplift from digitization with the introduction of smart, connected manufacturing technologies and products and services include:
- Lowered “price of variability” across production and processes
- Moving from analogue products to “connected, digital products”
- Manufacturing data…and new business models
- Software-enabled upgrades to products
- Pay-as-you-go model
Building a digital manufacturing strategy
Building a digital strategy requires a thorough self-assessment to determine a company’s “current state” of its digital evolution—and, just important, defining its “target state”. This means tailoring digital operations solutions to a business’ assets and making the right moves at the right time—from ramping up data analytics capabilities, to monetizing product data to considering a “digital deal”.
PwC concludes, “The future of digital manufacturing holds many “what-ifs”. But, if it unfolds as dramatically as our survey indicates, most all manufacturers will be altered to some degree. And, for every “what if”, there are choices manufacturers ought to consider.”
Accenture Researches Industrial Digital
Take a look at some of the results of Accenture’s research. Although the majority ofmanufacturers have implemented digital platforms, more than half (51 percent) lack the skills to operate digital factories. The more successful manufacturers have advanced talent strategies in place to digitally enable the workforce of the future.
Cracking the Code on the Digital Factory, a report based on a global study of 450 manufacturers, found that a growing skills gap is one of their biggest concerns – a situation that has worsened in recent years as manufacturers have transformed their operations using new technology, analytics and mobility capabilities.
Fifty-five percent of manufacturers, up from 38 percent in 2013, reported a skills gap among skilled trades laborers, who need to operate increasingly advanced digital machinery and equipment, such as 3D printers or modeling and simulation tools on the plant floor. Likewise, 60 percent of manufacturers, up from 31 percent in 2013, cited a shortage of maintenance workers skilled in the use of predictive maintenance analytics that leverage data from embedded sensors in a machine-to-machine environment.
“For manufacturers to realize the full potential value of digital factories, they need to redesign their workforce to include new manufacturing skills, such as analytical reasoning and data-driven decision support,” said Russ Rasmus, managing director, Accenture Strategy. “Developing a comprehensive talent strategy inclusive of new digital skills is an imperative for today’s manufacturers.”
Digital Factory Leaders
The research identified a small group of manufacturers (8 percent) that outperformed their peers by increasing production and profitability by more than 10 percent since 2013. These “leaders” are more likely than their peers to understand which new skills they need for future growth and success, and have a more effective strategy to attract, develop and retain this new breed of manufacturing talent.
A majority of these leaders (73 percent) more frequently reported already having the requisite digital skills, as compared to 49 percent of other manufacturers, and they were nearly 50 percent more likely to report a higher degree of visibility into what skills they needed. That has allowed most of the leaders (81 percent) to achieve greater internal workforce mobility in roles involving digital, enabling them to match employees with managers who need those skills.
Barriers to Success
While these digital factories are enabled with rapidly developing technology innovations, the technological aspect of their implementation is not the top barrier to success. Seventy-five percent of the deployment challenges cited by survey respondents are related to skills, organizational change or structure, and the talent within the organization.
Chief obstacles that hinder manufacturers’ digital adoption.
“Manufacturers must aggressively manage these non-technical barriers as they deploy their digital factory capabilities. These include the ability to create new processes, lead teams made up of workers and machines, and constantly update training programs,” said Rasmus.