Gerhard Hartman, Vice President, Medium Business – Africa & Middle East at Sage, explains how digital transformation offers manufacturers an opportunity to make informed decisions, respond in real-time, and take advantage of market opportunities.
The digital transformation of manufacturing processes is progressing on a global scale. This advancement has led to the development of new types of so-called ‘intelligent’ business applications, such as intelligent ERP, CRM, finance, and HR.
However, many manufacturers still run on legacy technology and processes that prevent them from tapping into the benefits of these new solutions, which include increased productivity, efficiency, and effectiveness. To step up profitability and ensure long-term success, manufacturers need to start thinking about investing in intelligent applications and moving away from legacy technology.
Things to keep in mind when making the shift
Over the last two to three decades, banks, retailers, and manufacturers have used large monolithic enterprise applications to automate their business processes. With the world advancing its digital agenda rapidly, legacy organisations are seeing diminishing returns and must therefore optimise their business processes. Markets are changing dramatically, and, in industries like manufacturing, brand loyalty no longer exists. Consumers compare products online from businesses all over the world. They can with equal ease import products as if they were shopping locally.
Legacy technology and traditional methods stop manufacturers from competing at this level. Clearly, they need to optimise to stay competitive.
Why optimisation?
Planning ahead has proven to be problematic, but with newer technologies like artificial intelligence (AI), big data, and the Internet of Things (IoT), manufacturers and supply chain stakeholders can start addressing complex optimisation challenges. With intelligence programmed into applications, businesses benefit from better planning capabilities. Cognitive processes and decision making are soon set to become automated, creating intelligent autonomous applications within businesses.
This change, particularly in the manufacturing industry, will fast track developments like Industry 4.0 and smart factories.
A new role for leaders in manufacturing
The biggest challenge facing leaders in manufacturing is overhauling shop floor processes. Most businesses have invested in technology applications like Enterprise Resource Planning (ERP) and in methods to ensure greater agility of the supply chain. They’ve also invested in distribution logistics by automating these processes. However, manual floor processes that start when a product goes into production, and continue until it arrives on the shop floor, hamper their effectiveness.
Floor operators still rely heavily on physical documents to record machine process parameters and test results. This inefficiency reduces the effectiveness of raw equipment by as much as 40% in some factories. Rather, they should rely on intelligence from materials and production to improve manual processes in real-time.
The risk of stagnation
Manufacturers are under pressure to increase productivity while making cheaper and higher quality products. Choice has eroded customer loyalty too. If they have a bad experience, customers won’t hesitate to look elsewhere for a better quality or less expensive product.
By not adapting, manufacturers risk becoming so marginalised that they may not be able to survive the digital economy.
Digital transformation is complex because it must be applied holistically in the business rather than in siloes. A smartphone stripped down to its components is not worth much, but people will pay thousands to be able to use these components when they are integrated. That’s the value of digital transformation.
There is no one-size-fits-all approach to technology that will magically change your business. Rather, to truly transform your organisation and meet market demand, it is about how you apply technology in your business to support innovation.
New thinking, new possibilities
C-level executives with a traditional background may not see how new technologies can transform the business; they prefer to stick to tried and tested methods that worked decades ago. However, younger C-level executives are moving into higher positions in manufacturing companies, bringing with them new ICT skills and a good grasp of how technology can increase visibility and move the business forward.
Where previously the focus may have been on process management and how to make supply chains more efficient, it’s now becoming more about how intelligence and analytics can speed up production, increase quality, and integrate external data.
The cloud is the future
On-premise server rooms and data centres will become redundant for manufacturing companies, as the cloud takes over as the de facto computing model. To run successful AI projects, businesses need massive computing power to support large data sets – and that’s better left to the technology experts.
Through cloud computing, data will be more secure and easy to access than if it was stored on an on-site server. In addition, it will be a lot more cost-effective to explore cloud options to capitalise on AI, data and machine learning.
Manufacturers are under increasing pressure to transform digitally to keep up with the constantly changing global environment.
Digital transformation offers an opportunity to make informed decisions, respond in real-time, and take advantage of market opportunities. And that’s worth the effort and investment.
