10 Factors Driving Digital Transformation In Manufacturing

Manufacturers are predicted to rapidly increase spending on digital transformation of their operations from $152B in 2017 to $479B in 2023, attaining a 21% Compound Annual Growth Rate (CAGR) according to Statista.

Digitally transforming factories are revolutionizing manufacturing by enabling a 7X increase in overall productivity by 2022 according to Capgemini.

56% of manufacturers have invested $100M or more towards smart factories in 2017.

Manufacturing’s inflection point is here, and it’s accelerating across shop floors to the top floors of every company in the industry. Every manufacturer realizes that relying just on product revenue is rapidly becoming the past, and services & software revenues are the future.

At the intersection legacy manufacturing operations and the need for new services revenue are smart, connected products. Capgemini estimates the size of the connected products market globally will range between $519B to $685B by 2020.

Manufacturers will need to digitally transform themselves to keep growing in the future or risk being left behind as their customers’ preferences change to increasingly smart, connected products. Consider the soaring adoption rates of voice-activated assistants including Apple Siri and Amazon’s Echo technology, both embedded in over a dozen of the latest automotive models being introduced in 2018 and beyond.

  • Smart, connected products are the fastest growing category of new products. They’re forcing manufacturers to transform to keep growing digitally. The following ten factors are driving the digital transformation of manufacturers today and in the future:
  • Digitally enabled supply chains designed for greater accuracy, speed, and quality capable of supporting short-notice, customized production runs. Being able to flex and support short-notice production runs for customized smart, connected products is the fastest path to growing new sales growth. Digitally transforming manufacturing operations needs to begin at the supplier level by having real-time information streams on the availability of needed assemblies, components, and parts.
  • The need for real-time, 360-degree views of product configurations by engineering, manufacturing, marketing, and sales makes the integrating of PLM, CAD, ERP, and CRM a must-have to drive services revenue. Soon every manufacturer who sets the goal of capturing new services & software revenue will need to think differently about the lifecycles of their product configurations. Treating engineering, production, marketing & sales as separate silos need to end. Integrating the systems, they rely on and providing each with a contextual view of product configurations’ lifecycles is the future. Configuration Lifecycle Management (CLM) breaks down the silos across departments and for the first time delivers real-time, 360-degree views of each product configuration.
  • Analytics and Business Intelligence (BI) are the rocket fuel digitally transforming manufacturers rely on to power their businesses forward. The most successful digitally transforming manufacturers are putting the customer at the center of every initiative. From redefining production workflows on the shop floor to designing contextually intelligent, connected products they’re focused on delighting customers and exceeding their expectations. And analytics and BI are the fuel they’re relying on to keep digitally transforming in the right direction. Indexing product quality to customer satisfaction is achievable today, as is tracking every aspect of manufacturing contributing to excellent customer experiences. Analytics and BI are enabling a new level of transparency with customers, and that’s essential to driving new revenues in services and software.
  • The era of intelligent cloud platforms has arrived, and they are enabling manufacturers to streamline production, improve quality and speed up time-to-market. Manufacturers’ IT systems were designed to produce the same product at the highest quality and speed possible. Today, customers are demanding more flexibility than ever in product design, production run availability, embedded intelligence, and integration options for their products. Intelligent cloud platforms are enabling manufacturers to excel at delivering short-notice production runs of customized smart, connected products. Microsoft Azure has well over 600 Web Services available that can be selectively used to support re-engineering everything from production workflows to aftermarket services. The era of the intelligent cloud has arrived in manufacturing, and it’s enabling a new era of smart, connected products that deliver services revenue.
  • Real-time monitoring is revolutionizing shop floor operations and providing valuable real-time data streams to analytics and BI applications. The core metrics that manufacturing runs on include cycle times, Engineering Change Orders (ECO), Overall Equipment Effectiveness (OEE), Perfect Order performance, Corrective Action/Preventative Action (CAPA) and many more. Producing smart, connected products is going to change the underlying assumptions of each of these metrics and force a new level of customer focus and intensity to improve continually.
  • Quality goes from being siloed on the shop floor to an enterprise-wide core strategy tracked daily against goals and customer-driven benchmarks. Designing and launching an entirely new series of smart, connected products forces every phase of manufacturing to improve. Quality management has to move beyond being silos on the shop floor and become an enterprise-wide initiative, complete with analytics, metrics and KPIs tracking improvement. It’s encouraging to see the first manufacturers launching smart, connected products turning quality into the new marketing by openly sharing how they design, produce and service new products.
  • Enterprise data management that can easily create and scale new product and service taxonomies based on new customer requirements. Legacy IT systems were designed to support product taxonomies that rarely changed, were inflexible, rigid and slowed down the development of new products. To digitally transform themselves and scale in response to customers’ new, unique needs for smart, connected products, manufacturers need to create and excel at data management platforms that can support new taxonomies. Data management is one of the most pivotal technologies transforming manufacturing today and has scale and speed advantages across every aspect of manufacturing, especially Configuration Lifecycle Management (CLM).
  • The Internet of Things’ (IoT) exponential growth is enabling greater accuracy, control, and visibility in manufacturing and enabling a rich data stream from smart, connected products. Improving daily operations across suppliers, scheduling, production, quality, inspections, fulfillment, sales, marketing, and service is where IoT is revolutionizing manufacturing. It’s also allowing for greater accuracy and visibility than ever before. What’s driving the explosive growth of smart, connected products is embedding IoT into product designs and having the sensors provide a continual stream of product data that enable entirely new business models.
  • Enabling greater mobile apps access across the shop floor to the top floor for tracking the impact of quality and production performance gains on smart, connected product sales. Customers’ expectations are accelerating rapidly in the area of customizing smart, connected products. So are their expectations regarding being able to track order status, deliveries, quality, and compliance. The CEO of a local machinery manufacturer says that mobile apps combined with compliance and quality management are increasing production yields of their newest smart, connected products by 35%.
  • Becoming competitively stronger and faster at improving by using Artificial Intelligence (AI) and machine learning to analyze and take action on production and product data. The live data streams production processes produce that are captured with IoT sensors, Programmable Logic Controllers (PLC), and other sensing technologies hold the secrets to improving production and operations. Inbound data streams from smart, connected products enabled with IoT sensors are delivering rich data sets that are revolutionizing product designs and future products. Digitally transforming manufacturing is more than just redefining long-standing systems from transactions to services. It’s about achieving a new level of competitive e intensity driven by greater insights into customers and how they’re using products today and what they’ll need in the future.


Bottom Line: Every manufacturer is in a race for new services and software revenue, and by taking an insightful, proactive approach to digitally transforming operations to produce smart, connected products they’ll succeed.