Global spending on digital transformation (DX) technologies and services was projected to be $1.1 trillion in 2018, according to International Data Corp. (IDC). “DX spending will be led by the discrete and process manufacturing industries,” said IDC, “which will not only spend the most on DX solutions but also set the agenda for many DX priorities, programs, and use cases.”
The problems that digitalization solves strike at the very heart of manufacturer’s challenges today. But for a lot of small to medium sized manufacturers struggling to navigate economic and market shifts, DX seems risky and the value unproven. The technology can seem out of reach or even unnecessary.
What is real and what matters right now is how technology can solve immediate problems. Manufacturers are under competitive pressure to deliver better goods at lower costs. They want to reduce costs and streamline processes in their supply chains and factories. At the same time customers are asking for more unique features in the products they buy. Customization versus standard products are often difficult trade-offs with implications in design processes, production costs and schedules.
This is where DX can begin.
Digitization, digitalization and digital transformation are a confusing mix of buzzwords that suggest something new but describe what manufacturers have been doing for years: using technology to plan, procure, produce and distribute products. Digitization is nothing more than converting analog information – text, audio, images, and video – into ‘zeroes and ones’ that can be stored, processed, and shared by computers. Gartner’s online glossary defines digitalization as “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities”. It is the practice of adopting operations and processes to use digital technologies. Digital transformation (DX) is the strategic, enterprise-wide application of digitalization to not only improve a business’ entire system of production, procurement, sales, operations, human resources, and financial management, but to completely transform the way a manufacturer makes money and delivers value to customers.
To begin to understand strategic DX, manufacturers need look no further than current and available technologies.
For instance, artificial intelligence (AI) and machine learning can now improve supply chain efficiencies by offering predictions on supplier reliability and cost variability. AI models are also used to improve process quality through real time anomaly detection.
To more easily (and more cheaply) accommodate customer demands into quoting, design and customer service processes, companies can use bots. Customer service bots are AI enabled with skills such as product configuration, order taking and query handling which can allow companies to easily scale up without adding overheads.
Another area of opportunity is in an Internet of Things (IoT) platform. This means installing network-connected sensors in a manufacturer’s products, so that operational performance data (and anomalies) can be stored in the cloud. This data can unlock tremendous value to both the manufacturer in terms of anomaly detection, preventative maintenance, quality and their customers who can understand how these assets are utilized.
In connecting these technologies, ERP (enterprise resource planning) platforms such as SYSPRO, now offer manufacturers the chance to integrate all digital transformation technologies (AI, IoT, etc.) to remake, redefine, and broaden their business operations so that they can become more profitable and productive with the resources they already have at hand.
The key to successful digital transformation is aligning these kinds of initiatives to the overall business strategy. Developing a digital transformation strategy, a manufacturer can find cost saving value in their operations, generate new revenue streams from their customers by increasing the value they deliver and can even look ahead to monetizing new data being collected through digitalizing products and operations.
A case in point: Insulated Structures is a SYSPRO customer who makes refrigerated cabinets for grocery retailers; the kind you buy cooled and frozen products from every week.
In recent years, Insulated Structures has added sensors to their cabinets. If a grocer’s cooler is running too warm, Insulated Systems’ IOT platform will automatically initiate the service process to fix the problem before any food gets spoiled. This includes alerting the customer about the problem, sending out a service technician equipped with the right knowledge and parts to fix it fast, and invoicing for the repairs.
The IoT monitoring data being forwarded to Insulated Structures by its coolers and freezers is also helping the company more accurately predict routine maintenance issues like lightbulb replacements. To a retailer, a working fridge protects their revenue and costs. The result: Insulated Structures has digitally transformed itself from a refrigeration manufacturer to a trusted provider of profit generating cooling and chilling solutions. In the future the company will also be able to consider monetizing the intelligence their data can provide. Cabinet usage and energy consumption patterns, for example, could provide valuable insights that grocers can utilize to improve their product offerings.
Are you ready for digital transformation?
DX is a journey and not a result. Deploying point solutions or automation without an overall strategy is not DX. So how do you begin? A few key considerations are important:
• Have you considered the ways your digital initiatives will change the way you operate, deliver value or earn revenue?
• Have you defined the specific business value that will come from your digital transformation project? Can you measure it?
• Can your technology and operational foundation, your ERP for one, support and deliver on your digital initiatives?
Done right, digital transformation will change your business and position it for long-term success in the years to come.
Dale Kehler is senior vice-president of Product Services at SYSPRO Canada, a leading provider of ERP business management software.