- On January 26, 2021
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The New Industrial Revolution: Digital Transformation in Manufacturing Continues
In recent years, manufacturing companies have gradually been incorporating more technology into their business operations. This new industrial revolution has encouraged midsize companies to adopt business management software, robotics, IoT, data and analytics into their everyday operations. Historically, the manufacturing industry is constantly evolving, but this typically happens at a “slow and steady” pace.
All that changed in 2020, when the manufacturing world was rocked by the disruption of COVID-19. A whopping 60% of manufacturers reported significant impact of the virus to their operations (2). This unprecedented disruption proved to be a blessing in disguise because it accelerated the digital transformation of midsize manufacturing companies worldwide. As we look to manufacturing in 2021, we will continue to see increasing adoption of technology to make rapid improvements to a once slow-changing industry. The following manufacturing trends for the coming year reflect this transition.
Adopting Technology on the Production Floor
IoT and automation are becoming increasingly pervasive in the manufacturing industry. This trend will be even more prevalent in 2021. Social distancing protocol and safety measures have caused manufacturers to rely more heavily on technology in lieu of human workers to aid in production. According to a study from the MPI Group, nearly one third (31%) of production processes now incorporate smart devices and embedded intelligence. Additionally, 34% of manufacturers have plans to incorporate IoT technology into their processes, while 32% plan to embed IoT technology into their products (4). Robotics on the factory floor are also increasing, with a record 2.7 million industrial robots operating in factories worldwide (7). In order to ensure that production is running smoothly and efficiently, it is important to have a system where data from all of your production processes, whether handled by man or machine, can come together and give you a complete picture of your business operations.
Business management technology like Enterprise Resource Planning (ERP) solutions brings data together from all of your production processes and equipment. This type of technology allows for informed decisions using real-time data and remote-monitoring of quality and equipment to increase efficiency and reduce downtime. For example, manufacturers in 2021 are looking to implement predictive maintenance in order to avoid stalls in production due to equipment failure. A whopping 98% of organizations report that a single hour of downtime costs them over $100,000 (5)! An ERP system allows you to monitor exactly how much a particular machine is being used and which products are tied to it. This allows you to set rules that will alert you when a certain number of products has been produced by a particular piece of equipment so you can schedule a monitoring test or routine maintenance, reducing machine failure before it even happens. Imagine the monumental cost savings!
Nearshoring and Reshoring Production with Digital Documents
In both an effort to increase resilience and appeal to today’s consumers, manufacturers are shifting their global supply chains to a more localized business model. Reshoring (bringing imported goods or materials back to domestic production) was on the rise prior to the pandemic due to trade wars, tariffs, and greater consumer interest in supporting local businesses and ethically manufactured products. However, the pandemic further expedited this trend as international borders shut down and rattled manufacturing supply chains that relied heavily on offshore production and sourcing. Manufacturers scrambled to find suppliers closer to home, and they will continue to transition sourcing to a more local model this year. In a poll by Deloitte, 44% of executives plan to recalibrate their supply chain by shifting more toward a regional model in 2021 and 31% of executives mentioned that they will nearshore some part of their production back to the Americas (1). Both reshoring and near-sourcing will continue to be leading trends heading into 2021, as manufacturers attempt to reduce or eliminate dependencies on foreign materials and production.
Technologies that allow for the use of native electronic documents help to simplify the process of nearshoring and reshoring by allowing midsize businesses to easily identify new suppliers. Electronic requests for quotations (RFQ’s) allow suppliers to provide price and availability of goods in a matter of seconds, so manufacturers can identify and implement new agreements on the fly.
Connecting the Workforce, Near or Far
The ability for manufacturing workers to stay connected and collaborate from a distance has been a rising trend in the manufacturing industry. COVID-19 accelerated this push, making it even more important for businesses to find a way to connect an increasingly remote workforce efficiently. Midsize businesses need to digitally connect as many pieces of their operation and production processes as possible in order to stay ahead of disruptions and accommodate for an increasingly remote workforce. McKinsey estimates that digital collaboration has the potential to unlock more than $100 billion in value—thanks in part to productivity boosts of 20-30% in collaboration-intensive work processes (8).
An Enterprise Resource Planning (ERP) system allows you to manage data from all aspects of your business in real-time and convert it into valuable information that allows you to make rapid, informed decisions. Tools that connect operations, inventory, equipment, orders and customers, and financials into a single platform allow employees to collaborate effectively, no matter where they are working from. By breaking down data silos across your departments and locations, ERP enables you to make all your data actionable. Handheld devices and scanners that directly and immediately send updated data to your system also make it easy to keep track of inventory across all your locations, without ever needing to leave your home office!
Meeting Increasing Consumer Expectations
Today’s consumers have higher expectations than ever, and their experience extends long before they purchase (initial awareness, marketing, etc.) to far beyond the delivery date (customer service, warranties, quality, etc.). Customers expect personalized experiences and products, complete transparency into the production and sourcing of goods, and immediate responses from customer service. 80% of executives feel that ‘customer persuasion’ now spans marketing, sales and service, and that these functions can no longer operate within silos (6). Manufacturers in 2021 are looking to provide a more customized buyer’s journey using customer data and technology that ensures a seamless customer experience.
Technology that provides real-time visibility into orders, production, and delivery allows you to make sure you are providing customers with the best experience possible. Making sure you have inventory and raw materials in exactly the right place, at the right time is imperative to eliminate late deliveries and poor customer service. Having a complete view of all your customer interactions across your e-commerce platforms, distribution networks, and direct sales, all in one place, allows you to store customer data for a more personalized marketing and shopping experience, as well as forecast demand for optimal and cost-efficient production in the future. In a hyper-connected world, technology that allows you to enhance the customer experience will set you apart from the competition and increase customer loyalty, ultimately impacting your bottom line!
Advocating for Sustainable Production
New administration, rising consumer concern in environmental footprints and overall corporate responsibility makes sustainability top of mind for manufacturers in 2021. Currently, the manufacturing industry represents 54% of the world’s energy consumption and 20% of global emissions (9). Consumers are looking to purchase from brands that promote sustainable production, with 66% of millennials more likely to patronize a company with sustainable and eco-friendly culture and brands that advocate for sustainability growing 5.6 times faster than brands that do not (3).
Technology enables manufacturing companies to go green by providing complete visibility into production. This allows for a reduction in waste since you can now tie each raw material to a particular purchase order and even repurpose or recycle certain resources that you have in stock. Furthermore, a complete view of your supply chain allows you to provide consumers with better transparency into your production cycle, so they know your products are created with sustainability in mind.
2020 was a tumultuous year for the manufacturing industry. However, the disruptions midsize companies faced last year has accelerated the digital transformation and resulted in rapid improvements within the industry. This adoption of technology will continue at an expedited rate in 2021 and prepare the manufacturing industry for an even brighter future ahead.