Dan Gilroy, Director of Consulting Services at RDA shares his thoughts on an article from Global Manufacturing - “I have shared a number of articles about digital transformation and the effects it is having on manufacturing. This article provides much of the same information that we have already discussed except for the third point about connected customers. More and more, manufacturers are dealing with end customers. Developing a strategy to engage those customers is a critical new capability and this article provides a good primer on the areas where we can achieve customer success.”
Manufacturers are under more pressure than ever before to make efficiencies across the board. Across the production, distribution and end-customer phases, they are being driven by market forces to find new ways to improve processes and results, address safety regulations and ensure production efficiency.
Digitisation across each of these platforms is fast becoming the inevitable solution to updating the manufacturing industry as a whole but particularly in three specific areas:
- Connected plants – where operational efficiency and utilisation of assets, workers and associated processes are transformed to deliver a substantially higher level of productivity.
- Connected enterprises – where organisational efficiency leads to improved employee performance, lower cost of IT and highly responsive supply chains.
- Connected customers – where radical improvements in marketing, sales and support of product results mean dramatically improved customer experience, and in turn additional revenues.
Digging one level deeper into each of these areas provides a bird’s eye view of why digital interventions in the manufacturing space are inevitable.
connected plant: asset game changer
The connected plant has three main components. Each is witnessing fundamental and permanent changes:
- Assets and equipment: According to a GE report, a 1% improvement in asset efficiency can result in substantial benefits. In the commercial aviation industry, this 1% translates (over 15 years) into fuel savings of US$30 billion. In the healthcare industry, these savings can be as big as US$63 billion. Digitisation has a key role in this. Through digital connectivity, workers are able to access real-time visibility and control over the plant’s assets and equipment, through as simple means as cameras or indeed automated support systems. This allows workers on the ground to be proactive, and makes room for preventative interventions in the case of malfunction, resulting in higher assert reliability, improved efficiency and lower unplanned downtime in the case of a system failure.
- Worker safety: Safety is a major concern for manufacturing organisations. Workplace injuries and illnesses result in an annual loss of over US$220 billion in the US alone. These risks can be minimised using autonomous robotic systems that can manage risky or repetitive processes in place of the workers. In addition to this, digital technologies like sensors and cameras embedded in a worker’s helmet may be used to detect proximity to hazardous zones, exposure to poisonous gases and even the risk of fatigue, alerting a field worker and the associated supervisor. Furthermore, radio-frequency identification (RFID) can be used to identify workers when they enter a plant and automatically assign tasks to them over mobile devices. In more advanced digital methods, technologies like augmented reality (AR) and virtual reality (VR) can be used to assist workers in understanding maintenance and operations. For example, Lockheed Martin’s F-35 aircraft assembly plans have been paving the way for these methods, and have already increased their engineering accuracy by 96% while enabling employees to work 30% faster.
- Production processes: Digitisation can also help on the shop floor, bringing together operations technology (OT) and information technology (IT). Using connected IoT sensors and systems, shop floor information that was previously only available in silos becomes visible across the plant in real-time. This means that equipment malfunctions and production bottlenecks can be detected as they occur and, in several instances, even predicted. Through this visibility, manufacturers are able to prevent defective units from being rolled out and gives maintenance teams the essential information required to ensure better ‘uptime’. Amongst the most important outcomes of this digitisation is the ability to connect the shop floor to the top floor, enabling management at the plant to take faster and better informed actions.
connected enterprise: driving digital awareness
The connected enterprise, which focuses on the office environment and desk-workers, has three components. Each is witnessing a dramatic digital makeover.
- Infrastructure: The emergence of cloud and virtualisation technology has spelt the end of large capital budgets for computer, storage and network equipment. Pay-as-you-go, need-based models are now preferred to locked-in investments, chiefly because of the former’s flexibility and efficiency. Of course, security remains of paramount importance. Many firms are now using hybrid clouds to manage sensitive data. Through real-time threat detection, artificial intelligence can also bolster data and infrastructure security through sophisticated machine learning. Such technology can ensure infrastructure security from as yet unknown types of attacks.
- Employees: Advances in digital technologies are enabling better employee engagement and greater efficiency thanks to improvements in the contextualisation and personalisation of information. Mobile technologies are also having a positive effect. They can now facilitate access to data, apps and collaborative platforms more easily than ever before. Natural language processing, the technology behind chat bots, is enhancing the human-computer interface, which is resulting in improved user experience. Other developments in the connected enterprise, such as more prevalent automation, has improved employee productivity. Manufacturers using digital technologies have reported a 20%-30% increase in gross margins and a 15%-20% growth in operating income.
- Supply chains: Sourcing and inventory management can become a major source of margin improvement. Industry surveys have shown that just-in-time sourcing, streamlining route-to-market, reducing batch and shipment sizes, optimising the number of suppliers and turning multi-day delivery into 24-hour delivery can make a radical difference. Connectivity, IoT and collaborative platforms enable this while ensuring supply chains become responsive. The secret lies in driving real time end-to-end visibility, information exchange with internal and external stakeholders, predictability into supply chains, and agile decision making, thereby reducing risk from disruptions.
connected customer: high customer satisfaction
The connected customer has a focus on three key components: commerce, products and support. In the ever-changing world of the customer, digital is driving change across all three.
- E-commerce and marketing: Traditionally, the marketing function has had to depend on print, radio, television and outdoors. Digital, on the other hand, leverages search engines, social platforms, rich media and mobility. Big data and analytics help to provide customer insights and accurate segmentation, enabling organisations to deliver personalised and engaging content. This, in turn, means higher conversion rates online. Digital marketing supports e-commerce that calls for the integration of product catalogues, system of records and payment gateway to fulfil customer transactions. The benefits from digital marketing are manifested quickly, usually in a 4 to 6 month timeframe.
- Connected products and services: Connected products give rise to a new set of services and revenue opportunities. Today, after an original equipment manufacturer (OEM) product reaches the end user, the OEM has no visibility into how the product is used, where it is being used, and its current state and so on. But once a product begins to return data to the manufacturer, new services such as remote diagnostics, proactive maintenance, usage-based insurance, fraud detection, product upgrades, etc. can be enabled. The effectiveness of connected products is evident in the auto industry, where the number of consumers willing to pay for connected car services in a subscription-based model went up from 21% in 2014 to 32% in 2015.
- Customer service support: Customer support through digital channels is the inevitable path towards customer satisfaction. Two years ago, 28% respondents in a survey claimed to use virtual agents for customer support. Today, that number has gone up to 42%. Customers have been increasingly using digital channels (web and mobile-based self-service portals), suggesting that time is of immense value to customers. Clearly, customer service organizations must explore ways in which digital can be leveraged to create low friction channels that improve support while decreasing support costs. One of the most significant developments in this space has been chat bots that use natural language to converse with customers, interpret queries and resolve problems. Assuming that even 70% of customer support contacts can be resolved using advanced self-service digital channels, the savings can add up to significant amounts.
the new normal
Digitisation can mean improved efficiency and streamlined production in the plant, as well as stronger integration over data infrastructures to ensure customer satisfaction and smarter product choices. Within a plant, digital connectivity through autonomous robotic systems can provide more control over equipment and detect potential hazards. Cognitive systems can also help protect the enterprise’s data infrastructure. Digital channels, including chat bots and social media, can also be useful to the end of the manufacturing chain, providing web and mobile-based customer services. Digital is touching and transforming every aspect of the manufacturing industry. Over the next 12 to 24 months, digital will become all pervasive, helping productivity, efficiency and customer experience to reach new levels. As digital will become the new normal, business models will change. Everything else will be history.