Digital transformation in manufacturing: How to emerge stronger in the post-pandemic time?

Digital transformation in manufacturing: How to emerge stronger in the post-pandemic time?
N-iX
2020-07-09T19:28:20+00:00

Companies and the media are busy debating globalization, regionalization or nationalization, meantime they are missing the biggest opportunity – digitalization in manufacturing Mattias Andersson, CEO and Founder, MTEK Back in February and early March, some CEOs of manufacturing companies t...

Digital transformation in manufacturing: How to emerge stronger in the post-pandemic time?
By Nadia Serheichuk July 09, 2020
Companies and the media are busy debating globalization, regionalization or nationalization, meantime they are missing the biggest opportunity – digitalization in manufacturing
Mattias Andersson, CEO and Founder, MTEK

Back in February and early March, some CEOs of manufacturing companies thought they may face financial issues due to the pandemic and quarantine measures. Nearly half of the respondents in Gartner’s survey said that they anticipated changes in operations and around 35% expected supply chain disruptions. 

manufacturing industry and COVID19 pandemic

However, as time passed, the level of concern rose. In April, the percent of manufacturers worried about their business rose to 80-90%.

Analysts say that the global financial impact on COVID19 will vary between $2T and $4.5T. This may well be one of the biggest disruptions we have ever experienced. On the chart below, you can find information about the level of concern over different disasters and incidents as compared to the pandemic. 

COVID and other natural disasters (comparison of impact on economy)

So how can your company absorb this shock and adapt to the new reality? Let’s take  a look at some of the best practices and opportunities. 

Manufacturing and COVID19: Pre-, peri-, and post-pandemic reaction

Quarantine, disrupted supply chains, the inevitable loss of cash flows, and instant change of scenarios - manufacturing companies have felt it all. With so many uncertainties, companies worldwide are going through common phases. 

3 phases of manufacturing industry reacting to COVID

You can find yourself in any of these stages, so let's go through each phase and see what happens at each of them. 

The first stage is ‘Respond.’ In times of crisis or pandemic, your first reaction is to eliminate unnecessary expenses, rationalize processes, and renegotiate deals from a manufacturing perspective. Cost reduction in manufacturing is inevitable at this time. You need to focus on the essential needs of production and optimize cash flows.

Phase 1: cost reduction strategies and automation in manufacturing

Next comes the ‘Recover’ phase. You need to figure out the damage that has been done, reset your financial plan, improve efficiency, and ramp up productivity. Experts also say that it is the time for digital transformation in manufacturing. Also, from an IT point, it is important to enable transparent optimization across the company.Phase 2: digitalization in manufacturing as an opportunity to optimize the costs

The final phase is ‘Renew.’ First of all, you need to assess your processes before the pandemic. Then, you should figure out what new best practices you can introduce and what can help your company deal with unexpected situations in the future. Analysts believe that this phase is a great time for digital transformation in manufacturing. 

Phase 3: digitalization in manufacturing

Even though it may seem like freezing all the investment in the development of the IT sector is a good idea, the majority of companies around the globe plan to invest the same (~68-80%) or even more (6-14%) in technical advancements of their processes.

digitalization in manufacturing: how will IT investment change due to covid19?

Despite the initial shock and certain degree of confusion that pandemic has brought, manufacturers are now looking at their IT investments as a tool that will help them restore and adapt to the new reality faster. 

R&D and IT initiative introduction as a part of digitalization and automation in manufacturing

In the earlier stages, manufacturers should take a closer look at their relationships with IT (whether it is an in-house unit or a third-party vendor). It will allow them to pull off the following stages easily. From remote collaboration tools, through the adoption of Cloud and advanced analytics, to more advanced technical solutions like replacing prototypes with simulations or introduction of machine learning. So what technologies will shape the future of manufacturing? 

5 technological trends that will reinforce digitalization in manufacturing

So the main question here is what technological advances can boost the restoration processes in this industry. When a manufacturing site is forced to limit its operations due to the quarantine, it is important to increase the efficiency of the remaining processes and operations. 

Trend #1: Automation in manufacturing 

To understand the capacity of automation possibilities in the manufacturing sector, McKinsey Global Institute conducted a study of manufacturing work in 46 countries in both the developed and developing countries, covering about 80 percent of the global workforce. This study shows that even though manufacturing is one of the most highly automated industries globally, there is still significant automation potential within the manufacturing sites themselves, and related areas like supply chain and procurement. It is the second industry with the highest potential for automation, especially in data collection and processing, as well as predictive physical sectors. potential for  automation in manufacturing

Capturing long-term value from automation in manufacturing

The ultimate goal for manufacturers as they weigh the various factors described above is to capture as much long-term value as possible from automation. How to go about achieving this depends, in part, on how far along the spectrum of automation maturity a given manufacturer is. 

automation in manufacturing depending on the maturity of the company

This spectrum represents four stages of automation maturity in manufacturing:

  • Low maturity. This stage has limited infrastructure automation. It may be a lack of robotics or data-collection systems. It is essential to implement automation on the small-scale project to test it properly and then to zoom it out. 
  • Mid-maturity. The next stage means that more systems are installed, but the manufacturer utilizes only a fraction of the potential. E.g., the company installed sensors, but the majority of data they collect is not processed or used.
  • High maturity. Companies that mastered the traditional automation infrastructure on the manufacturing floor are usually on their high maturity stage. However, they lack automation in their managerial, support-function, and back-office tasks.
  • Best-in-class. A company uses both traditional and cutting-edge tech solutions for automation of all spectrums of the operations.

Understanding the stage of the company's maturity can help plan automation in manufacturing effectively. For example, lower-maturity manufacturing sites can benefit more from the automation of basic tasks. At the same time, more mature companies should focus on fully utilizing their existing automation infrastructure, introducing more advanced approaches

The benefits of automation for your business:

  • Lower operating costs and labor savings;
  • Improved worker safety;
  • Faster ROI (Return on Investment);
  • Ability to be more competitive;
  • Production efficiency, quality, and consistency;
  • Efficient use of floor space.

Trend #2: IoT and robotics in manufacturing

Pandemic will jumpstart automated manufacturing 
– Michael Tyrrell, Digital Coordinator at
International Federation of Robotics (IFR)

The ongoing digitalization in manufacturing requires constant innovation and the increasing adoption of the latest technological advances for automation. One of the trends that allow manufacturing companies to speed up their processes is robotics engineering.

From 2013 to 2018, the global operational stock of automation systems rose by about 65% to 2.4M units.  The International Federation of Robotics (IFR) predicts that the number of robots shipped globally will increase on average by 12% per year from 2020 to 2022. 

robotics engineering in manufacturing: market size

Also, the IoT in manufacturing market size was valued at $424B in 2016 and is expected to reach $994B by 2023, registering a CAGR of 13.1% from 2017 to 2023. 

IoT in manufacturing: market size

So why do companies around the world choose automated manufacturing?

The combination of IoT solutions and robotics allows manufacturing sites not only to automate pair production lines or simple repetitive processes but also closely monitor complex procedures, analyze performance, and understand the ground for improvement. 

Benefits of robotics in manufacturing

  • Improved quality and consistency. Along with other technologies, such as industrial IoT or 3D printing, robotics allows manufacturing companies to provide better production quality. Also, it helps to reduce cycle times and introduce real-time monitoring to improve preventive maintenance.
  • Increased productivity. The speed and efficiency of robotic solutions allow us to maximize throughput.
  • Greater safety. Using robots for repetitive tasks reduces the risks of injury for workers, especially under hostile conditions.
  • Real-time information. The use of sensors allows manufacturers to receive real-time information about the processes and condition of machinery. 

Disadvantages of robotics in manufacturing

  • High initial investment. The introduction of automated manufacturing systems requires a substantial upfront investment.
  • Rare expertise. Robotics in manufacturing is a sophisticated system with complex operation, maintenance, and programming needs. It is essential to understand the costs of personnel investment.
  • Ongoing costs. While robots may reduce some manufacturing labor costs, they do have their own expenses, e.g., maintenance. 

Related: IoT trends that will rule in manufacturing

Trend #3: Predictive maintenance 

As the number of sensors and other IoT devices grows, so does the amount of information about hardware, robots, and other machinery. Another way for the manufacturers to reduce the costs and optimize their processes is to invest in predictive maintenance. Manufacturing sites typically rely on reactive maintenance, which often comes with huge expenses, extended downtime, and disruption in the processes. On the contrary, predictive maintenance allows the manufacturing industry to reduce the upkeep cost by 25% to 30%. Also, it helps to reduce the downtime and align maintenance schedules to create as little disruption as possible.  

predictive maintenance in manufacturing: flow

Why do companies need predictive maintenance?

Manufacturing needs predictive maintenance, as neither reactive (fixing the already existing failures) nor proactive (using experience to anticipate potential breakdowns) ways of addressing the problem are sufficient enough nowadays. So, manufacturers are expected to use predictive maintenance apps boosted up by IoT. The obvious advantage is the control of their repair costs and schedules, reduced unplanned downtime, and the opportunity to eliminate the causes of failure. Predictive maintenance also uses non-intrusive testing methods to evaluate asset performance trends.

Benefits of predictive maintenance in manufacturing:

  • Optimization of operational expenses;
  • Material cost savings (25 to 30%);
  • Maintenance is performed as needed;
  • Reduction of the maximum amount of downtime.

Cons of predictive maintenance in manufacturing:

  • Specific technology needs to be purchased;
  • A lot of time needed to implement correctly.

However, we cannot ignore other applications of data in manufacturing. Let’s take a look at how proper data management can improve other areas of manufacturing. 

Trend #4:  Predictive analytics in manufacturing

Many manufacturing companies, especially in the further phases of their maturity, collect large amounts of data from many sources. If treated properly, this data opens up the whole new world for manufacturers. Digitalization in manufacturing is a complex solution that combines Big Data, machine learning (ML) algorithms, and cloud computing software tools. It plays a crucial role in interpreting and predicting:

  • Consumer demand;
  • Employee productivity, safety issues, etc.;
  • Areas of improvement, and much more.

Take a look at the chart below to explore the areas of predictive analytics in manufacturing: 

manufacturing data analytics: chart

If appropriately used, predictive analytics is hugely beneficial for manufacturing:

  • Allows to access sophisticated data-driven analytics, insights, and decisions
  • Improves forecasts and maximizes revenue;
  • Helps bring the automation in manufacturing sites to the next level;
  • Improves inventory management with demand forecasting;
  • Enhances operational efficiency in real-time.

You might also like: How to mitigate supply chain risks with Data Analytics.

Trend #5: LEAN manufacturing

You may wonder what this trend has to do with technology. LEAN is a system or method focused on waste reduction. LEAN manufacturing focuses on the optimization of all processes and an overall reduction of waste of any type. Here are eight problems that LEAN manufacturing helps to solve: 

Lean manufacturing: 8 problems to solve using optimization and automation in manufacturing

So how can technology help manufacturing in LEAN adoption? LEAN is about smart use of resources. It relies heavily on predictive analytics in manufacturing in terms of making smart decisions and automation in manufacturing for better use of available resources. 

Short and long term benefits of LEAN manufacturing:

  • Improved quality. The smart approach to resource management allows manufacturers to focus on the quality of products;
  • Increased efficiency. Balanced resources help companies to plan their work effectively;
  • Easier to manage. Automation solutions and predictive analytics make it easier to manage complex production sites. 
  • Safer work environment. Removing unnecessary elements from the operation, helps manufacturers become more organized And an orderly work environment is a safe work environment.
  • Bigger potential for automation of manufacturing processes. When a company is focused on optimization and waste reduction, they are also eager to find ways for automation in their manufacturing sites.

Depending on the planning and effort put into your implementation, you can still face some of the problems. Challenges you may face when implementing LEAN manufacturing:

  • Resistance. The human factor can never be easy, as most people don't like change. You can find that your long-term employees will be the hardest to convert to the new lean culture. 
  • Training. A lot of resources will be needed to help employees transition to a new framework.
  • Upkeep. Like any process, LEAN manufacturing requires upkeep and maintenance. 

Digital transformation in manufacturing: in-house vs outsource

Behind any digital transformation (in manufacturing or any other industry) is a team of people who make it happen. Most companies think about digital transformation in manufacturing only in terms of two dimensions: either having an in-house team or outsourcing. Let’s take a look at some pros and cons of both approaches. 

In-house for digital transformation: pros and cons

Having an in-house team is better because of:

  • Control. It’s easier to manage a team that sits next to you (however, consider that pandemic has actually decreased the value of this benefit).
  • Deeper understanding. When the team sees the processes they need to transform, it helps them to understand business values better. 
  • Talent development. If you need some specific skills, you can develop it in your employees in the way you need them.

However, you should be ready for:

  • Talent development costs. Yes, you can develop the talent you need within the company, but you will also be the one paying for it.
  • Great expenses. Finding a suitable team with relevant experience in your location can cost a fortune.
  • Time. Hiring in-house personnel with the required expertise can take 6 to 12 months.
  • Limited access to experts. In most cases, it’s hard to persuade an expert to relocate for a relatively short-term project, so you will be forced to choose from the local tech talent pool.

Outsourcing digital transformation in manufacturing: pros and cons

Benefits of outsourcing include:

  • Cost efficiency. No explanation needed here.
  • Access to a larger talent pool. Thus you will be able to find the necessary expertise.
  • Ability to scale the team. Whether you need to scale up or down, your vendor will be taking care of that. 
  • No extra capital expenses. There’s no need to find a bigger office, equip new workplaces, etc. You just hire a dedicated team and can work with it regardless of their location.

However, you need to be ready to face some challenges:

  • More complicated communication. Outsourcing teams may need more clarification and guidance. Plus, pay attention to the time zones differences.
  • Harder to manage. It requires more time and attention,  It requires more time and attention. However, with a reliable vendor, you just need to appoint an in-house Product Owner or Project Manager, or simply have a dedicated person your outsourced team can contact.

Digital transformation in manufacturing: pros and cons of in-house vs outsource

However, the recent BCG study shows that among the companies that successfully implemented or are actively digitalizing manufacturing sites, 92% are using a combination of in-house and outsourcing resources.

Digital transformation in manufacturing: in-house, outsource, mixed

Vendor’s selection criteria for digital transformation in manufacturing

In one of our articles, we have discussed the criteria that define the selection process when it comes to IT outsourcing. Typically, these are:

  • Location;
  • Expertise and experience;
  • Size of the company; 
  • Available pricing models;
  • Communication and cultural fit, etc.

But in terms of digital transformation, manufacturing companies need to focus on one of the most important aspects: expertise and previous experience. The analysis shows that companies that have successfully implemented digital transformation have created a competitive selection process and also focused on portfolios of potential vendors.

Main criteria for choosing a vendor for transformation and automation in manufacturing

How to choose the best vendor for digital transformation in manufacturing? 

We have created a step-by-step guide on the vendor selection process, but here’s a recap for your convenience:

  1. Clarify your business goals and establish clear selection criteria;
  2. Decide on an outsourcing destination (region, country, or city);
  3. Explore the local IT landscape and narrow down the list of potential candidates;
  4. Choose a vendor with previous experience in automation in manufacturing, digital transformation, and tech expertise that includes enterprise solutions (like enterprise mobility), IoT, Big Data, Data Science, and Cloud.
  5. Negotiate a win-win contract with a vendor you have selected.

How can N-iX help you with digital transformation in manufacturing?

N-iX is an Eastern-European software development company with 1,000+ experts that have experience working with business cases of different shapes and sizes. We have delivery offices in Ukraine, Poland, Bulgaria, and Belarus. We see cooperation with our clients as a fusion of your ideas and our technical expertise.

We have helped many companies in manufacturing and related industries with their digital transformation:

  • Fluke Corporation, is a US-based company that manufactures, distributes, and services electronic test tools and software for measuring and condition monitoring. We have helped the client to improve asset maintenance by arming maintenance teams with critical asset information in real-time and tools that can effectively process it.
  • A leading automotive technology company (under NDA) engaged the N-iX team to be a part of its digital transformation phase. The company had many manual processes that it has targeted to transform through digitization. As a part of their digital transformation, the client decided to digitize their car maintenance process and computerize the flow of warranty data between mechanics and vehicle manufacturers with a Cloud-based application. 
  • WEINMANN Emergency is a medical technology company that develops life-saving equipment used by professionals in the emergency medical services, hospitals, and military medical corps. The company needed to bring new products to market faster and make sure they comply with medical standards and regulations.N-iX has built a strong engineering team with deep expertise in embedded software development and experience in delivering healthcare software products. Apart from expanding the functionality of the product and releasing a new version of firmware that complies with the latest industry standards, N-iX team has also implemented a predictive maintenance system that enabled cost savings, solution reliability, and seamless operation
  • Another client (under NDA) is a Global Fortune 100 multinational engineering and technology company from Germany. As a leading IoT company, our client offers innovative solutions for smart homes, smart cities, connected mobility, and connected manufacturing. It uses its expertise in sensor technology, software, and services, as well as its IoT cloud, to offer its customers connected, cross-domain solutions from a single source. They needed to redevelop the legacy platform; they did not have the comprehensive in-house expertise to address and solve multiple technical issues and make the platform efficient and scalable. N-iX is also working on a computer-vision solution based on industrial optic sensors and lenses and Nivida Jetson devices that will allow this client to manage and track the goods in a non-touch way.
  • Metrima, an Automatic Meter Reading (AMR) manufacturer and supplier, that provides solutions for data collection of electricity, district heat, water, gas, and other types of energy. The company was looking for a dedicated development team to augment in-house development forces.

If you have any questions about digital transformation in manufacturing, contact our experts.

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By Nadia Serheichuk July 09, 2020

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About N-iX

N-iX is an Eastern European provider of software development services with 1000+ expert software engineers onboard that power innovative technology businesses. Since 2002 we have formed strategic partnerships with a variety of global industry leaders including OpenText, Novell, Lebara, Currencycloud and over 50 other medium and large-scale businesses. With delivery centers in Ukraine, Poland, Bulgaria, and Belarus, we deliver excellence in software engineering and deep expertise in a range of verticals including finance, healthcare, hospitality, telecom, energy and enterprise content management helping our clients to innovate and implement technology transformations.

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