Digitalisation: Impact and Challenges in Manufacturing

October 20, 2020

The manufacturing industry has gone through several major disruptions in the last 50 years, each of which has happened abruptly and changed the way companies produce goods. The last disruption to take place was that of automation (Industry 3.0), where large portions of entire production lines of workers were replaced by robots of much higher precision and a smaller margin of error. Although automated, currently most production processes are still operated by engineers who manage their processes through intensive manual calculation and information analysis.

Industry 4.0 is aiming to change that. The current trend is to begin using data in a more connected way, so that the full potential of robotic production could be achieved. We are currently on the cusp of Industry 4.0 taking full swing. Predictions show that “by 2024, enterprises with intelligent and collaborative work environments will see 30% lower staff turnover, 30% higher productivity, and 30% higher revenue per employee than their peers”. Even COVID-19 hasn’t been able to put the brakes on the digitalisation process, instead it has highlighted the need for automated and remote production even further.

Impact of Digitalisation

Digitalisation of the manufacturing industry is bound to have a large impact on our society and the environment. By bringing the data of industrial manufacturing into the forefront and allowing the manufacturing process to be led and optimised based on data we shift from reacting to circumstances towards predicting and leading the process.

Digitalisation will have a strong positive effect on job satisfaction and scalability of the higher skilled technical workforce, while enabling to automate or displace around 37% of the manufacturing labour focused on repetitive assignments. There is also strong demand for change in the workplace due to employees changing lifestyles. A study in the US indicated that over 75% employees would prefer some sort of working from home option. Having the digital infrastructure in place to support this shift in manufacturing is an important challenge for all producers to work with.

Digitalisation Challenges

Digitalisation isn’t done for the sake of it, but is part of a larger strategy to eliminate manual errors, enabling data-based decision making or automating processes. Most are continually battling with sticking to a comprehensive strategy, change management within the organisation and gaps in the organisational structure.

When it comes to the use of the digitalised data, many are lacking adequate volumes or quality of data for process automation, data governance and price of data management solutions. Most of those challenges will most likely will be continually discussed in the future, as the amount of data held by companies continues to grow at a rapid pace.

Currently only about 50% of business decisions are based on data analytics. The rest is based on experience or opinion. This has also been clearly visible in our experiences with manufacturing processes. Data is gathered and stored but due to the extensive efforts needed to govern it properly, focus is put on a few static key metrics.

In Search of Long-Term Solutions

Manufacturing industry has realised that they can’t continue to work with legacy technology and something needs to change. Decision-making about digital transformation has been taken to the C-level and many have hired CTOs and CDO to generate along-term strategy. Unfortunately only 31% manufacturers are implementing their digital transformation strategies.

So far, the focus has been on data security and management to create a basis for further development. 59% of companies have been able to consolidate data to a central location but only 6% have transparency across their business ecosystems. Displaying the need for further efforts in data governance and long-term process sustainability.

From the companies that have implemented Industry 4.0 initiatives, 89% have achieved expected outcomes or surpassed them, with 75% seeing revenue growth due to their digital initiatives. Therefore, when looking at the big picture, then the future is bright for manufacturing and the efforts that are being currently made, will be paying off in the long term. Although market participants are currently at different levels of digitalisation, the direction and benefits that are to be achieved seem to be clear to most.    

Feel free to also check out our other posts:

Future of the Automotive Supply Chain Market

Gap Between C- Suite and Factory Floor: Data-Driven Decision-Making

Digital Twin Use Cases in Practice