2020 has come and gone, but the lingering effects of the pandemic and economic downturn continue, combined with the always present pressure to manage costs, quality, and productivity. Even as demand returns, supply chains balance out, and operations return to a modicum of their previous throughput levels, most manufacturers are faced with the continued challenge of increased costs and lowered productivity levels—all while the challenge of operating in a different world where non-essential employees are remote and essential employees necessarily focus optimizing safety, rather than operations.
Unlike prior years, 2021 kicked off with manufacturing leaders grappling with the need to achieve strategic goals while offsetting these additional challenges. It’s a “double whammy” for most organizations and forces leaders to rethink their investment in modernizing process and technology as they envision what a next-generation workforce might look like. Organizations need to figure out how to more permanently address these risks while readying their businesses for top- and bottom-line growth.
If the pandemic has taught us anything, it’s that in the manufacturing industry we must plan for—and permanently institute—a more digitally integrated operational model capable of continued operations with employee resiliency, workforce disruption, and safety in mind.
The good news is that 74% of manufacturing executives have a positive outlook for 2021 with the balance of manufacturers expecting a return to growth by midyear. We also know from prior recession research studies that how manufacturers react now will dramatically impact what comes next. For example, those companies that act fast to invest in process and technology transformation post-recession saw a resulting 54% increase in revenue in the years that followed. Precision investments into operations will allow manufacturers to eliminate waste and silos, improve productivity and quality, and reduce the risks associated with employee resiliency and skilled labor shortages for years to come.
Industrial Transformation Is the Driver for Change
Prior to the pandemic, investment in modernizing operations and transforming process, people, and technology were viewed as the next great waves of productivity for the manufacturing industry. Despite its promise, few manufacturers actually accelerated investment and scale of these solutions. Why? Transformation requires substantial retooling, upskilling, and change that organizations may not be ready to adopt. The other reason? It requires investment and wasn’t the most critical objective for their business.
Coming off a one-two punch of economic downturn and pandemic, manufacturing leaders have seen increased costs and lowered productivity. Most importantly, they discovered how wasteful those manual, paper-based, and siloed business processes are and how they’ve affecting the agility, resiliency, and competitiveness of their business. In 2020, leaders woke up to the hidden waste, and it’s the reason we are seeing a dramatic shift, including 85% of CEOsand 58% of CFOs now viewing smart factory or industrial Internet of things (IIoT) technology investments as key to their future business success.
With focus turning to Industry 4.0 as the driver for industrial transformation, how do we overcome the obstacles to adoption, execution, and scale? The answer is simple. Start where you had the most challenges in the prior year or where productivity is lowest. Listen to employees who tell us they are fed up with wasteful—but necessary—tasks like logging or traceability on paper, manual handoffs between employees, checking measurements, verifying equipment meters, and other monotonous and siloed non-value-added tasks. Not only are these wasteful tasks, but when employee turnover, sickness, or quarantines create gaps in how on-site tasks are performed, the old way of operations breaks down—or stops.
Leverage the organization’s Lean Six Sigma experts and culture of continuous improvement to guide what to change and how to prioritize. To succeed and scale Industry 4.0, we don’t have to start with the most exciting or complicated use case—we simply start with proven use cases that resolve visibility, inefficiency, and waste by instrumenting processes and unlocking data across the value stream. This approach not only shortens time to value, but it also delivers scalable precision cost cutting and a digitally integrated process and workforce—freeing them to work on higher value challenges. According to a recent study, most organizations investing in Industry 4.0 will yield an average 12% in efficiency gains across multiple subindustries so the effort will be well worth it.
And if technology is still a concern, there is good news there as well. Over the past couple of years, the marketplace has unleashed affordable and relevant enabling technologies to instrument your operations. These range from sensors, real tracking, smart buildings, data acquisition and protocol conversion for PLCs and legacy machines, edge compute, and software to integrate manufacturing into the balance of the enterprise. The technology has come a long way and is likely to be the least challenging element of industrial transformation.
When building a skyscraper, we don’t forget about installing a robust foundation—so why would we omit infrastructure necessary to support digital transformation? Most manufacturers are plagued with legacy unmanaged infrastructure hobbling the ability of operations to digitally adopt new technologies and effectively integrate the factory with other departments or business systems. With a predicted 80% of all manufacturing data being connected, computed, and utilized at the edge where processes are performed, it’s no wonder why 76% of manufacturers are seeking to integrate communications, infrastructure, and intelligent processes between operational technology (OT) and IT. This inability to converge has long resulted from diverging objectives, performance requirements, and skillsets.
This is our legacy, but it doesn’t have to be our trade’s future. The traditional obstacles to creating modern and integrated infrastructure have largely been resolved by vendors introducing new solutions that combine the needs of OT and IT professionals, leaving these issues in the past. Today’s manufacturer can acquire next-generation networking, power management, automated backup, disaster recovery, and unlock newer IoT technologies like BLE, Zigbee, MQTT, and OPC UA with a single integrated landscape that accelerates, not stifles, industrial transformation. We also can increase adoption of containers down to the OT edge, radically changing how manufacturers design, deploy, and maintain OT and IT software.
Ensuring your operational technology environments are built to support today’s and tomorrow’s transformations will be key to operational agility and productivity.
With all great opportunity comes risk. Manufacturers environments include a diverse landscape of end of support devices and adoption of next-generation technologies; many without thoughtful consideration and planning for how they will be introduced maintained within the environment. It’s because of this we are seeing an increase in industrial attacks in operational technology environments. In fact, 74% of OT professionals experienced at least one breach in the last 12 months with an alarming cybersecurity attack success rate of 33%. With guards down or preoccupied by larger issues over the past 18 months, we are seeing a rise in industrial attacks taking advantage of the 50%+ unmanaged OT devices operating with little or no security infrastructure to protect them.
To improve the situation, we must understand why these devices are unmanaged, unprotected, or disposed to cybersecurity attacks. The technology in these spaces have long life spans, out-of-support hardware and software, sometimes are leased or owned by a 3rd party, have compute or performance limitations, or simply were introduced with little thought around security hygiene. The lack of visibility and monitoring keeps IT security teams up at night while operations engineers are focused on keeping machines online and delivering quality product on time and at target cost. Of course, it doesn’t have to be this way.
Like with industrial infrastructure, this long-standing compromise between security operations and productivity is no longer an obstacle. Solutions now exist and were designed to support operational technology while optimizing and securing the environment. These technologies complement the environment, allowing those responsible for corporate security to have full visibility of all network traffic and—when events do arise—to partner with manufacturing leaders on how to respond, remediate, and implement prevention of future security events. The joint approach to security in OT will deliver better protection for the business while also unleashing engineers to digitally innovate.
The modern manufacturer has so much demand for technology that one must make decisions about what part of their tech estate to maintain on-premises, what creates unique differentiation, and what represents table-stakes or are candidates to move to cloud services. If your organization is not as current as the competition, you may be faced with the decision of catching up and accelerating your adoption of technology to remain competitive. In either case, cloud has much to offer manufacturing companies.
With 45% of manufacturers planning or acting on lift-and-shift to the cloud there exists proven benefits appealing to IT and business leaders alike. While we often think of cloud as a replacement for infrastructure—and it can be—cloud can also offer manufacturers a means to break away from legacy process transformation, accelerate innovation opportunities, and bring about more agility and resiliency. Cloud should be viewed from the stance of total cost of ownership—and the impact it has on the entire organization not just on the operational cost of software and hardware. It’s this larger view of the role cloud plays that is contributing to 74% of CFOs viewing cloud as most impactful technology initiative in support of business results.
Converting Data into Meaningful Value
Lastly, instrumenting and digitally connecting process and people is core to the success of Industry 4.0 but data is the real currency of Industry 4.0. Unlocking, connecting, transporting, and storing data is only the beginning of what industrial transformation is all about. Ultimately, the goal is to make decisions at the edge with limited employee interaction, to augment and improve employee productivity, and to automate real-time signaling into business process and systems. For example, properly leveraging data can result in the optimization of supply chains, research and design, production planning and execution, and the way we service and support our customers. With proper utilization of digitally integrated factories and data, manufacturers can achieve revenue impacts of 5–20%. Revenue outcomes like this are the true drivers for leaders to invest in foundational technologies that enable their businesses to become digitally integrated and to achieve the long-term benefits of leveraging data with purpose and precision.
The new year is sure to bring about improved economic conditions, but it’s also fraught with uncertainties for manufacturers as they navigate the side effects of the pandemic, political transition, and economic downturn. One decision within leadership’s control is the choice they make when it comes to investment in long-lasting industrial transformations that will offset today’s risk while unleashing innovation and value for years to come.
To learn more about Connection’s Manufacturing Practice, or to discuss the challenges and solutions highlighted in this article, contact us today.