Business leaders within global manufacturing and distribution sectors have shown urgency in embracing digital transformation to overcome the disruption caused by the pandemic. In February, IBM released a report showing that two-thirds of manufacturers have accelerated their adoption of digital technologies due to their experience during the pandemic. Those manufacturers that digitize their operations will gain significant advantages, and those that don’t will have a more difficult time catching up.

We conducted a similar survey in 2020 that uncovered essentially the same trends. Specifically, we found that:

• As social distancing became the new normal, entire workforces needed to connect as well as collaborate remotely. Based on survey findings, nearly half of  businesses were unable to function effectively due to a reliance on their operational staff only being able to function from the work premise. In a shift towards remote work and increased collaboration, 73% of businesses stated they would need to invest in technology to facilitate remote working capabilities in the future.
• Unsurprisingly, the survey showed that 60% of businesses were impacted by supply chain disruptions during the pandemic. With the increasing shortages of parts, manufacturers and distributors started looking to find alternative supply sources and establish more resilient supply chains. This shift in strategic sourcing and procurement as well as a high percentage considering re-shoring, is now being considered as a viable option worldwide. As a result, 42% suggested they will consider reshoring to overcome supply chain disruptions and ensure supply-chain resiliency

Digital transformation is therefore an imperative for manufacturers to overcome future disruptions, embrace new business models and ensure quality and control.

 

Why is it so important for manufacturers to invest in digital transformation?

I think the pandemic is a great illustration of digital transformation’s importance to manufacturing. The crisis exposed weaknesses in the supply chain. Companies can increase their supply chains’ resiliency through dual sourcing, but that adds a lot more complexity, which generally requires digital technologies to manage effectively.

It also illustrated the importance of connectedness for the industry to engage with all stakeholders (suppliers or customers) in real time.  In many cases, organizations relied on disparate systems and needed manual interventions.

With this realization, manufacturers and distributors have started to look at systems underpinned by meaningful data to secure their digital future.

ERP can support manufacturers to digitalize by providing the systems and platforms that resolve the biggest areas of impact; remote workforce enablement, implementation and automation of business systems to handle procurement and sourcing policy changes, distribution and lead time planning; and analytics providing data real-time to support improved decision-making. While there has been downtime, manufacturers have the opportunity now to make a change to improve operational efficiency and thrive now and into the future.

How has the pandemic been a priority reset for manufacturers?

It showed in stark relief how much better prepared organizations that had already undergone significant digital transformation were to weather the storm. Those who had embraced automation were better able to operate with personnel working from home. If they’d invested in digital supply chain management, those that leveraged it to take advantage of dual sourcing may have been able to continue production while those that didn’t had to sit idle.

Manufacturing has learned a great lesson. We’re seeing a massive increase in digital investment across the board.

Where should manufacturers focus their digital transformation efforts?

It depends on their business growth strategy and the industry pain points that a company needs to solve. Those looking to enter new markets and grow existing revenue streams should focus on aspects of their business where they can accelerate revenue growth, such as creating an automated self-service business engagement model.

There’s also a lot of opportunity for digital transformation with suppliers. Supplier portals, for example, give a manufacturer two-way visibility that enables both parties to make informed decisions based off of dashboards. Both can plan more proactively.

So, I can’t give you a single answer. Every company is different, and every industry is different. Each organization has to look at its business strategy and evaluate where in their business digitalization will best advance their goals.

What best practices should manufacturers embrace as they undergo an accelerated digital transformation process?

Always keep your strategy in mind as you execute, and work closely with all stakeholders to ensure you are all aligned. Also, remember that digital transformation is more than just technology. You’ll need to rethink and change the processes that these new technologies will support. Communicate regularly to the entire company about what changes are coming, why you’re making these changes and how they will ultimately benefit everyone. The message needs to be consistent and repeated from all areas of leadership. Arguably, managing the human element of digital transformation is more complex, difficult and important than the technology.

What missteps do manufacturers need to be aware of?

Over the last year, the success of the companies that already had a digital initiative in place was remarkable when compared to those that did not. It has become clear that the better the flow of data and information, the better the flow of goods.

While it has also become clear that improved technology is required to compete on a larger scale, for many manufacturers and distributors, the prospect of digital transformation is still very daunting. Some will avoid it altogether because of misconceptions around time and financial investment. Here, digital transformation needn’t be an ‘all-or-nothing’ investment. For example, manufacturers can  start off by investing in Shop Floor Data Collection solution – widely regarded as a good starting point to collate data. With your data in hand, the next step is the analysis and manipulation of data to produce meaningful insights into the process. This requires a platform that can integrate both internal and external data (like the Internet of Things) and deliver an end-to-end snapshot of the business. Enterprise Resource Planning (ERP) is a platform that is able to collect all of the data and using some form of analytics, interrogate and develop management information for the organisation.

Another misstep occurs because companies fail to achieve complete buy-in from all stakeholders, which includes executives, employees, customers and suppliers. If customers resist digital invoicing, it won’t matter how much you invest in it. Likewise, if employees go around the new systems to do things the old way, the efficiencies you’re looking for won’t materialize. Here ongoing training and upskilling is vital, to ensure maximum ROI from digital transformation initiatives.