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Digital Transformation in Manufacturing, or Digital Manufacturing for short, is a matter of survival now for manufacturing concerns. Manufacturing companies desirous of survival have no choice but to hop on the Digital Transformation bandwagon, rapidly.
Business Transformation of any kind is not an easy endeavor. Change Management of Digital Manufacturing is typically more difficult than any Change or Transformation Program that an organization may undertake.
Forming a strategy to leverage digital technologies is the 1st step in transforming a manufacturing concern towards Digital Manufacturing. Bigger challenges are faced in strategy execution.
For Transformation execution to be effective, CEOs must reconsider almost everything about the way their companies work; for instance, establish new Business Models, reorganize their Organizational Design, and also rethink their Leadership style.
Specifically, there are 3 key pillars of Digital Manufacturing execution that need careful consideration for the Transformation to be successful:
- Business Model over Technology
- Independence of Digital Operations
- CEO-driven Digital Transformation
Let us consider the key pillars a little more in detail.
Business Model over Technology
Shifting from old technology to new is easier than changing the Business Model of any concern, especially a manufacturing concern. Customarily, manufacturers sell machinery, hand out software as complementary, and offer after sales repair and maintenance service for the machinery.
For Digital Transformation to be truly successful, the whole way of doing business has to change. Manufacturers have to look at what they are selling i.e., outcome instead of a product. What is important is manufacturers should be willing to do away with existing Business Models to create and capture new value.
Value creation is achievable in many ways using industrial Internet of Things (IoT) by manufacturers. All of the avenues for value creation should be used in parallel so as to gain the largest impact.
Value created through Digital Manufacturing can be captured in 2 ways:
- Software as a Service and Subscriptions/Licenses
- Offering Success as a Service
Independence of Digital Operations
Digital operations can create a meaningful impact only when they are independent of the main business. Independence is important but so is proper linkage with the industrial business.
Initially, understanding regarding value provided by Digital operations may be very limited in the manufacturing business therefore cooperation may be inhibited. Finding ways to link Digital operations with the manufacturing business must cater to the requirement of understanding how the machines work.
Resistance from the manufacturing business is expected when the 2 forces combine, especially when the Digital operations grow. Delineating who handles customer relationship and all factors associated with it, is also a question that may spring up in cooperation between manufacturing and digital operations.
Ways to obtain gains from linking vertical business and the horizontal digital function must be found.
CEO-driven Digital Transformation
Sponsor of the Digital Manufacturing initiative has to be the CEO. Only the CEO has the influence to decide the divergences between the old manufacturing business and the new digital business.
CEOs have to drive the Digital Manufacturing shift. Leading from the front to make everyone understand that Digital Transformation is a very serious and important endeavor.
CEOs must have the will and resolve to challenge incumbency, obliviousness, and existing state of affairs. While remaining firm on the strategic direction, CEOs must be flexible enough to experiment, learn, and adjust course.
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Supply Chain Management (SCM) is the design, planning, execution, control, and monitoring of Supply Chain activities. It also captures the management of the flow of goods and services.
In February of 2020, COVID-19 disrupted—and in many cases halted—global Supply Chains, revealing just how fragile they have become. By April, many countries experienced declines of over 40% in domestic and international trade.
COVID-19 has likewise changed how Supply Chain Executives approach and think about SCM. In the pre-COVID-19 era of globalization, the objective was to be Lean and Cost-effective. In the post-COVID-19 world, companies must now focus on making their Supply Chains Resilient, Agile, and Smart. Additional trends include Digitization, Sustainability, and Manufacturing Reshoring.
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About Mark BridgesMark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.
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