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The 5 Stages of Digital Transformation in Manufacturing

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The 5 Stages of Digital Transformation in Manufacturing

Feb 1, 2022

Daniel Erickson
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Digital transformation has been on the manufacturing agenda for some time, but recent market conditions have elevated it to high priority.

New research by Aptean reveals that 72% of manufacturers now have a roadmap in place for automating operational processes. But fewer organizations have started investing in the technology infrastructure needed to execute this digital transformation strategy.

To understand more about manufacturers’ current capabilities versus their smart factory goals, Aptean has categorized companies into five digital transformation stages for our latest industry report, Perception Versus Reality: Manufacturing’s Digital Transformation Disconnect.

Stage 1: Non-Existent

Manufacturers at this stage of digital transformation: 22%

For almost a quarter of North American manufacturers, automation is a goal rather than a reality. And companies that have been in operation for five years or less are most likely to have no digital transformation roadmap, our research has revealed.

Within these businesses, almost all operational processes will be executed manually, with employees relying on verbal communication, paper and spreadsheets. This limits the speed and scalability of manufacturing processes, and also leaves these manufacturers vulnerable to mistakes and missed opportunities.

Running operations manually also makes it difficult to formulate insight-driven decisions. Without a digital infrastructure, there may be no single, reliable source of operational data.

What’s the next step for manufacturers with a non-existent digital transformation strategy?

If your company falls into this category, creating a manufacturing digital transformation roadmap should be a critical business priority. 78% of manufacturers are ahead of you on the digital transformation curve. Process automation doesn’t need to be radical; if you start by auditing your current operational vulnerabilities, this will help you to create a hierarchy for change. 

Stage 2: Nascent

Manufacturers at this stage of digital transformation: 17%

Around 1 in 5 manufacturers have already automated simple processes using manufacturing software. But there’s much greater scope for digitization.

The sophisticated capabilities of a manufacturing ERP means basic technology is quickly becoming outdated. Manufacturers at the nascent stage of digital transformation need to look at whether their existing automation tools can scale and develop, or whether it’s time to replace legacy technology with longer-term solutions.

Manufacturing software choice is particularly important for data management. Digitally nascent businesses might be tempted to keep current technologies and add new solutions in other operational areas. But extracting business intelligence from multiple systems involves complex technical integrations—which explains why 77% of manufacturers are still manually collecting and analyzing business data.

What’s the next step for manufacturers with a nascent digital transformation strategy?

If your manufacturing business falls into this category, you’re in an ideal position to address the bigger picture. Your technology investment to-date may have been based on specific use cases. By looking holistically at smart factory transformation, you can solve today’s problems AND put the digital infrastructure in place to increase automation tomorrow (filling gaps in operational data in the process).

Stage 3: Progressing

Manufacturers at this stage of digital transformation: 26%

1 in 4 manufacturers have started digital transformation in earnest, automating processes to improve data quality.

For these manufacturers, technology investment is delivering bottom line improvement. Our research discovered that manufacturing companies implementing digital transformation projects are more likely to be in a place of financial recovery or prosperity post-pandemic. In fact, 43% of prospering manufacturers have used technology to overcome a specific challenge, compared to 30% of financially struggling companies.

For many organizations, innovation initiatives to-date will have been driven by a small number of people within the business—a dedicated steering group, or even just one open-minded individual. Operationally, smart factory projects are moving in the right direction, but a technology-first approach is about people as well as processes.

What’s the next step for manufacturers with a progressing digital transformation strategy?

If your organization falls into this category, your key objective is to make digital transformation a company-wide goal. Every person in your workforce should be able see the automation strategy and understand how manufacturing software will enhance their role. The sooner people adopt new processes and utilize data, the quicker digital transformation will deliver ROI.

Stage 4: Maturing

Manufacturers at this stage of digital transformation: 25%

A quarter of North American manufacturers have achieved full or near-full process automation, and the benefits of digital transformation are being delivered daily.

Within these companies, employees in every business area use technology intuitively, driving cohesive planning and decision-making through data insight. Many will have created a smart factory set-up by investing in end-to-end solutions like manufacturing ERP software, which can be scaled and enhanced over time—rather than bolting-on new technology as needs change.

Importantly, these manufacturers have the connected insight capabilities to analyze and report on performance in real time. They understand how change in one area impacts another, for example the effect of supplier delays on customer orders, production schedules and materials requirement planning.

And through this understanding, employees can take action that limits the impact of setbacks on both productivity and profitability; for example, 23% of digitally maturing manufacturers want to move to a predictive maintenance model in 2022, to reduce equipment downtime.

What’s the next step for manufacturers with a maturing digital transformation strategy?

With operational efficiency now achieved, the next step for digitally mature manufacturers is to look forward. If your company falls into this category, now is the time to move to a predictive business model, creating ‘what if’ scenarios to anticipate disruption and ascertain the best course of action in advance.

Stage 5: Sophisticated

Manufacturers at this stage of digital transformation: 10%

A small percentage of manufacturers have highly sophisticated smart factory strategies already, and they are now looking at the next stage in manufacturing’s digital transformation model.

With all relevant processes automated and data being used to predict future behavior, organizations are focused on doing what they can do better. A huge volume of data is streaming through their business, and Artificial Intelligence/Machine Learning software can utilize this information to take modelling and forecasting to a new level.

Manufacturers that have completed digital transformation projects are also looking at how technology can change the role and value of employees, with 95% interested in using robotics to manage both high risk and low value tasks.

What’s the next step for manufacturers with a completed digital transformation strategy?

Having completed digital transformation projects and seen the benefits, the sky is the limit. If your manufacturing business falls into this category, see how hard you can make your data work. Explore advanced learning technologies that enable you to increase operational agility and identify new business opportunities quicker—so you’re always one step ahead of the competition.

Accelerate Your Digital Transformation Strategy at Every Stage

Much of the guidance on digital transformation in manufacturing is either generic or too high-level; it doesn’t cater to the reality of where most manufacturers are right now. In response to this, Aptean has created a new whitepaper on Perception Versus Reality: Manufacturing’s Digital Transformation Disconnect.

Our research discovered that most manufacturers overestimate how digitally savvy their business operations are. Which is why we’ve defined the five stages of smart factory transformation and provided tailored feedback on strategies and next steps for each level of maturity. 

Download our digital transformation whitepaper to benchmark your company’s technology infrastructure, or get in touch to find out more about how Aptean Manufacturing ERP software can accelerate your automation capabilities.

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