Manufacturing is fundamental to a country’s economic success. India and the global economy are at crossroads now, caught in the throes of the coronavirus pandemic. When Covid-19 finally subsides, the Indian economy will shift gears from battling an existing slowdown to pulling out of an even deeper economic precipice, catalysed by both global disruptions as well as broader economic challenges.
As industries, especially manufacturing, strives to recover from this slowdown, the role of digitalisation will become more pronounced. We recently asked top CEOs in India about what their top priority would be post the coronavirus crisis. More than 50% affirmed that greater digital adoption and automation would be the key priorities. A Bain survey also found that even though more than 50% of companies adopt digital operations, only 5% of them exploit their full potential.
We expect digital to get more traction on the shop floor post COVID-19. These could be reflected in the use of IoT and sensors to monitor machine performances and reduce the number of operators; in the safety and security of staff by adopting digital solutions and finally, automation through the use of robotics. Companies should use this crisis to familiarise themselves with new age digital solutions, which otherwise the traditional plant staff is always hesitant to use.
Within manufacturing, companies have been adopting digital across 12 key themes. These include additive manufacturing, Overall Equipment Effectiveness (OEE) and productivity, production logistics, dynamic production planning, automated and adaptive manufacturing, safety and security management, quality management, intelligent energy management, labour productivity, systems (IT) management and predictive and remote maintenance.
Smart factories have the potential to bring significant benefits like increased throughput, higher production efficiency, lower costs (CAPEX and OPEX) and improved quality. In our experience, we have seen that average overall operating and labour costs could go down by up to 20% each. Similarly, digitalisation has the potential to improve plant capacity by about 20%. Savings, agility, quality and efficiency are the broad parameters that could positively get impacted.
What CEOs need to do
Companies that reap the biggest benefits from digital investments take a strategic approach from the outset. They link investments to strategy, prioritise investments that create the most value, adapt their organisational model and move uncomfortably fast. In effect, it is a five-pronged strategy.
Follow a structured approach to digitalising manufacturing operations
At the macro and top management level, there is need to create a compelling digital vision for digitalising manufacturing operations and linking it to the overall strategy of the company. It is important to follow a disciplined approach to piloting and scaling new digital solutions. Often digital experiments originate as grassroots initiatives led by enterprising department heads who are keen to improve specific processes. Their decisions make sense in isolation, but the resulting hodgepodge of initiatives, scatter investment and management focus undercutting the ability to focus on key business outcomes. This is why a structured approach is critical.
Look beyond cost savings
Leadership teams tend to focus on an overly narrow set of goals when digitalising manufacturing operations. Our survey showed that 80% of executives are mainly seeking cost savings. Many overlook the opportunity to improve the reliability and flexibility of their operations and to pursue strategic opportunities. Therefore the advice would be: don’t ignore cost benefits, but focus primarily on improving quality, speed, reliability and visibility of manufacturing operations.
Prioritise opportunities, do not go after everything
A highly fragmented technology and vendor landscape offers companies endless opportunities to test, learn and spend. The risk in this approach is ongoing experimentation with minimal benefits. Therefore, it is crucial to prioritise technologies that will create the greatest value and are scalable.
Move uncomfortably fast
Most companies are still operating at yesterday’s pace in vetting new technologies. As disruption accelerates, executive teams need to move faster in deciding which pilots to scale. They also need to set clear criteria to kill unproductive investments quickly and redirect resources.
Build a smart digital organisation
Companies that ensure that they have the right people in the right roles, sufficient digital talent, strong governance structures and an executive team aligned with the digital strategy become winners and are successful in implementing a digital strategy. It is important to embrace new capabilities, such as agile ways of working and collaborate with start-ups to make the most of cutting-edge technologies.
Investing in digitalising manufacturing operations is a journey with tremendous potential which can create a huge competitive advantage. Already, the gap between leaders and laggards is growing. Our experience shows that a handful of success factors can make all the difference. Digital innovation will make companies of the future exponentially smarter and faster. Those that put it to work will forge a new era in manufacturing operations.
Views are personal.
Deepak Jain and Gaurav Nayyar are partners and Sushil Pasricha is principal in Bain & Company’s New Delhi office. Jain co-leads the Advanced Manufacturing & Services and Energy & Natural Resources practices and also leads Manufacturing and B2B Digital for the APAC region. Nayyar is a leader in Bain India's Advanced Manufacturing & Services and Performance Improvement practices. Pasricha is a member of the firm’s Performance Improvement practice.