Digital transformation is presenting significant benefits to organizations worldwide - from strategic benefits to operational and financial benefits.
So we ask ourselves, but why digital transformation? Of all the reasons presented, the three most prominent are: cost savings, compounding growth, and improved experiences for all involved.
Cost Savings
On the financial side of things, there are multiple ways that digital transformation can contribute to cost reduction. Five main cost-focused goals that manufacturers deem critical are:
- Asset efficiency
- Workforce productivity
- Cost of goods sold (COGS)
- Operational and manufacturing costs
- Service costs
Let's dive into each...
1. Asset efficiency - Improving the availability, reliability, and performances of assets.
Manufacturers have a multitude of products, machines, and equipment across various facilities and environments. Gaining insights into these machines and their perocan grant you drastic improvement on your overall equipment effectiveness (OEE). It can also have a positive impact on downtime and resiliency. Tackling these operational costs through increasingly efficient use of assets is prevalent with the Industrial Internet of Things (IoT) injecting connectivity and correlating intelligence into these machines.
2. Workforce productivity - Increasingly effective onboarding, streamlining, optimizing, and empowering frontline workers with their tasks.
Manufacturers are aiming to optimize their workforce, especially with the large skills gap in the industry today. Empowering workers with digital insights can help with various tasks, including physical tasks like assembly, maintenance, quality inspection, and more. You can also leverage the Industrial Internet of Things (IoT) in supplement to augmented reality (AR). This allows you to view real-time work instructions overlaid onto your environment - serving as an immersive lens to unlock productivity enhancement.
3. Cost of goods sold (COGS) - Reducing direct costs necessary to construct the goods offered/sold by your organization.
By utilizing digital, it allows you to boost your inventory, minimize scrap/waste, and leverage labor. Artificial intelligence (AI) can offer important insights and identify supply chain areas to optimize costs. Additionally, Software as a Service (SaaS) can provide a platform to link these supply chain processes that are typically disconnected.
4. Operational and manufacturing costs - Minimizing overhead and production costs related to maintaining operational continuity, as well as the expenses associated with manufacturing a product.
Digital transformation entails cost reduction in various categories, from labor to energy, materials, supplies, and capital expenditures. For example, digital-driven insights can balance factory power usage across assets to lower energy costs. Other expenditures are also subdued through digital transformation programs and their assistance optimizing existing production capacity.
5. Service costs - Cutting labor, asset, part, and customer costs.
There is an extensive list of costs related to servicing deployed products and improving your service team's metrics. Optimization opportunities for the technician are possible through matching skillsets and proximity to service issues in the field, as well as remotely resolving issues through smart connected products.
Utilize Digital Innovation to Drive Compounding Growth
In addition to finances, digital transformation also offers innumerable other benefits across the enterprise - including driving compounding growth. Manufacturers are constantly challenged to achieve competitive growth metrics despite having limited resources to do so. By incorporating digital into product development, it has cleared a path to attain compounding growth. The main ways that digital transformation has helped achieve this is through the following:
- Improve Time-to-Market
- Introduce New Products
- Introduce New Business Models/Revenue Streams
- Throughput & Yield
1. Time-to-market - Minimizing the amount of time to get new or existing products to your customers.
This includes both improvements in product development (reduction in design iteration time) and manufacturing (cycle time, throughput, etc). A digital thread creates continuity between these functions so manufacturers are able to ship their products at higher speeds.
2. Introduce New Products - Lowering allocated time in product development processes.
New and evolving technologies are beginning to equip engineering teams with the ability to rapidly innovate product designs. Generative design can autonomously create thousands of design variants based off of your specific requirements, specs, and goals. To introduce new products at unimaginable speeds, these modern methods of innovation are essential.
3. Introduce New Business Models and Revenue Streams - Forming alternative methods to drive new revenue streams.
Digital provides a way to establish revolutionary new strategies and methods. For example, through product-as-a-service, manufacturers are mirroring the software subscription model and selling product usage and business outcomes. These digital transformation programs refresh traditional manufacturers and business models to recognize reoccurring revenue streams and sizeable service margins.
4. Throughput & Yield - Diminish the amount of time for a product to complete its' way through a manufacturing process.
In some industries, growth directly translates to rapidly producing massive amount of products. In these industries, manufacturers turn to IIoT driven digital transformation solutions to boost production processes and rates, while simultaneously driving down the number of defects.
Transform Customer Engagement and Customer Experience
Aside from cost savings and growth.... a challenging, yet desirable goal is to become a customer-centric organization. After all, customers are what ultimately keep your organization afloat. This is why digital transformation is being leveraged by an increasing amount of organizations - to not only exceed existing customer expectations, but to also attract new ones. Here's a few ways that digital transformation can contribute:
- Product Quality
- Customer Experience & Engagement
- Service Quality
1. Product Quality - Consistently creating high-quality, reliable, and customized products.
Internally fixating on quality metrics works well to ensure your product's resiliency in operating environments. Mass customization and product complexity are enhancing the need for digital threads to manage the enormous amounts of information and maintain the highest level of product quality across lifecycles.
2. Customer Experience & Engagement - New products, features, or services to customer delivery models.
Digital transformation can supply manufacturers with a lens into their product's deployment. In addition to that, it can also display the customer's usage of your product. These insights are crucial for product designers that may be working on next iterations, as well as other team members included in the design process or throughout the organization.
3. Service Quality - Offer increasingly reliable, responsive service operations.
As previously mentioned, digital transformation can bolster your direct cost savings across the service lifecycle. However, in addition to direct cost savings, it can also ensure reliability and trust with your customers. By achieving a basis of trust while servicing your customers' products, you can really become an ally of the customer and initiate future customer loyalty.
Overall, digital transformation is continuously evolving. It is offering organizations a multitude of benefits, ranging from financial gains, to quality improvement and more. When your organization implements a well-structured digital transformation strategy, the attainable value is endless.