How Digitization Can Drive Growth for Manufacturing Companies
Nick Ostdick - April 18, 2017
It’s a goal every manufacturing company chases, but what do we really mean when we talk about growth? Do we define growth as merely increases in annual revenue? Is growth an expansion of a company’s footprint and influence in certain markets or with specific customer pools? Do we consider growth in terms of developing and evolving a company’s overall operational platform or strategy? More than likely, growth for today’s manufacturing companies is a blend of all three conceptions, and to foster a brand of growth which encapsulates each definition, today’s manufacturers need to leverage a holistic reimagining of their supply and production schemes.
This is where digitization and the move toward a completely digital supply stream is critical for driving long-term, sustainable growth in terms of revenue, footprint, and development of internal processes. Digitization has the potential to impact each touch point along the value chain by streamlining processes, enhancing efficiencies, and providing planners and managers with greater insight into their overall supply situations. As such, companies looking to remain competitive in today’s global manufacturing landscape must reconsider digitization as a tool to create growth rather than just simply a technological advancement designed to replace outdated methods of conducting business.
Much like our slightly redefined notion of growth, considering digitization from a growth-oriented standpoint not only highlights the real-world value of a digitally-driven supply stream, but it also pushes companies to reimagine how digitization can positively impact their overall operations well beyond the production room floor. With this in mind, let’s examine some of the way digitization can drive growth for manufacturing companies by adopting lean manufacturing principles and optimized supply chain management strategies.
Merging the planning and execution phases
The merging of demand planning and execution carries a significant value when shortening lead times, increasing productivity of production cycles, and providing greater visibility in the production stream to combat disruptions and breakdowns. Digitizing the planning and manufacturing processes — everything from BOM management to job allocation and scheduling — allows planners to take actions based on real-time data and reporting and allows for replanning both in the short and mid-term based on changes to current conditions and restrictions.
This enhances the efficacy of the planning and production stages which can help expose areas of waste for companies to deploy lean manufacturing principles in service of shorter lead times, more accurate delivery timetables, and increased customer satisfaction. These outcomes are key in driving our three-pronged definition of growth and enhancing overall supply chain management.
Connecting the dots between data points and sources
The Internet of Things (IOT) has become a force in supply chain management in recent years as a way of not only connecting systems and solutions, but also fostering more accurate, responsive, and accessible data management and analytics. Via the IOT, digitizing the supply chain connects various methods of collecting, sorting, and evaluating data to help planners and managers create more accurate forecasts of demand for more effective planning strategies. The connection of data sources also helps planners and managers create enhanced what-if scenarios and simulations, both of which are critical for driving planning schemes for production programs with a growth-oriented mindset.
Digitizing the supply chain allows companies to make more informed decisions based on increased levels of visibility and transparency, which in turn helps companies execute actions to reduce costs, expand their reach, and refine their operational functionality.
Increased communication and collaboration
We discussed in previous blogs how digitizing the supply chain is a critical move toward eliminating cross-organizational silos in both communication and planning. This means major players within the supply stream will have a greater capacity to share data, collaborate on important initiatives, and work in conjunction to ensure smooth workflows free of bottlenecks, disruptions, or breakdowns. Because a digitized supply chain is based in part on a central hub of data storage with multiple access points, gone are the days when those within the supply stream had to wait days or weeks to review data sets and communicate the results of said data.
This allows companies to make key modifications to planning and production processes essentially in real-time to reduce the likelihood of bottlenecks or breakdowns which can be costly in terms of manpower, materials, and resources.
Greater understanding of demand planning principles
The ability to create accurate demand planning programs and forecasts depends largely on the current level of production constraints and capabilities — current volume of orders, sequencing of these orders, inventory, facility capacity, and the potential for breakdowns or bottlenecks. Digitized manufacturing allows planners to see simultaneously a local and global view of production streams in order to leverage the best possible decisions when it comes to scheduling these streams and allocating resources to fulfill orders in accordance with expected delivery dates. Digital manufacturing solutions also allow planners to alter, modify, or adjust production in real-time based on new rules and constraints encountered during the production cycle.
This level of agility and responsiveness makes it easy for companies to engage in lean manufacturing principles where waste and the potential for lost capital and resources is significantly reduced in both the short and long-term. This not only makes growth possible - in each manner of our definition - but it also provides companies an important competitive advantage in a crowded global market.