The manufacturing industry is in the midst of a metamorphosis. The term Industry 4.0 keeps cropping up – the idea that the world is currently undergoing a fourth industrial revolution, as impactful as the shift from hand production to machines or the advent of the assembly line. While some are hesitant to embrace the term, the facts remain: technology’s forward march is bringing profound changes to the way today’s manufacturers conduct business. In turn, these changes put new pressures on IT departments, which are tasked with supporting new operating models and integrating new technologies into existing production and supply systems. The following macro trends are the source of new IT challenges – but also of opportunity.
1. Supply chain digitization
Complex and fragmented supply chains are nothing new to the manufacturing sector. In an industry where supply chain costs can sometimes represent as much as 90 percent of operational costs, streamlining operations is critical to continued business success. Digitization across the supply chain – that is, the moving of various operational processes online – is not only a way to save money but also time. Inefficiencies in the supply chain can lead in a delay in time-to-market, which can give quick-moving competitors an advantage that is hard to reclaim. A recent PricewaterhouseCoopers study indicated that companies that focus on supply chain performance significantly outperform their peers financially, and IDC estimates that this sort of operational model transformation will improve responsiveness and productivity by 15 percent.
However, such a major change in the way that manufacturers do business puts pressure on legacy IT and network systems. As pen and paper processes are centralized and digitized, the manufacturer’s network infrastructure must absorb increased volume.
2. Globalizing operations and standards
Although the digital overhaul of legacy systems is daunting on its own, it is made significantly more complex when operations are dispersed across multiple geographies. It isn’t uncommon for the supply chain to span several continents. However, standards are converging – not only product standards, but operational process standards as well. IDC research suggests that by the end of this year, 90 percent of manufacturers will impose global standards across all operational regions. The topic of global standards in manufacturing is so relevant that the UN and the World Economic Forum are co-hosting a thought leadership conference regarding the future of global manufacturing in 2016.
Increasingly, IT departments will be tasked with enabling increased collaboration between regions. Additional complexity will need to be addressed with some facilities operating far from large population centers. Regardless of how far afield they may be, all of the links making up the global supply chain must be connected to ensure a seamless global standard.
3. Hybrid cloud
The shift from private networking to the cloud is a natural result of increased digitization across the enterprise. With in-house infrastructure straining under new demands and with global teams instituting uniform processes and standards, cloud computing is an obvious path for manufacturers seeking to streamline their operations. Cloud research group Ovum reports that manufacturers are looking to increase their cloud investments this year, citing the cutting of business costs and the improvement of operational processes as the two key drivers.
Due largely to security concerns, many manufacturers are implementing a hybrid cloud strategy, integrating the cloud into certain parts of their business while maintaining a tighter rein on their most critical applications and processes. Ensuring a smooth integration falls largely upon IT teams.
As manufacturers’ business models become increasingly digitized, security continues to grow as an area of concern. Cloud computing is cited as a solution to several of the manufacturing industry’s problems, yet hesitation in migrating to the cloud still exists, and security is a major reason why. The cloud is hardly the only area of concern, however: other areas of the business are also vulnerable as the cyber threat landscape continues to evolve. Protecting trade secrets from corporate espionage is a consideration. Another major target is end customer data, which is being collected and utilized by manufacturers in new ways. Many manufacturing leaders are making major customer centricity investments, beginning to explore e-commerce and aftermarket sales and increasing the brand’s interaction with customers via multiple channels. Given the advent of the Internet of Things and connected devices, there is far more at risk now than even five years ago.
Security has always been, and will continue to be, a top consideration in IT decisions. As manufacturers continue to change the way that they do business, network security must evolve alongside operational strategy to ensure valuable brand assets remain protected.
5. Smart Factories and Big Data
Customer data analysis is only the beginning of the data mining that manufacturers are now doing. Big Data analytics are entering the manufacturing in a variety of ways. The digital transformation of the manufacturing sector and the proliferation of the Internet of Things mean that factories are becoming smarter. Interconnected machines optimize and improve the production process. The volume of data available to manufacturers has greatly increased due to these innovations as well, and that data is being used to find and eliminate production inefficiencies.
As factories become smarter, IT and operations will have to work hand in hand to ensure that new technologies are properly integrated. Far from being a cost center, IT is becoming more of a profit center for savvy manufacturers.
Manufacturers who innovate and differentiate through technology stand to gain share. Many of the above trends require major and disruptive changes to the way that manufacturers currently do business, and forethought will be critical to stay ahead. The top manufacturers of the future are making investments in IT today, and as the global business environment continues to evolve, these are the companies that will emerge as industry leaders. In transforming their business models, these leaders will prioritize partners that enable them to deliver on this global strategy and leverage tools that can turn big data into actionable business intelligence.
Maya Ogranovitch Scott is a vertical strategist and data devotee covering Manufacturing and emerging verticals for the North America Marketing team at Level 3. When she’s not developing vertical campaigns or crunching numbers, she can probably be found twenty feet in the air at her local circus gym.