Why manufacturers are lagging in the digital transformation race
- Manufacturers are quick to adopt new technologies to improve productivity and maximize production output
- But the research has found the industry to be lagging in utilizing data
The manufacturing industry has been swift to dive into adopting next-gen technologies such as AI (artificial intelligence), automation, robotics, and others for improved productivity and enhanced safety on factory floors. Cutting-edge technologies can hold the key to optimizing uptime and productivity.
Throughout the pandemic, when supply chains were in disarray and demand for household items skyrocketed, manufacturers scaled back spend on larger projects but remained consistent in investing and upgrading software and smaller-scale technology initiatives that helped to streamline operations and ensure they remained competitive.
But while manufacturers are enthusiastic about spending on state-of-the-art automation tech for core processes on the factory, as wider businesses — replete with marketing, finance, HR, among other functions — they are falling behind others when it comes to the digital transformation of the entire enterprise.
This is according to a study by Deloitte, which found that members of the manufacturing sector are behind in adopting broader enterprise-wide digital initiatives; this, in turn, limits the digital strategy horizon and pushes manufacturing enterprises further behind. The study shows digital transformation initiatives that span the entire enterprise, such as customer-centric innovation and human resources, are missing.
The continued use of legacy systems and antiqued tech, including CRMs, hardware, ERPs, and network infrastructure, inhibits the manufacturing industry from stepping up its digital transformation game and staying competitive, regardless of the tech downstairs. Another main challenge described in the study is the inflexibility of legacy systems that accommodate modern digital solutions.
The report found that just a quarter (26%) of businesses could be considered digital transformation frontrunners or those that strongly believe in the business value of adopting new technology solutions for digital transformation and are ready to use the new technologies.
These frontrunners also have higher confidence in their ability to outperform their competitors in a classic measure of delivering stakeholder value: delivering financial results.
Based on survey results, frontrunners are 1.5 times more confident than stragglers in delivering strong financial results in the long term, reflecting their apparent ability to adopt new technologies that will transform the business.
One example cited by the management consultancy was how manufacturers were leveraging digital transformation to optimize the evolving tax code with respect to income made overseas. Those at the forefront of digital transformation were more readily prepared to assess, analyze, and plan for recent US tax legislation and evolving global tax legislation.
Companies at the forefront of digital transformation can obtain and analyze data regarding their supplier network, distribution networks, factories, etc., in ways that never existed before, often on a real-time basis. This can enable tax and finance departments to not only maintain these new tax calculations but also empower management to make operational decisions that can lead to tax savings that are measurable instantly (and not after thousands of hours of number-crunching by tax and finance).
In short, while uptime and productivity are key drivers of success in the manufacturing sector, as fully-functional businesses at large, there are plenty of areas in which digital transformation must take place in order to ensure revenues are maximized and the business is competitive.
The trend uncovered by Deloitte has been identified before. A report by IDC and Seagate, based on a survey of 1,500 global enterprises across industries, found that the manufacturing sector has one of the lowest rates of data growth compared to other industries, despite owning one of the highest data center footprints.
Manufacturing’s legacy on-premise infrastructure and lacking the ability to cultivate, process, and manage the trove of data is a hurdle in place of the industry’s path to digital transformation.