Digitizing Manufacturing: Ready, Set, Go!
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1 Digitizing Manufacturing: Ready, Set, Go! IKT NRW, Transform to the power of digital
2 The percentage of manufacturing companies that agree on Digital Transformation bringing value-adding benefits increased by a factor of three in the last couple of years Perception shift towards Digital Transformation Digital Transformation is a valueadding challenge that drives future manufacturing competitiveness 75 % 25 % Results from a survey in First Industrial Revolution through the introduction of mechanical production facilities with help of water and steam power Second Industrial Revolution through the introduction of a division of labour and mass production with the help of electrical energy Third Industrial Revolution through the use of electronic and IT systems that further automate production Fourth Industrial Revolution through the use of cyber-physical systems Degree of complexity Up-to-date 2 perception First mechanical loom, 1784 First assembly line Cincinnati slaughter houses, 1870 First programmable logic controller (PLC), Modicon 084, Time 1 Capgemini Consulting: Are Manufacturing Companies Ready to Go Digital? 2 Capgemini Consulting: Digitizing Manufacturing: Ready, Set, Go! 2
3 Both, perceived opportunities and threats clearly show the need for manufacturing companies to engage with Digital Transformation Opportunities and threats of Digital Transformation 1 Perceived opportunities Perceived threats 75% 67% Digital Transformation is a competitive opportunity for the company Digital technologies are helping us to improve internal efficiency Opportunities Our competitive position will suffer if we do not engage in Digital Transformation Digital Transformation is likely to involve internal _ organizational disruption 67% 50% 54% Digital technologies are helping us to improve customer relationships Threats Our Digital Transformation options are constrained_ by the actions of others 25% 52% Digital technologies are helping us to improve our products and services Digital Transformation is a threat to our company s status in the industry 15% Are manufacturing companies ready to engage in Digital Transformation? 1 Capgemini Consulting - MIT Center for Digital Business, Expert Survey 3
4 In our survey we concluded that the typical manufacturing company remains a digital beginner in the context of Digital Transformation Digital Intensity Digital maturity by industry low high FASHIONISTAS low Travel and Hospitality Pharmaceuticals Manufacturing BEGINNERS Telecom Retail Consumer Packaged Goods High Technology Insurance Utilities Banking Transformation Management Intensity DIGIRATI CONSERVATIVES high Only 12% of the manufacturing companies can be associated to the Digirati. 1 Capgemini Consulting: The Digital Advantage: How Digital Leaders Outperform Their Peers in Every Industry 4
5 The different degrees of maturity in digital intensity and transformation management intensity can be analysed along four independent dimensions Digital business models outline the degree of digitization applied on products, service offers and on engaging with customers Dimensions of digital maturity Management practices capture leadership in Digital Transformation visioning, digital steering and in aligning business & IT Merely 34 % of the manufacturing companies have a roadmap for Digital Transformation 48% of manufacturing companies use digital technologies to improve products and services Digital business models Digital practices Management practices Digital capabilities & skills Only 39 % have necessary skills in leadership to conduct digital initiatives Digital practices describe the maturity of a company regarding digital workforce management, digitization of processes and digitally engaging with customers Digital capabilities & skills summarise hard and soft abilities of an organization in applying Digital Transformation Only 54 % of manufacturing companies have automated their core processes 5
6 Manufacturing companies are still at an early stage and should thus take action in Digital Transformation to benefit from value-adding benefits Evaluation of Digital Maturity 1 1 Capgemini Consulting - MIT Center for Digital Business 6
7 We see a comprehensive framework for manufacturing companies to gain digital excellence PEOPLE LEADERSHIP & CHANGE Industry 4.0 Framework FUTURE MANUFACTURING BUSINESS MODEL AGILE OPERATING MODEL (DECENTRALIZED, MODULAR, FLEXIBLE, BOUNDLESS) GROWTH DRIVER SMART SOLUTIONS SMART PRODUCTS SMART SERVICES CUSTOMER INTEGRATION COLLABORATIVE ENGINEERING AFTER SALES INTEGRATION 360 SUPPLIER COLLABORATION AGILE COMPETENCY SOURCING SCALABLE CAPACITY NETWORKS EFFICIENCY DRIVER SMART FACTORY DECENTRALIZED PRODUCTION CONTROL DATA-DRIVEN OPERATIONAL EXCELLENCE IT STRUCTURES & GOVERNANCE CYBER-PHYSICAL SYSTEMS MOBILE CLOUD BIG DATA M2M SOCIAL 7
8 We have identified four key fields of action for manufacturing companies to start engaging with Digital Transformation Regarding the average maturity of manufacturing companies in Digital Transformation... Key fields of action...and taking current digital market trends into account... Digital Business Models Digital Practices Management Practices Digital Capabilities & Skills...Capgemini defined the following four key fields of action... Integrated business planning Datadriven business excellence Cyberphysical supply chain Digital service management Scope for today... and an approach for initiating Digital Transformation CONDUCT DIGITAL MATURITY ASSESSMENT IDENTIFY OPPORTUNITIES & THREATS IMPLEMENT & SUSTAIN THE DIGITAL DEFINE CHANGE LEADERSHIP DIGITAL VISION & AGENDA DERIVE DIGITAL ROADMAP PRIORITIZE TRANSFORMATIO N DOMAINS 8
9 Business analytics transforms data into key insights on how to improve corporate performance along the manufacturing value chain Data-driven business excellence Marketing, Sales Finance Big data analytics Production Research & Development Production silo Data silo analysis optimises business function performance Data lake analysis leverages cross-functional optimization Starting small, winning big - leading organizations start leveraging the potential of data by conducting pilot projects that target very specific business issues through analytics. 9
10 Chip manufacturer Intel designed and implemented a data-driven chip testing process resulting in significant operational cost savings Intel Data-driven business excellence Techniques of big data analysis applied on core value processes can lead to annual savings of several million USD Background Highly automated production facilities generate about 5 TB of data every hour In the past, the potential arising from this data was not leveraged to drive its core competency of high volume, precision manufacturing Solution Intel initially launched several pilot projects to discover the potential arising from data By this, a business analytics solution was designed that optimizes test procedures of a specific production line Previously, all produced chips were run through an extensive series of tests Added value The model results were leveraged to significantly cut down the number of conducted tests This led to cost savings of USD 3 million within the first year By rolling out this solution to all production lines, annual savings of USD 30 million are expected 1 Capgemini Consulting estimation based on project experience in the manufacturing industry 10
11 Manufacturing companies can target supply chain complexity by connecting physical commodity flows with digital platforms Cyber-physical supply chains Electronic interfaces Big data analysis Instant cloud access Increased transparency and improved remote accessibility Real-time processing and improves network monitoring Increased flexibility and improved decision-making Digital platform integration backbone Master Data Tracking & Tracing System Supply Chain Event Management ASN ASN & GPS GPS RFID & GPS RFID & GPS ASN & GPS ASN RFID RFID Supplier Logistic service provider Internal Logistic service provider Cyber-physical supply chains interconnect and map value networks and thus provide a transparent and unique view for breaking down operational issues. 11
12 HP developed a digital solution for dynamically mapping supply chain structures leading to an increased operational visibility Hewlett Packard Cyber-physical supply chain Through a comprehensive supply chain transformation HP targeted multibillion annual savings Background Operating one of the biggest and most complex supply chains Current digital maturity does not allow to visualise and analyse the supply chain Solution Development and implementation of real-time geographic supply chain analytics Design of a digital solution to provide a simplified, transparent and unique view of the supply chain to break down complex operational problems Added value for the client Improvement in supply chain visibility Cut down time for ad-hoc network optimization reduced by 50% Reduction of supply chain risk by visualisation and analysis of the impact of disruptive events 1 Capgemini Consulting estimation based on project experience in the manufacturing industry 12
13 Based on Capgemini Consulting research the digital supply chain future is driven by three major trends added by customer focus and environmental sustainability Overview Supply chain Trend analysis Expectations Innovation Trigger Internet of Things Cyberphysical SC In-memory analytics RFID Item level Peak of Inflated Expectation 2-5 years to mainstream adoption Stochastic SC Planning Supply Chain Segmentation Multiechelon Inventory Optimization Trough of Disillusionment (Enterprise) 3D Printing 3D Load Design SCM Business Process as a Service (BPaaS) Circular Economies Integration Broker Predictive analytics and simulation Master Data Management in SCM Slope of Enlightenment Scarcity of Natural Resources Control Tower + Shared Service Center Workforce Management Systems for Logistics Plateau of Productivity The SCM trend star Optimization Service orientation Sustainability Trend Star Segmentation Emerging Technologies Analytics & simulation 3 out of 6 major trends are fully technology driven Source: Trends with an expectation of two to five years to mainstream adoption Capgemini analysis based on the Gartner Hype Cycle model Y-Axis: Degree of a trend s expected impacts X-Axis: Real demonstrated trend benefits The future of supply chain management will be driven by applying emerging technologies in various areas 13
14 The next level of SCM will be the fully connected supply chain plus first applications of emerging technology in production Connected supply chain SC Tower Control / Agile Supply Chains Production process GPS ASN 3D Printing RFID GPS ASN GPS ASN Some first and easy steps to utilize technology for better supply chain management Information flow Material flow WEB EDI and EDI to transmit ASN information Global Positioning System messaging to inform about material flow status analytics to utilize enhanced information base in order to control the supply chain and avoid losses in production due to late material supply chain control towers for fast decisions Advanced Shipping Notifications (ASN) Global Positioning System (GPS) 14
15 Use cases of agile supply chains, 3D printing and RFID demonstrate the potential for Industry 4.0 applications Use Cases Agile Supply Chains 3D Printing RFID Use Case: UPS Supply chain network control is centralized and focuses on the last mile by combining technical devices (e.g. RFID and GPS) and big data analytics Real time information are used to enable a dynamic routing of the delivery fleet Integration of crowd-based delivery services leads to an improved capacity utilization Key disruptions Efficient supply chain design: Optimization of customer service levels by real time, transparent tracking and tracing Sustainable supply chain management y the reduction of miles driven per year and consequently fuel costs and engine times Further use cases: Job scheduling Use Case: Digital Dentistry By adopting the 3D printing solution, dentists are able to realize a complete digital workflow for in-house fabrication of models, abutments, coping/crowns and bridges of any size and combination Key disruptions Elimination of manual modeling bottleneck, reduction of treating times and required sessions due to efficient ad hoc production of required parts Improvement of cost structure (e.g. production, handling, logistics) Lean supply chain due to enhanced parts availability and flexible production capability Further use cases: Prototyping, mass-customization of products Use Case: Schuitema N.V. By engaging Capgemini to provide RFID expertise, Schuitema N.V., a Dutch retailer and food distributor, piloted a successful Fresh Link project to get fresher produce to the consumer RFID was used to track crates and temperature in the supply chain Key disruptions Information transparency and sharing (e.g. between partners) throughout entire chain of fresh produce Direct insight into inventory at batch level Early error detection, enabling correction at cause Dynamic adjustment of shelf life Further use cases: Inventory visibility, multichannel fulfillment, real-time consumer product interaction 15
16 Digital service management enables manufacturing companies to leverage remote service offerings and to optimize the service delivery chain Real-time performance and status information Digital service management Remote service staff information provision leads to Improved field service efficiency Installed Base Management Digital service management Field Service Efficiency Service Profitability Increased service revenues and reduced delivery costs Predictive Maintenance Smart service offers based on advanced analytics Digital service management provides a customer oriented platform that integrates IT and business needs to deliver innovative service offerings and to optimize service operating models. 16
17 Leading electronics company designed a digital service management platform to enable the delivery of innovative remote service offerings Example Digital service management Service digitization increases the efficiency of service delivery and ensures the delivery of high-quality services at low costs Background Intention to offer innovative remote services Renew and expand the IT platform to offer extend value added services Create a better customer experience Solution Definition of function, role and process requirements for operating the remote service portfolio Design of a target IT architecture for digital service management Implementation of an advanced digital service management platform Added value Business structure and IT perfectly respond to business needs Deliver innovative service offerings through highly automated and efficient processes 1 Capgemini Consulting estimation based on project experience in the manufacturing industry 17
18 Research results promise tremendous benefits coming from the new digital revolution but there is quite some uncertainty about the when and the what Is this all realistic? Core questions to be answered Which will be the first mass applications with the right level of maturity? Where are the robust business cases? How do we know what to do when? Die deutsche metallverarbeitende Industrie könnte laut einer aktuellen Studie der TU Berlin bis zu 2,3 Mrd Euro an Material- und bis zu 600 Mio Euro an Energiekosten einsparen. Möglich wäre das durch ein nachhaltiges Ressourcenmanagement und neue Technologien in der Produktion What is the competition doing? What happens with the employees when we are automating even more?
19 Our approach to initiating Digital Transformation addresses the four recommended key fields defined above Approach to initiating Digital Transformation A deep understanding of the current status of digitization in the organization CONDUCT DIGITAL MATURITY ASSESSMENT IDENTIFY OPPORTUNITIES & THREATS Explore opportunities, look into altering customer demands, competition dynamics and digital best practices across all business domains Implement and sustain the change process across the defined transformation domains IMPLEMENT & SUSTAIN THE CHANGE DIGITAL LEADERSHIP DEFINE DIGITAL VISION & AGENDA Top-down definition and communication of a digital vision incl. short- and longterm objectives Create a common roadmap that outlines the transformation journey in a phase-wise approach DERIVE DIGITAL ROADMAP PRIORITIZE TRANSFORMATION DOMAINS Prioritize the transformation domains based on the perceived business benefits and ease of implementation 19
20 20
21 Not even half of the manufacturing companies leverage digital business models to improve their solution portfolio and targeting new customers Only Digital business models Compared to 48% use digital technologies to improve products and services 35% launched new digital business Digital topperformers whose proportion is about twice as high 28% use digital technologies for reaching new customers Manufacturing average 67 % Top-performers (Digirati) 67 % 83 % Digital technologies enable manufacturing companies to transform into a holistic solution provider, thereby creating true USPs 21
22 Only a minority of manufacturing companies leverage digital practices to improve their operations efficiency and customer interaction Manufacturing Digirati Manufacturing average Manufacturing average Manufacturing Digirati Digital practices Operational excellence Customer experience Only 54 % of manufacturing companies have automated their core processes Merely 29 % of manufacturing companies use analytics to target market and customers 54 % 100 % 54 % % 100% 83% 83 % 38 % 67% 33 % 14 % Core process automization Operations monitoring in real-time Use analytics to target market and customers Sell products & services Less than half are as mature as top-performers in real-time operations monitoring Only 14 % of manufacturing companies use mobile channels to sell products and services 22
23 Most manufacturing companies have a serious deficit in digital leadership and thus face significant barriers for initiating and conducting digital transformation Category 1 Category 2 Time Period 1 Time Period 2 Time Period 3 Time Period 4 Time Period 5 Current State Item 1 Item 2 Item 3 Item 4 Category 2 Category 3 Category 4 Future State Management practices Envisioning and digital leadership Steering and engaging the organization 83 % of the Digirati have a comprehensive vision and a roadmap towards digital 100 % of the Digirati state that they fully aligned business & IT and coordinate digital vision Only 28 % of manufacturing companies have an aligned digital vision among executives and middle management align IT & business Interconnect Merely 34 % of the manufacturing companies have a roadmap for Digital Transformation roadmap 52 % of manufacturing companies think they know how IT can be used to increase productivity of operations Only 38 % of manufacturing companies coordinate cross-function and cross-company digital initiatives Manufacturing average Top-performers (Digirati) 23
24 More than half of the manufacturing companies demonstrate a lack of digital capabilities which will prove to be a true show-stopper on the way ahead IT and platform integration Digital capabilities and skills Digital Know-How 75 % 48 % have a common digital platform for different business units Only 39 % have necessary skills in leadership to conduct digital initiatives 83 % 67 % 43 % think to have an integrated view of product & service performance 39 % think to have mobile skills in digital 100% 67 % 38 % believe to have an integrated view on customer data Merely 19 % expect to have mobile skills to conduct digital initiatives 67 % 100% 56 % state they have an integrated view on supply chain status Manufacturing average Top-performers (Digirati) 43 % suppose to have skills in embedded devices 100% 24
25 In order to trigger action among potential clients, we have developed a digital maturity flash assessment that will go live next week Digital Maturity Flash Assessment for Manufacturing 25
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