Industry 4.0 means that manufacturers around the world are thinking about digital transformation.
Choose the right tools and technologies and you will see a boost to efficiency and competitive edge. Make the wrong choice and be left with a failed investment that will cause irreparable damage to the business.
As SAP experts, what we do can play a small but important role in digital transformation. In this guide, we’ve gathered together some vital stats about digital transformation you need to know, and provided you with our insight and commentary as SAP experts.
Smart Factories
Innovate or Die.
That’s the message being bandied around the manufacturing industry.
The fourth industrial revolution is upon us, and any manufacturer worth their salt is in the process of upgrading their boring old factories into the smart factories of tomorrow.
At least, that’s what we’re told.
A recent study however disagreed.
When asked about their Smart Factory plans, 27% replied that they “currently have no plans. It is not on our radar when it comes to adopting Smart Factory Technology”.
Source: The Manufacturer Annual Manufacturing Report 2019
You might think this is bad news for SAP companies who increasingly promote their "smart" credentials.
However, despite the ney-sayers, 74% of people feel Smart Factory Technology will be used to streamline internal company processes from shop floor to admin.
Source: The Manufacturer Annual Manufacturing Report 2019
So who is right? Should we all be rushing to invest in smart technologies ASAP? Are they a vital part of your business case for digital transformation? Or are they just something that should be implemented on an “as needed basis”?
No plans for adopting this technology should not be an option. Smart manufacturing leads to increases in product quality, reduction in downtime and the ability to make faster more informed decisions. Turning your back on it is a King Canute approach which will damage your future competitiveness.
JULIAN RAWLINSON - RESULTING IT S/4HANA AND EWM CONSULTANT
Digital Tech
Smart Factories might be the newest buzzword in manufacturing, but there is so much more you should be thinking about.
81% of manufacturers said they are ready to invest in new digital technologies to boost productivity
Source: The Manufacturer Annual Manufacturing Report 2019
which as you’ll remember is more people than those relying on Smart Factory technology.
So what are the other technologies you should be looking into?
VR
VR has come along way in just a short space of time, and is no longer just the novelty gaming device you use to freak out your grandad on boxing day.
Innovation in the space has meant VR is a vital tool for many companies, helping them achieve a number of important goals from teaching new skills to onboarding staff.
When VR users were asked “How do you measure success and value of immersive technologies (VR)” these were the results.
- Business Perception 20%
- Risk Reduction 18%
- Increased Productivity 17%
- Improved Quality 17%
- Money Saved 16%
- Orders Generated 10%
- Other 2%
Source: Catapult Immersive Technologies in Manufacturing
So how do you know if you can benefit from VR?
With the power of VR, manufacturers could have all of their staff training held within VR simulations, where people could see the consequences of their actions. For example, a VR simulation on Health & Safety protocols in a factory where severe/life threatening injuries are a possibility. A person could be very knowledgeable about how a process is completed, but not know how to do it themselves. For example, a person could pass their driving theory test but not have a clue how to actually drive a car. With a VR simulation companies can put people in scenarios that can evaluate their skills within a risk free environment.
NATHAN WINFIELD - RESULTING IT VR GAME DEVELOPER
Robots
There have been robots of one kind or another in factories as far back as 1962 when General Motors deployed the UNIMATE in their New Jersey Plant.
In recent years however the development of “cobots” - smaller, safer robots that can work alongside people - has opened up a whole new realm of possibilities for robotics in factories.
The International Federation of Robotics (IFR) forecasts that by 2020 more than 1.7 million industrial robots will be installed worldwide.
Source: International Federation of Robotics
AI
When you talk about any future tech AI is bound to come up, but it might have more practical applications than you think.
When asked “Which areas of your business do you plan to automate with the help of Artificial Intelligence in the next three years?” here is how a group of manufacturers responded.
- Production and the manufacturing process 30%
- Decisions around optimising operational performance 27%
- Predicting and managing maintenance issues 24%
- Predicting and addressing quality deviation 24%
- Customer Service 16%
- Sales and Marketing 14%
- Distribution 13%
- None - we are not automating any areas - 6%
- None - we have automated all we need to 1%
Source: SSG Insight, Harnessing Brexit, Technology and Insight
The role of AI with particular focus on predictive and prescriptive analytics will have a huge impact on Manufacturing processes. IoT sensors combined with efficient data processing now allow businesses to see everything. This however does not equate to knowing everything. This is where AI will be able to build a more complete picture.
With the ever increasingly levels of capability in AI we are beginning to see significant changes however these will come with plenty of challenges and failures. AI is not a silver bullet and requires the highest levels of capability within organisations to implement with a positive ROI. Those that invest with the long term will reap the benefits of increased competitive advantage or simply being part of the new normal.
ROB HAMILTON-SMITH - RESULTING IT AI PRODUCT LEAD
Confused?
With all these different new technologies to consider, it can be hard to decide what to focus on. After all, you wouldn’t want to be the guy who spent half of 2020’s budget implementing the next mini-disc.
Here’s what other people think are the most important technologies for them in the coming years.
“Which of the following areas of technology do you predict will play a greater role in your business in the next three years?”
- IoT 24%
- 3d printing and material science 18%
- Analytics of big data including customer insight 28%
- AI and machine learning 26%
- App based mobile reporting software 22%
- Automation robotics and cobots 25%
- None 6%
Source: SSG Insight,Harnessing Brexit, Technology and Insight
Data
So what’s the point of all this new tech anyway? Often, it's to help you gather more data and interpret it more effectively for more informed and profitable decision making.
If you’re not already thinking about how you use data you’re behind the times.
91% of manufacturers feel positively that Data from connected machines and people will inform decision-making and reduce costs.
Source: The Manufacturer Annual Manufacturing Report 2019
Alarmingly though, despite the value of data 20% of manufacturers don’t share data, whether internally or outside of their businesses.
Source: KPMG, How to gain a competitive edge in UK manufacturing
In a post GDPR world, this is understandable when it comes to customer data, but as factories become smart and better connected, it's vital you start leveraging data as much as possible.
Collaboration with both suppliers and customers is key to successful manufacturing. The only way this can work effectively is to share relevant data allowing you to reap the benefits, for example in reducing lead times or improving customer service.
JULIAN RAWLINSON - RESULTING IT S/4HANA AND EWM CONSULTANT
Brexit, Uncertainty and Strategy
Despite these exciting and potentially game-changing innovations, the business case for any new tech should be business led and provide real business benefits.
You can’t just kit out your factory in the newest tech because you think it’s cool and everyone else is doing it.
New tech should be implemented to support your business strategy - and this is where the problems lie.
According to one survey 71% said Brexit uncertainty is damaging strategic planning and business prospects with 66% saying they feel they cannot plan for the impact until they know the Government’s strategy and EU response.
Source: The Manufacturer Annual Manufacturing Report 2019
Source: MHA, 2018/19 Manufacturing & Engineering Report
Until businesses better understand how Brexit will affect them, creating a water-tight business case for any new tech will be a challenge as no-one is quite sure how Brexit will affect business strategy.
So while you might be excited to implement new tech into your factories, you need to understand your business strategy first.
Skills Shortage
In the world of ERP and SAP specifically, the need for SAP customers to migrate to S/4HANA in time for the 2025 ECC support deadline has created a skills shortage - there simply aren’t enough experienced S/4HANA consultants to go around.
Similarly, it seems that the shift towards Smart Factories and Industry 4.0 has created a similar skills shortage in the manufacturing sector as a whole.
60% put skills shortages at the top of their agenda. Most businesses want to see government action on expanding skills training for the future work-force at all levels of education.
Source: MHA, 2018/19 Manufacturing & Engineering Report
61% of manufacturers believe technology investments will complement or create new roles for people, rather than replace them.
46% Cite availability of talent as an obstacle in realising their digitalisation strategy.
Source: KPMG, How to gain a competitive edge in UK manufacturing
Having established a position as market leader over the part of 20 years, SAP have recently announced a total re-plaform of their software to run faster, in the cloud and to be much, much simpler to work with. This new world is called S/4HANA and will create a new demand for SAP skills in what is now an ageing workforce.
Big companies are realising that offshoring isn’t as good as they first though it might be. More expensive, quite frustrating and hard to sustain any sort of competitive edge through innovation.
The demand for offshore SAP skills is reducing. Which means the demand for local SAP skills is increasing.
And the drive to migrate from SAP R/3 to S/4HANA means that this situation is only going to get worse as demand increases and the local workforce ages.
This has the potential to cripple some of the world’s biggest companies who need to adapt their business models to compete in a digital era but who won’t be able to due to a massive supply and demand imbalance and a talent war
STUART BROWNE - RESULTING IT MD
So what next?
So what do these stats tell us about manufacturing?
For me, it speaks volumes about how vital it is for manufacturers to embrace new technology as much as possible.
By leveraging tools such as AI, Data and VR, manufacturers can set themselves up for the biggest chance of success in the wake of challenges such as skills shortages and environmental and political factors beyond their control.
For many, the real challenge will be modernising their systems to make the most of these tools, as this could require significant digital transformation.
If you are thinking about digital transformation, particularly in the SAP space - we can help.
Contact us any time for a chat here.
Download "Fifty shades of blue: the secrets to taking control of your S/4HANA journey" for everything you need to know about S/4HANA migration.
