Over the last few years, you’ve probably read a lot about digital transformation, together with descriptions about the tools and technologies it entails like robotics, machine learning, automation, digital twins, cloud, IoT, extended reality, big data analytics and more.
While much has been written about these topics, the concepts behind these megatrends are often misunderstood and can be hard to understand from a strictly financial perspective. One might think these are just the latest technology fads. Is there any real long-term value to these investments? And, if so, what can be done to start that journey and justify the investment?
When you add up the cost of acquiring the needed technology, the specialized talent needed to implement digital systems, and the combined disruption of reconfiguring the shop floor, the workflow processes, the staffing requirements, it can be an overwhelming decision. It’s easy to understand the reluctance of seasoned financial executives to abandon their familiar, even though sometimes low-tech tools. If it isn’t broken, why fix it?
If you feel this reluctance, try taking a step back for a different perspective. Sometimes future outcomes can be unexpected—as well as the best path forward for long term value creation. A closer inspection will reveal that an investment in overhauling your digital environment can have far reaching impact with benefits that far outweigh the risks of not making the move.
The good news is that there are systematic ways you can determine, in advance, what digital investments can lead to the most immediate payoffs, and they don’t need to be ones that leave your business in a state of shock or disarray.
A realization by financial leaders is now emerging that a wealth of high-value intelligence can be reliably extracted from your current manufacturing operations—information that can provide a basis for better decision-making. Not only can this information be accessed quickly, but with the right systems in place, concrete steps can be taken to reduce financial risk. This is a realization that has begun to capture the attention of financial executives throughout the manufacturing sector. We call it Manufacturing Intelligence.
Forget About the Shiny Objects
Digital transformation isn’t really about all the shiny new devices, trendy software and leading-edge services you’ve heard about, even though they’re what first comes to mind for most people when the subject is brought up. The real value behind the advanced technologies we’re seeing in digital transformation comes through their role in securing real time manufacturing intelligence. And for CFOs, the importance of these technologies is their ability to provide exactly that sort of manufacturing intelligence—tools that can deliver the information needed to guide your company’s financial path. Among them: real-time visibility into financial metrics, improved control over quality, and an improved ability to navigate the impact of supply chain disruption.
For example, the Italian industrial equipment maker Biesse sells production machines that send data to a digital platform that can predict machine failure and promptly deploy maintenance crews before a breakdown. It prevents work stoppages and keeps the shop running.
Or consider the case of Volkswagen, which used AI-powered designing to revisualize its iconic 1962 Microbus as an electric vehicle. They created parts that were lighter and stronger, reducing the time between development and manufacturing from a 1.5-year cycle to just a few months. Their cost savings were considerable.
And finally, there are supply chain disruptions. Gartner sees various forms of supply interruption as a long-term trend that will most likely accelerate as we face climate change, global power balance shifts, logistics failures and more. Business leaders who understand that dynamic have prepared their organization accordingly. What Gartner calls “fit” supply chain operations in many industries are those using digital tools to provide visibility into their supplier networks and gain competitive advantage during disruptions, while “fragile” organizations struggle.
The point is that organizations that turn data into insights are benefitting because they can respond faster and more decisively with real-time intelligence. They can ease supply chain disruptions to reduce their financial impact. They can streamline manufacturing operations. And they can evaluate the potential risk of new business opportunities using improved insights.
In a digital world, especially for those industries with significant regulatory requirements, company operating systems need to adapt. At the same time, though, many of their key performance metrics are hidden. When data is collected and made available in a centralized repository, digital production systems, such as a manufacturing execution system, can provide superior visibility into production, quality and supplier performance. That, in turn, provides insights for better decision support and guidance on how to best manage risk and anticipate future rewards.
That’s the real reason you should consider getting started now. Thoughtful, strategic investments in digital technology can help safeguard the future of your own company as well as that of your industry. And, with the attractive new cloud-based managed service options, the upfront cost is significantly less than you might think, which can be paid for as a subscription service. So there really is no compelling reason to not consider an investment in adding real-time manufacturing intelligence to your financial planning program.