The rise of smart factories and the technology-driven transformation of manufacturing

The Fourth Industrial Revolution has the potential to generate $1.2-$2 trillion in value for manufacturing and supply chain management from the application of AI alone. Complementary technology driving the Fourth Industrial Revolution includes machine learning, automation, advanced and predictive analytics, and the Industrial Internet of Things (IIoT).

Quality, cost-effectiveness and efficiency are improved by Cognitive Automation, powered by Fourth Industrial Revolution technology, that intervenes and makes decisions during the moment by moment running of manufacturing. This will lead to Hyper Automation where the value chain is essentially independent and run by AI that can make decisions at all levels. Soon only the goal setting and strategies will need human intervention.

What changes are driving transformation?

The uptake of new technologies is usually prompted by changes and challenges that need to be navigated. On top of the need to optimize supply chains as a result of widespread blockages and delays in the past few years, there are 3 main drivers of innovation in manufacturing.

Hyper-customization

Consumer expectations have changed so the mass production of identical products is no longer fit for purpose. Now consumers expect to be able to customize their order to receive the exact product they want, complicating the production process.

Localized manufacturing

Outsourcing to mega factories could become a thing of the past as smaller satellite plants are built to be able to apply customized products to local markets. As well as addressing the demand for customization, smaller scale factories reduce environmental impact, simplify logistics and increase agility.

New ownership models

Consumers also have changing expectations around how they acquire products. Basic product ownership is being replaced by packaged solutions where customers pay for the outcomes and results, reducing financial risk for the customer. Services and data are also increasingly becoming products in their own right.

The benefits of organizational transformation in manufacturing

While change is disruptive, there are benefits to be gained. Hyper-automation will completely change the running of factories and this creates new opportunities for meeting consumer expectations and increasing profitability.

Creating end-to-end customer-centricity

The key to success in the current climate is to produce products for a “market of one” and approach every step in the value chain with that customer in mind. Cognitive Automation is making that possible with full integration of all stages from R&D to payment processing. Data silos are broken down to be able to serve customers with sensitivity, responsiveness and flexibility.

Refining the ecosystem

Automation from end to end stabilizes and speeds up the value chain while making it easier to monitor. Full visibility through the implementation of AI and IIoT enables personalization as the business and customer collaborate on product design. The whole ecosystem is managed by predictive algorithms to make it much more efficient, effective and reliable.

More effective collaboration

End-to-end visibility is only possible with a trusting collaboration between all parties in the supply chain. The use of the secure and decentralized blockchain increases trust so predictive management models can be used for moment-by-moment refining throughout the supply chain.

To achieve these benefits, the core systems need to be able to handle granular data flow and produce high-quality predictive insights.

How technology will transform manufacturing

The organizational transformations taking place in manufacturing hold a lot of potential. They can only be unlocked with the right technology to enable change. The manufacturers need a technology stack that incorporates hyper-automation, joint innovation and customization for use in a dynamic, scalable and continuously evolving environment.

A key transformation in this process is to update the value chain so IIoT and data flow can be leveraged. Implementing the technology of change is a step-by-step process and each business has its own starting point for driving innovation powered by predictive analytics, augmented reality and virtual reality, Digital Twins, and AI.

The main focus is to create a close connection between 5 key areas in the value chain.

1. Fulfillment – Predictive analytics ensures the value chain can keep up with constantly evolving stock demands.
2. Production planning – Advanced technology allows for a precise relationship between granular data and automated machine operation to accommodate small runs of precise orders.
3. Production execution – Here technology allows for rapid and responsive configuration through integrated ecosystems of intelligent platforms while reducing resource use and waste.
4. Quality management – Proactivity is enabled through predictive intervention to avoid issues using real-time data during production.
5. Plant optimization – Moment-by-moment management of all machines through real-time data on efficiency to environmental performance and cloud-based management systems to monitor and intervene.

The journey to organizational transformation through advanced technology can be an arduous one. Having a partner can ensure better results sooner as the transformation is broken down into discrete steps.

The key to successful transformation

The risk with transformation is getting stuck in “Pilot Purgatory”. This is a term used by McKinsey in their research that found around 70% of companies that were attempting to leverage smart factory concepts got stuck in successive pilot projects. They never got beyond the stage of reworking and testing.

At NTT DATA we understand value chains, connectivity and major production systems from the inside, meaning we have a realistic view of the business imperatives and the processes involved. Our proposed path to the future is therefore practical and requires auditable information for review at every stage.

We recommend using SAP as the core specialized software for MES, APM, R&D, finance and maintenance as it interfaces successfully with core SAP planning and backend systems. This secures a firm foundation to build smart transformations. With NTT as your partner, the process of becoming a fully-realized digital enterprise will be completed sooner.

Marc Kreutzenbeck, NTT DATA SAP global offering lead for Manufacturing