Digital transformation creates significant changes for an organization’s information technology department and processes. But it can also create the need for major changes in the management and processes of other business functions. A truly effective transformation will impact every area of the organization. The success of the digital transformation of a company depends upon how the other departments react to the introduction of digital technologies and systems or fail to react. This article is part of a series of articles that consider some of the changes and their implications in different business functions and departments. In this article, I will address changes that are needed within the manufacturing operation.
First, let us quickly review what we mean by digital transformation. The Institute for Digital Transformation defines digital transformation as, “The integration of digital technologies into a business resulting in the reshaping of an organization that reorients it around the customer experience, business value and constant change.” This definition recognizes that digital transformation is much more than just a change in IT technology such as hardware, software, or a digital platform. A digital transformation goes to the heart of the business processes and transforms them to leverage digital capabilities that were unavailable during the industrial age. Customer demands, including the customer experience, and business value are different in a digital business. Added to that, a digital business doesn’t stop and rest on its laurels, it embraces constant change to adopt and leverage new digital technologies and new business models. This is not your father’s industrial-age company.
Digital Manufacturing Technology
Let’s identify some of the technology aspects of a digital transformation that would have a significant impact on manufacturing operations. This is an illustrative list, not an exhaustive list. In fact, the specifics of each of these technologies is changing almost monthly, so this list is really a list of categories of digital technologies.
- The Internet of Things (manufacturing often refers to it as the Industrial Internet of Things) is a digital technology that has grown rapidly during the past few years. Every piece of equipment in the manufacturing operation can have multiple sensors and monitors that are measuring both the effectiveness of the process and the health of the equipment. This dramatic increase in the number of communicating devices and data streams will require a robust network and communication infrastructure. And with all that data running around, a data security process is needed to ensure the data is not corrupted or hacked. Many of these data sensors are providing direct input into enterprise wide applications such as an ERP system that is scheduling and tracking costs within the organization. In a complex business, this ERP will need to run in a data center that is often managed within a cloud computing operation.
- The widespread adoption of business analytics provides real-time data used to monitor and manage the manufacturing processes. Data from multiple sources is aggregated and this data is available at any workstation in the business and in some cases, it is made available externally through digital platforms or on smart devices. These platforms, devices, and associated apps provide monitoring of the manufacturing processes by the customers.
- Factory automation has been used in manufacturing for decades, but the automation available in the digital age is more sophisticated and is connected into the Internet of Things. In some cases, advanced techniques such as artificial intelligence or machine learning may be used to further improve speed and efficiency of the factory automation.
- 3-D printing technologies are now gaining widespread acceptance for manufacturing selected parts or assemblies. This equipment can make parts from plastic, metal or wood materials and create complex geometric forms without the need for designing and testing tooling or other manufacturing aids. The 3-D printers have the additional advantage of requiring little or no changeover as they fabricate different parts
Each of these technologies are continually improving in their breadth and depth of performance. For the purposes of our discussion, the precise performance level is not critical, rather it is the impact that these technologies create on how the manufacturing processes are designed and managed.
Transformation of Manufacturing Operations
Let’s consider how the nature of work changes in the manufacturing department due to these digital technologies. It is not just that equipment operates faster, although that is almost guaranteed to happen. The most important and fundamental change is that the business model and manufacturing KPIs have changed. Regardless of the product, the goal of manufacturing in the industrial age was to make products “fast, cheap, and good.” Achieving these goals allows the company to be competitive in their industry. A critical KPI for achieving “fast, cheap, and good” was that the production line remains stable. No changes! New equipment, new operators, new products all created uncertainty which led to slower processes, higher costs, and more defects. But in the digital age, change has been transformed from an unwelcome problem to an expected and embraced way of life. Change is now the competitive advantage and manufacturing processes find they are in a state of constant change. This means that a new manufacturing KPI is flexibility to rapidly adjust the manufacturing process for a new or unique product.
This has implications for every aspect of the manufacturing process; both in design and operation. The manufacturing process design is now based upon very small production runs – often a lot size of one. This changes the nature of the requirements for capital equipment and facilities. Small flexible workshops are much more practical than massive production lines that take months or years to construct and install. These small workshops still rely on automation, but now the automation must be designed to be flexible and can be reprogrammed rapidly by the operator. This equipment and the operators work instructions must not only be flexible, they need to be connected to the sales processes so as a customized product is sold, the information needed to make it is immediately digitized and sent to the workshop where the product will be made. In addition, the Internet of Things and business analytics allows each workshop to provide real-time status and control information to manufacturing management on their output and any problems they have. Resources can be instantly redeployed to accommodate changes in customer demand or to resolve problems and issues that have occurred in the operation. In this environment, the role of both managers and operators changes and will be discussed in more detail below.
Manufacturing Business Model
Let’s look at how manufacturing is different in the digital age business model. We start with the change in customer expectation. Every customer wants and expects a product that is uniquely suited to them. It is customized with their profile and adapted to their normal use for the product. This means that for manufacturing, change is not a “problem,” it is now the expected normal condition and the pre-eminent KPI. Whoever can change the best – fastest, cheapest, and with the most quality – has the competitive advantage. The key enabler for that change is data. Data from customers defining what they want and data from the manufacturing process controlling what is produced. Added to the change in the product, the product demand can spike or evaporate overnight as items “go viral.”
The strategy of mass production of standard commodities has given way to a new term, “mass customization.” This means that the manufacturing operation can produce unique customized products at the same rate that it formerly produced standard commodity products. And it does this at low cost and with high quality. Change, the “enemy” of manufacturing in an industrial age business, is the competitive advantage in a digital age business
In the design of manufacturing processes, flexibility and configurability is now the driver for the design and purchase of capital equipment. Supplier selection is based upon responsiveness, not cost. and the workforce training program creates multi-skilled workers who can be deployed to multiple areas of manufacturing. The process is designed to rapidly scale up or scale down based upon demand and even be quickly relocated to be closer to the customer demand. Therefore, instead of specialized equipment or robots that only do one function for one design configuration, the manufacturing equipment and process configuration can produce many different products and can switch from one to another with a minimum of setup by an operator.
Digital age manufacturing processes are based on flexible operations and scheduling with a “lot size of one.” This implies a constant reconfiguring of manufacturing process steps, work instructions, facilities, equipment, materials and workforce required. In this environment, 3-D printing of fabricated parts is significant advantage because it can product totally different parts just be selecting a different program to run. To be this flexible, accurate real-time data and information is needed at each step in the process. This was impossible to achieve in an industrial age business, but the Internet of Things and business analytics can provide that information. This is the “digital” part of a digital age manufacturing operation. Without these, the business cannot effectively react to the real-time changes.
Manufacturing Operations and Control
While the change to digital technologies has created some challenges, an industrial age business will likely find the change in manufacturing management approach and roles and responsibilities is even more difficult. To manage the continual change that is occurring in real-time, the typical job of managers and operators changes. The operators in the process must have the knowledge and authority to instantly react to changes in manufacturing demand and to changes in process configuration and process performance. They can’t wait for a new piece of capital equipment to be designed and installed. The operators must have the knowledge and skill to quickly setup or reconfigured the digital equipment in order to fabricate the changing products. The operator at the workstations now has analytics they can monitor that makes real-time product and process performance information available. They know exactly how they are doing with respect to, “fast, cheap, good.”
The day-to-day interactions between manager and the operators changes. The manager’s role is no longer the “boss” who tells everyone what to do and how to do it. Now, the operators are in charge of front-line decisions and what to do next in the process based upon each unique item being produced. The manager’s role is to ensure the operators have the correct information at the correct time to do the correct next thing. The manager has become the problem solver and facilitator of communication within the systems and between operators. That means they must let go of power and delegate decisions to the operators.
A concern I have heard voiced is that robots will replace the workers in the digital age manufacturing environment. Robots may replace those individuals making commodity products or doing repetitive identical actions on each product that goes through their workstation. Robots traditionally do one or two things very well and so they are suited to that role. However, in the digital manufacturing environment, there is a critical need for operators to make those real-time decision of what to do next and to setup and configure the equipment and robots that are doing the welding, molding, soldering, or fabrication.
The digital age manufacturing worker operates autonomously at their work station, but in a team environment that is reacting to the manufacturing demand. They can switch workstations within their workshop at a moment’s notice. The digital systems are giving them real-time data and direction. But keep in mind that every item is unique, so the worker must often make decisions about what must be done on each unique item that is being produced. This greatly increased the authority and the responsibility of a digital age production worker.
Digital age manufacturing operates on a very different level than industrial age manufacturing. Instead of driving out variation and turning workers into automatons on the assembly line doing the same operation again and again; those jobs are turned over to the 3-D printers, robots and automation equipment. Now the operators are reacting to the constantly changing demand. They are shifting resources and capabilities in real-time to meet that demand. The industrial age worker was hired for his strength and skill. The digital age worker is hired for his agility and judgment. The industrial age manufacturing manager was the smartest and most experienced person in the room. The digital age manufacturing manager is the one who solves the problems the fastest and does the best job of empowering their people to make good decisions.
Raymond Sheen, PMP® LSS BB, is president and founder of Product & Process Innovation, Inc. He is a veteran business leader with over 30 years of executive, engineering management, and project management experience deploying new technology and improving business performance. He has consulted and trained companies in various industries and business functions including marketing, engineering, manufacturing, service, IT, and Finance. Ray is author of the book, Guide to Building Your Business Case, published by Harvard Business Review Press. Ray received his B.S. in Mechanical Engineering from the United States Air Force Academy and his M.S. in Astronautical Engineering from the Massachusetts Institute of Technology and has a graduate certificate in Digital Leadership and Strategy from Boston University.