New tools are available for Australian manufacturers to optimise their revenue stream. The new focus is on digital transformation used to remodel value propositions and processes as an addition to development and production. Fujitsu asked over 1500 executives in mid-sized and large companies in 16 countries how they were using digital transformation programs. Of those asked, 69% had already begun using digital transformation programs.
While digital transformation programs begin by examining production efficiencies, they later move on to other sectors that are further along the transformation journey. It’s true that some industries have adopted digital transformation much earlier than others, especially in the service sector. For example, when disrupters affected the financial industry, service providers began looking for innovations to better optimise and reduce costs. From this start, companies turned to alternative services and products. New opportunities were found by transforming the value chain for expansion, growth, and development.
How Can Manufacturing be Transformed with Digital Technology?
40% of manufacturers are concentrating on improving their own production efficiency. By using new digital technologies, they are pinpointing optimisation opportunities to reduce disruption through the use of better monitoring and predictive maintenance in production centres and along supply chains.
Optimisation is only the first step for manufacturers who have gone further in their transformation journey. With the right implementation, the manufacturing sector can be completely overhauled and open up new avenues. One example is that manufacturers can begin experimenting with retail using online channels without the cost of opening a brick-and-mortar location.
How Are Retailers Affected?
Retailers can also search for new opportunities in manufacturing due to reduced costs in newer types of manufacturing. For example, 3D printing (additive manufacturing) offers possibilities. Another change is that distribution companies can directly access consumers opening up new sales channels for them. All of these changes increase competition from new sources in industry.
How Will This Affect Manufacturers?
Manufacturers that don’t respond to this new technology with strategic plans may get squeezed out of their core business. However, many industries have experienced market consolidation and profited from it. Savvy businesses not only survive, they thrive with new challenges. Businesses slow to respond to new technologies may be left behind.
What Other Challenges Will Manufacturers Face?
Manufacturers face several challenges starting with consolidation. Globalisation is increasing and affecting Australian manufacturers, making it difficult to compete with businesses from other countries. Since manufacturing cost is relatively high in Australia in comparison with lower costs in nearby Asian countries, some companies may find it hard to compete.
However, as changes come with rising wages and better working conditions in countries such as China, a country with a history of lower-cost manufacturing costs, this factor can change. The increasing usage of artificial intelligence (AI) and automation will help lower the cost of manufacturing at home, eroding the advantage of countries with lower energy and labour costs. Additionally, consumers and businesses may not be willing to pay the extra costs of shipping to get products from other countries and longer supply chains. They may prefer buying from Australian manufacturers.
What Other Digital Technologies are Available?
Online sellers such as Amazon and Alibaba offer new channels to even the smallest manufacturers, giving them access to a global audience. Small arts and crafts businesses in Africa can sell to buyers anywhere in the world. Previously, small companies like these were limited to do doing business in a nearby geographical area nearby due to the complexity of logistics and costs to set up as global retailers. Even tiny companies can now benefit from economies of scale they couldn’t just a few years ago. The entry of Amazon in the Australian market has already changed the local scenario and expanded the range of products available to Australians.
The digital innovation involved in the process of getting products from the manufacturer to the end consumer is only the start of how digital transformation is revolutionising the future of manufacturing. The Internet of Things (IoT), AI, and Analytics can be used to create global dashboards to monitor a wide range of manufacturing. This technology allows operators to see detail as small as how a single machine is performing, use data to predict and eliminate maintenance issues or bottlenecks, allocate components, raw materials, skills, and capacity where they are most needed.
Cheaper and faster methods are now available to produce customised products at scale, offering a personalised experience that once was only a service for the wealthiest clients. Manufacturers can give clients proposals with new innovations to deliver unique products from boats to home furnishings.
What Limits Are There to Digital Transformation?
Ultimately, the only limits are those businesses place on themselves in how willing they are to reimagine and redesign their purpose. This includes everything from finding the right partners to flexibility in creating products. As manufacturers learn to embrace digital transformation, they will be rewarded with increased revenues, a broader market, and a more stable future.
Published on 16th July 2019 by Ian Brady.