Why 2021 is the year of digital in manufacturing

The future we technologists have been imagining for more than 20 years is happening, now: Every business has become a digital business, thanks in part to the global pandemic that has accelerated the adoption of new technologies.

Case in point: A fully digital World Economic Forum (WEF) with participants from all over the globe.

While I participated from my home office it occurred to me that this fully digital Davos, unimaginable a mere 12 months ago, tells us two things: We all need to adapt to a new reality, no matter what we do in our personal and work lives. And this new reality is one that includes a focus on combining digital technologies and sustainability to drive competitiveness. That is true even for asset-heavy industries like manufacturing.

How the COVID-19 pandemic spurs manufacturers to make new tech-enabled breakthroughs

Manufacturers were the forerunners of business response as the pandemic was encroaching on our lives in early 2020.

I was amazed by the responses from global manufacturers: Mercedes Formula 1 produced a breathing aid in less than 100 hours. Anheuser-Busch turned from drinks to making hand sanitizer. Dyson switched production lines to manufacture ventilators. Anything seemed possible. Deep-seated barriers to change and innovation vanished overnight.

These businesses, and many others like them, were not just compelled by the crisis, they were liberated by it.

Innovation, digital and sustainability are the new currency. These three areas are key to reviving the economy in a post COVID era.

But there’s another side to the story — for other manufacturers — where the path forward is not clear. For example, the supply chain shock is still reverberating throughout the sector and demand is expected to contract further.

There’s no quick solution to this problem, but time is of the essence.

Where digital transformation in manufacturing comes in

You can invest in tech defensively to shift from just-in-time to just-in-case. Or you go on the offense, by applying digital transformation to power new growth and sustainable business practices.

As Kathy Wengel, EVP of supply chains at J&J said in a Davos session I participated in, “supply chains are an engine of growth.”

Let’s be honest though. As much as we all recognize the opportunity that digital can bring to manufacturing, very few companies have mastered it. In our recent research on the digital maturity of manufacturers’ end-to-end operations, only 17% of our sample of manufacturers’ have highly mature digital operations. On average, companies are at 39% digital maturity (on a scale where 100% indicates all capabilities are deployed and rolled out).

You can invest in tech defensively to shift from just-in-time to just-in-case. Or you go on the offense, by applying digital transformation to power new growth and sustainable business practices.

Does this mean the sector is doomed? On the contrary! I see an incredibly enticing prospect, where digital transformation leads not only to manufacturing growth but also a sustainable future that customers, regulators and shareholders want.

Here are a few examples of what digital transformation may look like:

• Pharmaceutical companies get the operational visibility to shift supply from centralized hospitals to a more disparate and complex network of local clinics that can better meet the patient needs.
• Data networks can provide auditable evidence of emissions or of water use.
• Blockchain is behind third-party platforms that allow brands to track the sustainable and ethical performance of their supply chains. It can even give end consumers trusted information about product sourcing.
• Augmented reality (AR) allows companies to create virtual showrooms or conduct virtual inspections.
• Sensors and data analytics are at the core of circular business models that closely monitor and manage the materials as they pass through production and consumption cycles.

There is no alternative to becoming a digital business

While some big manufacturers contemplate new strategies, smaller masters of Industry 4.0 are nipping at their heels. They see the year’s crisis as their moment of opportunity. They don’t just accept the new reality of a responsible industry ecosystem. They’re free of the baggage many legacy businesses carry.

New tech democratizes manufacturing. Automation, robotics, AR and digital twins are all within reach of stretched budgets. This helps smaller players meet the financial and non-financial needs of multiple stakeholders.

All is not lost for larger manufacturers, as I hope I’ve made the case. The possibilities are all there and the time is right. In fact, there may not be a better moment to change how we make things and make them in a way that is better for us all.