In the previous article, we explained why supply chain management requires digital transformation. Now, let’s move on to one of the vital aspects of the supply chain, which is the manufacturing production process.
With rapid advancements in technology, companies in the manufacturing industry are now faced with the necessity to digitalize their production processes. This change needs to be implemented not only in production aspects but also in business, to maintain competitiveness in an increasingly tight market.
Did you know that more than 80% of companies plan to accelerate their digital transformation?
If companies do not keep up with the digital current, they risk falling behind and losing market share. A study from L2L also mentioned that 75% of respondents believe that their competitors are far ahead in digitizing their companies. Therefore, it is crucial to take immediate steps toward digital transformation to ensure the continuity and success of the business in the future.
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Table of Content
Benefits of Digital Transformation for the Manufacturing Industry
Although only 24% of the manufacturers surveyed currently have a digital transformation strategy, as many as 30% have expressed their intention to significantly increase their investment after 2022. Additionally, the Asia Pacific region dominates digital transformation in the manufacturing industry.
This data confirms a crucial shift in the industry landscape: competition will intensify with digital transformation, and companies that do not adopt it will be significantly left behind.
Digital transformation is not only essential for staying competitive in the market but also provides numerous benefits for manufacturing companies, such as:
1. Cost Savings
Digital transformation helps save on operational costs in factories. Statistics show that the use of augmented reality (AR) for troubleshooting reduces overall costs by 11%. For example, the use of AR speeds up the troubleshooting process while saving costs because troubleshooting can be done from anywhere, without the need to be physically present at the location.
2. Reducing Downtime
Downtime is a major contributor to losses in the manufacturing sector. Studies have found that an hour of downtime can cost a company up to 300,000 US dollars. With digital technology, downtime can be significantly reduced by 30-50%.
3. Enhanced Data Visibility
Companies can have better and more transparent access to their production data. With increased data visibility, companies can easily monitor every aspect of the manufacturing process. A study shows that companies implementing ERP solutions, which enhance data visibility, can experience up to a 35% increase in operational efficiency. This helps in identifying areas needing improvement and ensures more efficient resource utilization.
4. Improved Production Quality
Manual production often experiences many errors. Additionally, the quality of each product is inconsistent due to poor coordination and unstandardized processes. With an integrated system, the production process becomes more coordinated, and the common errors in manual production can be minimized.
As a result, companies can produce higher quality and more consistent products. With digital transformation, production quality improves by up to 34%. Digitalization provides tools that support quality control, ensuring that each product produced meets established quality standards.
Differences Between Conventional and Digital Production Processes
The table below presents a comparison of conventional and digital production processes in manufacturing.
| Aspek | Manufaktur Konvensional | Manufaktur Digital |
| Downtime in production | 82% of companies experience unexpected downtime causing losses up to USD 2 million. | Manufacturing companies with digital transformation can reduce unexpected downtime by 30-50%. |
| Inventory management | Inventory storage costs account for 20 to 30% of total inventory costs. | Automated inventory management reduces storage costs by up to 20%. |
| Revenue | Conventional manufacturing revenue varies depending on the industry type, but does not grow as quickly as digital manufacturing. | The manufacturing industry is expected to reach a revenue of USD 367.60 billion by 2024, growing at a CAGR of 19.40%. |
| Use of raw materials and energy | According to the International Energy Agency (2020), the manufacturing industry accounts for 26% of global CO2 emissions and 38% of global energy consumption. | 80% of companies implement sustainability by reducing energy and raw material usage. |
| Production efficiency | 9% of manufacturers who have not digitalized their factories risk falling behind competitors due to inefficient production. | Production efficiency is expected to increase by 10% to 15%. |
Conventional production processes in manufacturing often involve manual steps at each stage of production. This includes operating machines, monitoring production by operators, and manually processing data. Although this has been common practice for years, the process is slower, less efficient, and prone to human error.
On the other hand, in digital production processes, technology is widely used for automation and optimization. This includes the use of sensors to monitor and control machines, real-time data analysis for accurate monitoring and forecasting, and the implementation of digitally connected manufacturing systems for better coordination between various production stages.
Risks Faced if Manufacturing Companies Delay Digital Transformation
Only 24% of manufacturing companies have undergone a comprehensive digital transformation, despite manufacturing playing a central role in the supply chain. This limitation exposes these companies to various risks and losses.
Here are further explanations of the risks incurred if manufacturing companies choose to continue operating manually:
1. Difficulty in monitoring the entire production process
One of the main weaknesses of the conventional manufacturing system is the difficulty in effectively monitoring the entire production process. In many cases, often inconsistent manual monitoring makes it difficult for production teams to obtain an accurate and up-to-date picture of production status.
The inability to monitor the production process can lead to various problems, including unexpected inventory buildup, production delays, and a decline in product quality.
2. High operational costs
Manufacturers that have not transitioned to digital transformation often face higher operational costs, especially due to unplanned downtime. Equipment failures or system inefficiencies can be very costly, with the overall industry losses estimated to reach $50 billion per year.
Without the ability to monitor equipment conditions in real-time, companies often realize problems too late, resulting in disruptions in production and unexpected maintenance costs.
3. Low efficiency in production processes
In traditional systems, many operations are performed manually or with outdated equipment, which often contributes to inefficient use of time and resources. These shortcomings lead to increased production cycle times and high levels of waste or production defects.
Moreover, the lack of integration between departments in a conventional setting often causes communication barriers and errors in information transfer, exacerbating efficiency issues.
4. Falling behind competitors
Conventional companies are slow in identifying trends and implementing necessary changes, thus giving agile competitors the opportunity to seize market opportunities and expand their market share.
As a result, conventional companies may experience a decline in sales and profits. They risk losing relevance in the eyes of consumers who increasingly expect innovative and responsive products and services.
Addressing Manufacturing and Production Issues with a Digital System
The problems occurring in production and manufacturing can be resolved by implementing a digital system. In addition to automating processes, a study from L2L states that reducing costs (50% of respondents) and increasing data visibility (39%) are the most beneficial outcomes when factory management digitizes their production processes.
Implementing digital transformation will be easier with the support of a robust and reliable digital system. One such system is HashMicro’s manufacturing system. With its comprehensive features, manufacturers can enhance production efficiency by simplifying the entire production process.
Here are the key features of the HashMicro manufacturing system that help companies optimize their production processes:
- Accurate production planning to meet customer demand without excess or shortage of products.
- Quality control to ensure that each product produced is of high quality and consistent.
- Bill of materials as a reference for the amount of raw materials needed for each production process.
- Integration with the Internet of Things (IoT) to assist in supply chain management, including inventory management, vendor relations, and scheduled maintenance.
- Management of overhead, material, and labor costs for total visibility of production costs within the manufacturing company.
Strategies for Successful Implementation of Digital Transformation
By now, you understand that digital transformation is crucial for the future of your factory. However, preparing to digitize production processes should not be taken lightly. Otherwise, you risk failing to reap the benefits that digital transformation offers. A 2020 study by the Boston Consulting Group revealed that only 30% of companies successfully achieve their digital transformation goals.
However, this does not mean you should reject digital transformation, but rather, you should seek effective strategies to ensure the success of your manufacturing business. After all, companies that implement digital transformation achieve 1.8 times higher growth and more than double the total company value growth.
Therefore, strategies to implement digital technology, especially in manufacturing, must be carefully devised. Here are some implementation strategies to support the success of digital transformation in manufacturing companies:
- Identify the needs and objectives of the company before determining the execution of digital transformation.
- Prepare for the transition from manual to digital systems by educating the entire company team.
- Invest in scalability to accommodate future growth and continuously adapt to the advancements of Industry 4.0. This also includes finding digital systems that support the company’s future growth.
- Implement a strong data management strategy that addresses security and privacy issues.
- Utilize automation to enhance efficiency and reduce reliance on manual processes.
- Prioritize continuous learning and skill development, ensuring your workforce is equipped with the necessary knowledge and skills.
Case Study: The Impact of Digital Transformation on the Success of Manufacturing Companies
Digital transformation brings numerous benefits to manufacturing production. There are many examples of manufacturing companies that have succeeded because they have implemented digital transformation in their operational activities. Here are examples of the success of two leading companies with digital transformation:
Unilever: Sustained Innovation with Technology Adoption
The second annual ARC Industrial Digital Transformation Top 25 report highlights companies that have successfully integrated digital technology into all areas of their business. Unilever, a global consumer goods company, ranked 19th in the 2022 report, with digital transformation playing a key role in its success.
Unilever has taken a proactive approach to digitize all aspects of its business. The company has adopted a wide range of digital technologies, including IoT, artificial intelligence, virtual reality (VR), and digital twin technologies, to automate and optimize production processes. Unilever gains better visibility and insights into production data, making decision-making more profitable.
Unilever has invested in a cloud-based Manufacturing Execution System (MES) to facilitate remote monitoring and control of production lines. This facilitates collaboration and data sharing across various manufacturing sites.
Unilever’s digital capabilities are undoubtedly achieving high efficiency in a short time. Unilever can evaluate more than 600,000 data points about materials and recipes from all its products globally. Moreover, Unilever’s technological capabilities enable them to mass-produce product innovations.
One of Unilever’s latest innovations is Hourglass Red 0. This is the first vegan alternative to the most commonly used red pigment in color cosmetics, carmine red, which is derived from female beetles and can require 1,000 beetles for one lipstick. Unilever has entirely reformulated it using computational models.
In recent years, Unilever has developed over 40 technologies for its rapidly growing Prestige Beauty business, which achieved a turnover of €1.2 billion in 2022. The significant turnover and Unilever’s capable innovation are the results of digital transformation in its production processes.
Conclusion
Digital transformation in manufacturing production plays a crucial role in achieving more efficient operational activities. With the right technology adoption, companies can optimize every stage of their production by enhancing efficiency, reducing costs, and increasing profits.
One of the best manufacturing systems for your company is HashMicro. With its comprehensive features and high scalability, you no longer have to worry about time-consuming and costly production processes.
In addition to automating production processes, the HashMicro manufacturing system is also equipped with various other modules that support your company’s end-to-end needs, from purchasing and accounting to inventory and warehouse management.
So, what are you waiting for? If you’re interested in learning more, you can register for a free demo here.
This article is the third edition in the series on the Importance of Digital Transformation in Business. Next, you can continue to read about business financial management and asset maintenance.
