How the Traditional Manufacturing Business model is Changing due to Digital Transformation

Manufacturers have been integrating the strategic application of technology and automated processes into their business models for several years. Yet, as manufacturing organizations continue to develop, digital transformation initiatives have infiltrated the industry.

Grasping the impact digital transformation has had on the manufacturing industry so far – and the probable impact it will continue to have – may help you recognize areas in need of transformation within your own manufacturing business model.

Technology is where it begins

At its core, digital transformation involves the strategic application and digital processes to expand productivity and perception into manufacturing operations. Numerous manufacturing firms have implemented IoT data sensors into their lines to capture data, which they then use to identify ways to enhance efficiency. Others have implemented digital connected planning solutions to better represent their operations and forecast future demand and supply chain requirements. Whatever form the transformation takes, it is supported by technology.

The support goes far beyond sensors and software

While improvements in efficiency may have been the initial goal for most manufacturers, the span of digital transformation has gone well beyond speeding up a line or furthering maintenance efforts.

Currently, manufacturing companies are investing in comprehensive digital transformation initiatives that reach further than the assembly line, crossing over into marketing, accounting, supply chain, and beyond. There is no facet of the traditional manufacturing business model untouched by digital transformation.

The change has led many manufacturers to reevaluate their operations and priorities. Many have shifted the focus from production to customer satisfaction. Producing better quality goods in shorter and more convenient periods has become far more important than simply providing products. The fact is, much of the digital transformation growth has been customer focused and separating a manufacturer from its competitors based on customer centric KPIs like satisfaction, cost, and method of delivery.

Resulting in sweeping change when it was needed most

Consequences from the COVID-19 pandemic has had a negative impact on nearly every manufacturing company in the world, causing billions of dollars in lost profits and historically extended lead times. However, rather than simply cope with it, many manufacturers have learned lessons during the pandemic to transform their business models.

Leveraging data gained by IoT sensors and customer engagements, some manufacturers have streamlined the research and development and prototyping processes to bring products to the market faster and in a more cost effective manner. Others have altered their focus from product manufacturing to developing software applications that support the goods they produce. By offering software subscriptions as well as their products, these manufacturers have diversified their revenue streams and improved their customer engagement. The “equipment as a service” model has also flourished as businesses begin to sell access to machinery runtime, as opposed to the machinery itself.

As pandemic related impacts to supply chain and customer expectations continues, digital transformation and evolution in manufacturing operating models will remain critical across the industry. If manufacturers don’t evolve to meet the changing challenges and customer needs, they may find themselves left behind.

How Microsoft Cloud for Manufacturing Can Help

As the manufacturing sector experiences this significant transformation, it’s vital that businesses are armed with a technology platform that is integrated, intelligent, user-friendly, scalable and secure.

 

 

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