Creating tomorrow’s digital factory

Jean Salamat of Strategy& Middle East discusses the steps for digital transformation of manufacturing

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Creating tomorrow’s digital factory Salamat: The digital factory concept is gaining traction in the region in sectors such as downstream oil & gas.
By  Jean Salamat Published  October 29, 2018

Digitization within the manufacturing world is advancing. Innovations, such as complex smart sensors, artificial intelligence and robotics, are facilitating integrated factories that use digital technology to produce a fully automated system. However, the transformation towards the digital factory will not be achieved overnight, and companies must act now to prepare the ground.

Within such a factory, digital technology is used to model and manufacture products in the style or quantity desired, and for communicating data. Fujitsu's plant in Augsburg in Germany offers one glimpse into a future of unprecedented efficiency. Robots select computer parts for assembly according to the customer order, which are then placed on self-driving vehicles. Dynamic information screens inform workers which components belong to each order. Meanwhile, historical and real-time data for each piece of equipment automatically predict potential breakdowns, reducing time lost. There is no carbon footprint, and the plant is highly productive and cost-efficient.

Despite the revolutionary potential of digital factories, there has been limited corporate investment. A PwC survey of leading European manufacturers revealed that although 90% of companies had invested in discrete or partially integrated technologies, only 6% possessed ‘fully digitized' factories.

In the GCC region, the digital factory concept is a major topic for the downstream oil and gas sector, where the integration of smart sensors, data analytics tools and artificial intelligence are on the agenda. Our recent work with large companies in the region indicates that the digital factory would pave the way for technologies related to smart operations, the connected supply chain, and digital maintenance, all of which will reduce operational costs.

Notwithstanding regional variations in the adoption and impact of digitized factories, companies should implement a six stage road map. First, the manufacturer should conceive a model for the digital factory that fits with its overall business strategy and can be used throughout the company.

As much importance should be attached to the impact on people as to the technology itself. Leaders need to assuage the anxieties of workers, promising large-scale retraining and making the case that digitization will improve safety and working conditions, and reduce the number of repetitive, arduous tasks. Due to increased productivity, it may even result in higher salaries.

The second stage is the launch of pilot projects. If successful, these can inspire support for more extensive digitization. Ideas for a pilot may include using data analytics to come up with predictive maintenance solutions, or digitizing certain production lines within a factory. The latter should involve the integration of several digital applications, not simply more stand-alone technologies. As digitization is limited in the GCC, identifying easily realizable pilots with a high impact would pave the road for more extensive transformations. One example for downstream oil sector is to use drone technologies for plant construction surveillance, so reduce the time spent by inspectors around large sites.

The lessons learned from the pilot project should facilitate the third stage-setting out the additional capabilities the company needs to move to fully digital factories. Capabilities span more than just people and skills, also encompassing organization, processes, and technology. The chosen capabilities should be based on the company's particular strategies and goals.

The fourth stage, honing expertise in data analytics and connectivity, is indispensable to any digital factory project. Every company must become thoroughly proficient both in the tools and systems of connectivity, which generate and transmit data, and in the analytical instruments that exploit data to boost productivity and quality. Our GCC experience indicates that companies are more inclined to invest in vertical data integration, rather than horizontal integration which entails sharing data with clients and suppliers.

Transforming plants into fully-fledged digital factories, the fifth stage, is centered on new technology and digital solutions. Other organizational factors are just as important, however. Approval processes for digital teams need to be accelerated by means of streamlined reporting channels so that they retain their focus on innovation rather than internal politics. Senior executives must champion the digital factory agenda, thereby signaling its strategic importance.

The final step should be to integrate the digital factory into a much broader digital ecosystem. One example may be to equip products with digital characteristics which exploit data to offer additional services. This could be a machine manufacturer making use of sensors and artificial intelligence to create more sophisticated maintenance packages.

There is much to be done, and the necessary investment is significant. Neither factor should deter manufacturers. Such a fundamental overhaul may take considerably longer to produce a return than less expensive piecemeal technology upgrades. The ultimate reward, however, is in another league entirely.

Jean Salamat is Principal with Strategy& Middle East (formerly Booz & Company), part of the PwC network.

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