McKinsey: five principles for scaling digital manufacturing

- Finance - Apr 14, 2020

Amidst the outbreak of COVID-19, McKinsey reports that achieving digital at scale can make European manufacturers resilient and flexible for recovery at speed.

The Coronavirus (COVID-19), a pandemic that is changing the ways in which organisations operate all over the world, like never before. During this pandemic Enno de Boer, Søren Fritzen and Rehana Khanam (partners at McKinsey) have witnessed organisations and leaders striving to not only ensure the health and safety of their people, but to react to shifting supply chains impacting sourcing and distribution logistics. As a result supplier resilience is being brought into focus with labour shortages bringing production lines to a halt. 

However the partners at McKinsey, stress that when the pandemic resolves, production facilities will need to move quickly to respond to new sources of supply, as well as shifting customer demand. As a result digital capabilities are going to be critical to providing flexibility and resilience for manufacturers to operate in unfamiliar environments.

“Yet most companies that have attempted enterprise-wide “digital transformation” have failed to capture the full business opportunities available from new technologies,” says McKinsey. 

In its recent research, the company has uncovered new insights into the challenges and success factors for implementing digital manufacturing at scale, highlighting that only 17 out of the 44 members of the Global Lighthouse Network are in Europe, with only three using fourth industrial revolution (Industry 4.0) tools across end-to-end value chains. 

“This lagging behind could be a result of many European manufacturers operating on brownfield sites,” says McKinsey. As a result the task of enhancing legacy processes, systems, and machinery with Industry 4.0 tools can seem more daunting than building a digital production facility from the ground up.

However, McKinsey stresses that it is time for organisations to adopt these digital technologies revealing five fundamental principles for scaling and sustaining digital technologies, regardless of how digital they are. 

Unlocking value with industry 4.0

Currently, McKinsey has identified a select group of industry leading manufacturers using digital transformation to develop new ways of conducting business operations by using: sensors, Internet of Things, cloud technology, blockchain, Big data, advanced analytics, artificial intelligence, virtual reality, augmented reality additive manufacturing, renewable energy, robotics automation and robotic process automation (RPA).

The reported benefits:

  • Between 30% and 50% reduction in machine downtime

  • Between 15% and 30% improvements in productivity

  • Between 10% and 30% increase in throughput

  • Between 10% and 20% decrease in quality cost

The result of these benefits impact the entire value chain which McKinsey says could be even more important, by increasing flexibility to meet customer demand, providing a faster speed to market and better integrated within the supply chain.

The challenges

Although McKinsey reports that manufacturers are transitioning to digital manufacturing, it is not being deployed at the same rate, with most finding themselves stuck in a ‘pilot purgatory’ and no clear approach for quick scale.

Latest research conducted by the organisation confirmed that at least 70% of manufacturers are in ‘pilot purgatory’, with culture being considered among the most significant challenges. 

Other challenges include the absence of:

  • Strategic direction - where and how digital manufacturing will bring real business value, and the incentives for people to make it happen

  • technical, managerial, and transformational capability to truly understand and execute the changes

  • Robust data and IT infrastructure

The five principles for scaling digital manufacturing 

Finally in McKinsey’s latest research the organisation outlined five key principles for an organisation to base its scaling approach on:

To read the full report by McKinsey, click here!

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