Why Manufacturers Need to Embrace Digital Transformation or Risk Being Left Behind White Paper White Paper - Why Manufacturers Need to Embrace Digital Transformation or Risk Being Left Behind 2 Introduction While most manufacturers know they need to transform their business to remain competitive, the reality is that most of these organisations are cautious by nature and are not racing to adopt new and emerging technologies that can deliver a competitive advantage. Instead, they are looking for ways to tweak their business models with minimal risk. This approach is confirmed by recent research by PricewaterhouseCoopers (PwC), which showed that only 30 percent of US-based industrial manufacturing executives said that they would increase technology spending in the next 12 months.1 However, the manufacturing sector remains vulnerable to international market conditions, continuing competition from cheaper overseas manufacturers and geopolitical factors. It’s critical for manufacturing companies to take steps to protect their businesses against these external forces. The entire supply chain ecosystem must transform to deliver competitive advantage, which means manufacturers need to re-tool and re-skill. Manufacturers need to evolve as they face changing customer expectations and a changing competitive landscape. Customers expect everything to be faster: innovation; product to market; production; and order fulfilment. Manufacturers have to stand out from the competition through faster response times, better quality products, and excellent customer service. Manufacturers need to have flexibility to innovate. Manufacturers are also facing a growing number of new competitors, who are taking advantage of technology to lower their cost of entry and increase their speed to market. This whitepaper outlines the key trends affecting the manufacturing industry, and how companies can use technology to take advantage of the opportunities and manage the challenges in a rapidly changing landscape. 1 http://www.pwc.com/us/en/industrial-manufacturing/ assets/pwc-manufacturing-barometer-q2-2016. pdf?_ga=2.73563282.1439194879.1497925607- 1518776202.1496965074 Table of Contents Introduction .......................... 2 Key trends affecting the manufacturing industry ........ 3 Internet of Things .................. 4 How to respond to these changes in manufacturing ... 6 White Paper - Why Manufacturers Need to Embrace Digital Transformation or Risk Being Left Behind 3 “industry 4.0 refers to the current trend of improved automation, machine-to- machine and human-to- machine communication, artificial intelligence, continued technological improvements and digitalisation in manufacturing.” Key trends affecting the manufacturing industry Industry 4.0: the future of manufacturing It is now generally accepted that the manufacturing industry has reached the fourth industrial revolution, known as industry 4.0. According to the Australian Department of Industry, Innovation and Science, “industry 4.0 refers to the current trend of improved automation, machine-to- machine and human-to-machine communication, artificial intelligence, continued technological improvements and digitalisation in manufacturing.” 2 Manufacturers need to implement modern enterprise software to ensure they can adapt to this new reality. The below design principles let manufacturers investigate a transformation to industry 4.0 technologies (extract below taken from: https://www.cleverism.com/ industry-4-0/ based on “Design Principles for Industrie 4.0Scenarios” by Hermann, Pentek, and Otto): • Interoperability: Objects, machines and people need to be able to communicate through the Internet of Things and the Internet of People. This is the most essential principle that truly makes a factory a smart one. • Virtualization: Cyber-Physical Systems (CPSs) must be able to simulate and create a virtual copy of the real world. CPSs must also be able to monitor objects existing in the surrounding environment. Simply put, there must be a virtual copy of everything. • Decentralization: The ability of CPSs to work independently. This gives room for customized products and problem solving. This also creates a more flexible environment for production. In cases of failure or having conflicting goals, the issue is delegated to a higher level. However, even with such technologies implemented, the need for quality assurance remains a necessity on the entire process. • Real-Time Capability: A smart factory needs to be able to collect real time data, store or analyze it, and make decisions according to new findings. This is not only limited to market research but also to internal processes such as the failure of a machine in production line. Smart objects must be able to identify the defect and re-delegate tasks to other operating machines. This also contributes greatly to the flexibility and the optimization of production. • Service-Orientation: Production must be customer-oriented. People and smart objects/devices must be able to connect efficiently through the Internet of Services to create products based on the customer’s specifications. This is where the Internet of Services becomes essential. • Modularity: In a dynamic market, a Smart Factory’s ability to adapt to a new market is essential. In a typical case, it would probably take a week for an average company to study the market and change its production accordingly. On the other hand, smart factories must be able to adapt fast and smoothly to seasonal changes and market trends. 2 https://industry.gov.au/industry/Industry-4-0/Pages/default.aspx White Paper - Why Manufacturers Need to Embrace Digital Transformation or Risk Being Left Behind 4 Internet of Things The Internet of Things (IoT) is having a major impact on manufacturers as they now have access to more visibility into their operations as well as their supply chain. At the same time, this brings several risks (ie. security) and challenges (ie. how do I use the data?). Gartner is forecasting that 8.4 billion connected things will be in use worldwide in 2017 and estimates that number will reach 20.4 billion by 2020.3 Manufacturers will benefit from the IoT in that sensors and other devices will enable further automation and efficiency gains. Being able to automatically monitor operations delivers cost savings. For example, a sensor that alerts other systems when the temperature in the factory reaches a certain level can help ensure the air conditioning is always optimised: not too hot and not too cold. That can result in energy savings while ensuring equipment doesn’t overheat. Similarly, automatic remote monitoring can alleviate safety issues and concerns by providing instant alerts if equipment is operating outside safe parameters. The equipment can be shut down and re-calibrated or repaired before it causes damage or injury. This can reduce the severity and duration of any unplanned downtime, and let the business manage maintenance proactively. Beyond the factory itself, IoT technology can be included in the products themselves. This lets businesses diversify their offerings, such as building remote servicing capabilities into products. This type of added value can help manufacturers compete more effectively. Agile manufacturing Agile manufacturing is becoming increasingly popular as a way to gain a competitive advantage. The concept focuses on three key trends in customer behaviour: customers want things faster; they want choice and personalisation; and they can change their minds quickly. To address these challenges, manufacturers are looking to implement an agile approach, which gives them a competitive advantage. With adaptive production processes, equipment, tools, labour, and materials, agile manufacturing is designed to adapt and create new and custom products quickly, while controlling costs and quality Business intelligence for greater visibility Thanks to better data collection and cloud-enabled analytics platforms, manufacturers can get much greater visibility into their businesses and operations. The data sources available to manufacturers have become more diverse and can range from RFID sensors and internet-enabled things to product data and customer/ end-user data. The possibility of accessing such a large volume of data can be daunting. Businesses need the right tools and systems to be able to extract, store, analyse, manage and protect their data. 3 http://www.gartner.com/newsroom/id/3598917 8.4 billion connected things will be in use worldwide in 2017 and estimates that number will reach 20.4 billion by 2020. White Paper - Why Manufacturers Need to Embrace Digital Transformation or Risk Being Left Behind 5 Simply collecting or even aggregating data isn’t enough. Businesses must identify the right big data strategy, from collection, aggregation, and storage to analysis, insight, and action, to help meet its unique requirements. Key considerations when it comes to data: • Classify the data: this lets the business sort, filter and find data. Classification will help with becoming more agile, as it means the manufacturer can be more adaptive to changing demands. • Understand the value of data: in a manufacturing environment, much of the data is connected to the internet or to one another. This is key in terms of protecting and keeping the data secure. • Know where data is kept: some data may be cloud-based, other may be kept on- premise. Knowing where the data is kept is important with regards to security and privacy to ensure adherence to regulatory legislation. B2B to B2B2C, or a customer-first approach? Excellent customer experience used to be something B2B companies didn’t really need to worry about too much. However, customer-centricity has become just as critical in B2B. Customers’ expectations have changed and manufacturers have to shift their approach to ensure they deliver an excellent customer experience. This is known as B2B to B2B2C. Most businesses today have taken control of their value chain to protect their brand and ensure they can meet consumer expectations. While manufacturing used to be insulated from the consumer market to some extent, the faster pace of business and increasing consumer expectations are affecting manufacturers directly. Companies need to reduce the time it takes to get products to market, without increasing costs. Consumers expect a fast turnaround but they aren’t willing to pay a premium. The entire supply chain ecosystem must therefore transform to meet these demands. To remain economically viable, retailers need to sell more products faster, and at competitive prices. This puts pressure on distributors to shorten delivery times and, in turn, on manufacturers to accelerate production cycles. Consumers expect to be able to access information such as in-store inventory information, but also information about the products they are purchasing. Manufacturers need to have visibility into their supply chain and operations, and be able to share this with their customers who can share it with their customers/consumers. Using the right technologies, manufacturers can drive higher customer engagement and growth opportunities. Early adopters have been able to increase efficiencies and reduce costs through embracing the new customer-first culture. Customers’ expectations have changed and manufacturers have to shift their approach to ensure they deliver an excellent customer experience. This is known as B2B to B2B2C. White Paper - Why Manufacturers Need to Embrace Digital Transformation or Risk Being Left Behind 6 How to respond to these changes in manufacturing DXC Eclipse can help DXC Eclipse is a leading Microsoft partner with extensive global manufacturing experience. DXC Eclipse works with customers to assess their current business systems, processes, and readiness to transition to the Microsoft cloud. The team focuses on managing the business risks, optimising the IT infrastructure, and managing the integration, security, and new technical and operational opportunities available in the Microsoft cloud. DXC Eclipse uses a Dynamics 365 Readiness Review questionnaire to help businesses understand their current and desired state, then plan a roadmap to the cloud. Microsoft Dynamics 365 for Operations is an ideal solution for the manufacturing industry. Dynamics 365 has been created with flexibility and change in mind, built with operational excellence at its core, and focused on letting the business drive innovation and stay ahead of the competition. Because it’s cloud-based and modular, Dynamics 365 can grow with the business, at the pace that is right for each organisation. With the tools available in Microsoft Dynamics 365 for Operations, manufacturers can develop new products and take them to market faster, run their factories more flexibly, and fulfil orders more intelligently, all while saving costs. With the tools available in Microsoft Dynamics 365 for Operations, manufacturers can develop new products and take them to market faster, run their factories more flexibly, and fulfil orders more intelligently, all while saving costs. White Paper - Why Manufacturers Need to Embrace Digital Transformation or Risk Being Left Behind 7 Dynamics 365 for Operations will let manufacturers get ahead by focusing on three key areas: 1. New product development A key competitive differentiator for manufacturers is how quickly they can conceive and build new products. Dynamics 365 for Operations can shorten that cycle by offering simulation models and 3D-printed prototypes so manufacturers can validate new product ideas and reduce the associated risk. It then helps fulfil demand through smart connected products, intelligent automation and digital manufacturing. 2. Agile operations Managing the production floor more effectively can help overcome skills shortages and deliver increased productivity. Dynamics 365 for Operations includes the ability to create workspaces, task guides, and work instructions tailored for operators and supervisors, which can adapt to any device’s display, getting even inexperienced workers up and running fast. It also delivers operational insights that let decision- makers take appropriate action to improve efficiency and remove bottlenecks. 3. Smarter order fulfilment Failing to meet promised delivery times to customers can erode trust and obliterate a manufacturer’s ability to compete. Making realistic promises to customers, and then delivering accordingly, is therefore key to a manufacturer’s ongoing success. Dynamics 365 for Operations delivers visibility around inventory, manufacturing, and logistics, and is available anywhere, on any device, so customer service representatives can proactively solve customer challenges and accurately predict order delivery timelines. Forward-thinking manufacturers are beginning to embrace this new reality and have started on their path to transforming their businesses. With the right technology and the right partner, they can lay the groundwork for long-term growth. DXC Eclipse offers agile solutions and industry expertise providing strategic guidance and helping manufacturers take on their technology challenges and maintain a competitive edge. About DXC Technology DXC Technology (NYSE: DXC) is the world’s leading independent, end-to- end IT services company, helping clients harness the power of innovation to thrive on change. Created by the merger of CSC and the Enterprise Services business of Hewlett Packard Enterprise, DXC Technology serves nearly 6,000 private and public sector clients across 70 countries. The company’s technology independence, global talent and extensive partner network combine to deliver powerful next-generation IT services and solutions. DXC Technology is recognized among the best corporate citizens globally. For more information, visit www. dxc.technology. Why work with DXC Eclipse? Moving to Microsoft Dynamics 365 requires careful planning to get maximum benefits with minimal risk. Businesses need to ensure the move is seamless, successful, and non-disruptive. DXC Eclipse is a leading Microsoft partner. DXC Eclipse works with customers to assess their current business systems, processes, and readiness to transition to the Microsoft cloud. The team focuses on managing the business risks, optimising the IT infrastructure, and managing the integration, security, and new technical and operational opportunities available in the Microsoft cloud. DXC Eclipse uses a Dynamics 365 Readiness Review questionnaire to help businesses understand their current and desired state, then plan a roadmap to the cloud. DXC Eclipse is a Gold Microsoft partner for Microsoft Dynamics and intelligent solutions in the cloud, on Azure, and on-premise. DXC Eclipse is the trusted partner for CFOs with 97 per cent customer retention year on year. DXC Eclipse has a global team of Microsoft consultants. We get to know your business so we can develop the right solution to match your needs, both now and into the future. We offer specialist industry solutions built on the Microsoft platform for retail, manufacturing, banking, healthcare, and mining. No matter what size your organisation is or what industry you operate in, we have a solution for you. We’ve helped more than 2,000 customers achieve their business goals. Learn more at www.uxceclipse.com July 2017© 2017 Eclipse, a DXC Technology Company. All rights reserved.