What has changed in digital transformation in manufacturing in 2022?

Digital transformation has been a primary trend across the entire business world for the last several years. As a recap, digital transformation is a business approach that covers a range of technologies, including artificial intelligence (AI), machine learning (ML), digital twins, predictive monitoring, robotics, and automation. 

Thought leaders explain that digital transformation is more than a specific technology or even a set of technologies. Rather, it’s a state of mind, and achieving it requires transforming (hence the name) the entire business to be digitally-focused and connected. 

With digital transformation occupying so much thought space and column inches for business leaders, it’s worth pausing to examine what progress has been made in the last few years. It’s widely accepted that the pandemic accelerated digital transformation in manufacturing, as companies rushed to find strategies to deal with a disrupted supply chain, the enforced remote workforce, distancing requirements, and changing customer demands, but did it really advance as much as was thought as a result of COVID-19? 

In this article, we’ll consider what is the state of digital transformation in manufacturing in 2022.

In 2022, how much has digital transformation progressed in manufacturing? 

Although the threat of the pandemic has ebbed since early 2020, the need for digital transformation in manufacturing hasn’t declined. However, it also hasn’t progressed as fast as you might have thought. Some companies have more or less completed their digital transformation and are moving on to implement aspects of smart manufacturing, while others are still working on rolling out digital transformation across their organization. 

Manufacturing companies have certainly embraced the idea of digital transformation, with Fictiv’s 2022 State of Manufacturing reporting that 90% of respondents are either using or implementing digital manufacturing technologies of some sort. But that doesn’t mean that similar numbers have a plan for a full digital transformation. 

The 2022 L2L Digital Transformation Survey contradicts the image of a tsunami of digital transformation crossing the manufacturing industries. By January 2022, only 24% of manufacturers have a digital transformation strategy. While 43% said their digital transformation was going well and another 6% said it was complete, 42%, or more than 2 out of every 5 companies, hadn’t even begun. Dr. Reinhard Geissbauer, Global Digital Operations Partner at PwC Deutschland, reports similar figures, concluding that close to two-thirds are still at the very beginning of their digital transformation journey and that just 10% have either completed their digital transformation or are in the final phases. 

However, there is a sense of urgency among manufacturers regarding digital transformation. 75% of participants in the L2L survey said that they think their competitors are ahead of them, and Aptean reports that digital transformation is a priority for two-thirds of organizations. 

Those organizations which have completed a digital transformation see the benefits, which could help fuel more companies to follow suit. McKinsey records positive results that include more flexibility, agility, and adaptability, with 30-50% reductions in machine downtime, 10-30% increases in throughput, 15-30% improvements in labor productivity, and 85% more accuracy in forecasting. It notes that “The right applications of technology can lead to more empowered decision making; new opportunities for upskilling, reskilling, and cross-functional collaboration; better talent attraction and retention; and improved workplace safety and employee satisfaction.”

What is holding manufacturing companies back from digital transformation success?

Every organization is different and faces different challenges, but if there’s one primary issue that keeps cropping up and seems to underlie all the other obstacles, it’s a lack of planning. 

L2L’s survey found that when asked for the biggest barrier to digital transformation, the top answer was that they have no clear path, which tallies with the 42% who say they don’t have a strategy. McKinsey likewise claims that the biggest factor in a successful digital transformation is planning and the biggest hazard is analysis paralysis.

When you haven’t planned sufficiently, you’re likely to struggle when curveballs come along. Manufacturing companies tend to be very dispersed, comprising multiple plants each with different tech stacks and management styles. This demands a top-down, carefully thought-out strategy that remains flexible enough to adapt to each plant’s specific circumstances. 

McKinsey cites siloed implementation and a failure to adjust to the unique situation in each plant as additional barriers, while PWC observes that successful manufacturers “are able to evolve into ‘embedded digital organizations’ capable of balancing central management of systems, technologies, and standards, but with a flexible local implementation based on user needs and preferences in different factories,” adding that “the most effective transformations take place in the context of an agile operating model. “

A different barrier to digital transformation is a widespread shortage of skills. Pressing through a digital transformation requires people who both understand the company and have a digital mindset. Manufacturing companies rarely have data scientists, engineers, and/or advanced analytics experts already in their workforce, unlike finance companies, for example. “Often, digital transformation is not a core skill for manufacturing companies,” said Max Ivannikov, solutions consultant at DataArt, a software engineering firm based in New York.

Finally, but no less importantly, PWC points to a lack of commitment to digital transformation, writing “Factory transformation cannot be done half-heartedly, but needs a solid IT and data backbone with focused operations and automation applications.“ Too many manufacturing organizations take a half-hearted approach, but success requires full commitment – and full resources too. PWC notes that industrial manufacturing companies are investing $1.1 trillion a year in digital transformation solutions, but they need to raise that by at least 50% to see high returns and rapid payback. 

The primary motivations for digital transformation in 2022

Despite the patchy progress that manufacturing has made toward digital transformation, companies still have plenty of motivation to achieve it. The industry as a whole is still scrambling for solutions to the ongoing supply chain crisis, rapid fluctuations in markets and demand, and the growing labor shortage.

Flexibility and resilience

After 3 years of the pandemic, supply chain breakdowns, recession, fluctuating demand, and a labor shortage, the primary reason for seeking digital transformation is no longer a desire for increased efficiency or greater cost savings, but a need for flexibility and resilience. In line with this concern, Fictiv reports that 94% of companies are using or implementing supply chain analytics and visualization. 

Customer experience

A need to deliver enhanced customer experience is also near the top of the priority list. Fictiv found that 97% of respondents agreed that customer demands are shifting, with growing interest in more sustainability, faster new products, and higher quality. As a result, 59% of organizations are working to improve visibility into production and 45% are concentrating on improving customer experience. 

Changes to the workforce

Manufacturing plants are facing a labor shortage together with an ongoing demand for hybrid, remote, and flexible working which also leaves plants with a smaller on-site staff. Companies want to improve communication between teams and between on-site and remote employees. At the same time, engineers are spending too much time on procurement, leaving them short of time for development. 

Business leaders are looking to tech to help engineers reclaim that time, and also to fill gaps in the wider workforce. 75% of respondents view technology as a key solution to addressing workforce challenges, according to Fictiv, and PWC observes that while the investment focus in Asia is on automating high-quality production volume growth, the main concern in Europe is for labor cost arbitrage. 

Sustainability 

Digitally-led sustainability initiatives are still a relatively low priority for manufacturing verticals, but it’s worth mentioning as a motivation. Experts at Fujitsu observe that this issue is expected to keep getting more important

The top technologies being implemented in manufacturing in 2022

Various technologies connected with digital transformation are being adopted at a disproportionate rate to companies going through a full digital transformation, which bears out PWC’s findings that the majority of commitments to digital transformation are half-hearted.

As shown in Fictiv’s table above, supply chain analytics are at the top of the list, which isn’t surprising since managing the supply chain is key for successful production and profits. On-demand manufacturing platforms, which help address customer demands and workforce issues, are also highly popular, along with predictive monitoring and predictive maintenance to help plants continue operating efficiently with a skeleton on-site staff. 

Industrial Internet of Things (IIoT) adoption rates are also sky-high since this is seen as a fundamental technology that opens doors to other tech use cases and more advanced digital transformation approaches. 

PWC notes that quality analytics and automated KPI monitoring are also highly implemented use cases that help with the need for resilience, while KPMG notes that 5G for IoT, AI, autonomous operations, virtual reality (VR), and 3D printing are also rising in the adoption stakes. 

More advanced and complex technologies like digital twins or digital lean solutions are lagging behind for the moment, but they are all expected to accelerate through 2023 and beyond, along with digital sustainability solutions, digital thread, mass customization, and digital supply networks, as digital transformation matures across the industry. 

Digital transformation has not yet fully arrived, but it is on the way

Overall, while manufacturing verticals acknowledge that digital transformation is vital for resilience, the ability to adapt to customer demands, and successful operations, they aren’t adopting it quite as fast as you might expect given how much it is talked about. 

Manufacturing companies are mostly beginning the journey by introducing technologies that have fast payoffs and bring quick results, which is in line with general advice for digital transformation. However, it’s important that they follow up on their successes by completing the transformation process, and don’t rest on their oars.