Five digital transformation trends in manufacturing for 2021

The COVID-19 pandemic has supercharged the demand for digital offerings and Industry 4.0 technology

By Julia Quintel and Johannes Papst March 8, 2021

As much as the COVID-19 pandemic will be remembered for its chilling effect on business and economic activity, apparently it has had quite the opposite impact on industry’s zest for digital transformation and Industry 4.0 technologies.

Based on a survey of 900 C-level executives across industries, the consulting firm McKinsey concluded in October 2020 the COVID-19 crisis has brought about a years’ worth of change in just a few months’ time. Not only have companies “accelerated the digitalization of their customer and supply-chain interactions and of their internal operations by three to four years” as a result of the pandemic, McKinsey observed, “perhaps more surprising is the speedup in creating digital or digitally enhanced offerings. Across regions, the results suggest a seven-year increase, on average, in the rate at which companies are developing these products and services.”

All of which portends a period of frenetic digitalization activity in the industrial sector throughout 2021 — activity that, looking at companies across the global industrial manufacturing and automotive landscape, likely will be focused in these five areas:

1. A decisive move to modular production as part of a broader focus on operational flexibility. A growing customer appetite for customized products is prompting manufacturers to explore new ways to make mass customization a profitable proposition. To that end, we see more manufacturers embracing modular production approaches that integrate tightly with other parts of the business.

Within an automotive factory, for example, multiple modular workstations could be established, each with their own assembly itinerary (e.g., one module to assemble battery-electric vehicles, and another to assemble hybrid-electric vehicles). When efficiently configured and intelligently connected to the broader enterprise, this modular approach can make mass customization viable. In a simulation of flexible-cell automotive manufacturing, the Boston Consulting Group found that worker utilization increased by 12%, “which in turn can lead to a similar reduction in labor cost per vehicle.”

The ability to capture these types of efficiencies on the plant floor is largely predicated on an intelligent, end-to-end approach whereby smart factory assets are connected to the broader enterprise. This enables a manufacturer to factor in short-term signals from sales, manufacturing, suppliers and even directly from customers — including late-order changes, labor shortages, quality issues and machine breakdowns — and then make in-the-moment decisions on the shop floor based on their overall business impact.

2. The ascendance of extended business networks. The pandemic-related disruptions of 2020 have made manufacturers laser-focused on resiliency in 2021. Many have looked to evolve beyond the traditional supply chain, with its inherent limitations, to a network or ecosystem construct that extends beyond company borders. More companies will move to multishoring, geographic diversity and extended business networks that include multiple tiers of suppliers, business partners, logistics providers, distributors, resellers, wholesalers, retailers and more to alleviate supply chain risk, in what amounts to an acknowledgement by manufacturers that their best chance of success comes with collaboration across the entire value chain.

This construct enables members to connect and exchange data in a safe and interoperable way to achieve real-time visibility, collaborate efficiently and take quick, sound, data-informed actions. A manufacturer would gain the ability to choose suppliers based on their proximity (to reduce emissions) or on in-the-moment component availability, for example. Having full visibility across the network enables a company and others that are part of the network to adjust on the fly to changing conditions. The recently announced Automotive Alliance is an example of how six companies within the automotive value chain are exploring an open B2B network.

3. A growing reliance on edge computing prompts a heightened emphasis on cybersecurity. As more manufacturers embrace edge computing to enable greater real-time flexibility, automation and adaptability within their plants and production processes, they also are moving to fortify cybersecurity at the edge. Amid a 2,000% year-over-year surge in cyberattacks on operational technology (OT), it’s expected there will be major ongoing investment in security planning and in measures to protect networks and data that are increasingly vulnerable as manufacturers’ use of connected assets grows. Here’s an area where large vendors could become a solid ally to manufacturers, providing them with secure, cost-effective solutions.

4. A major movement to mainstream sustainability initiatives. Decarbonization, net-zero emissions, the Circular Economy — more manufacturing companies will move these once-peripheral initiatives into their core operational and business decision making in 2021, joining companies like Bosch, BMW and many others that already have made sustainability a strategic imperative. They’re motivated by their own shifting strategic priorities as well as by the growing emphasis their shareholders, customers, business partners and, of course, regulators are placing on sustainability.

Digital capabilities (track and trace, advanced modeling, digital twin, etc.) can help companies execute on their commitment to sustainability. This enables them to factor “green line” considerations into decisions across their business and to measure, report and articulate the impact their operations have in areas such as carbon emissions. In 2021 and beyond, more companies will likely turn to Industry 4.0 technologies to help model and develop processes tailored to the Circular Economy principals of minimizing waste and maximizing reuse. Initiatives like Climate 21 and Plastic Energy/GreenToken are developing digital tools and processes to help companies do just that.

5. A renewed emphasis on human resources — not the department, but rather the people on whom manufacturers rely to produce quality products, innovate and deliver positive customer experiences.Even in the age of robotics, industrial manufacturers cannot run without skilled workers,” observes a 2020 study from Oxford Economics. In that study, which is based on survey responses from 300 senior executives in the industrial manufacturing sector, 22% of industrial manufacturers cited the lack of skilled workers as a top barrier to achieving their strategic change initiatives.

By incorporating automation, machine learning and other Industry 4.0 capabilities into their operations, manufacturers can empower their employees with real-time alerts no matter where they are. That way, they have the information to make faster and more informed decisions right on the shop floor. Ensuring that employees have the necessary skills and training to work collaboratively with intelligent machines and make decisions on the fly will be a key priority for manufacturers in 2021, as will keeping those employees — still manufacturers’ most important asset — safe inside the plant.

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Author Bio: Julia Quintel and Johannes Papst are solution managers in SAP’s discrete manufacturing industry business units responsible for Industry 4.0 initiatives for automotive and industrial manufacturing. They are based in Germany.