The very nature of industry is changing from a means of production to a process of value creation that leverages high value-add, digitally connected networks. Manufacturing is no longer about simply making physical products. Organizations are moving from make-to stock products and toward less inventory dependent build-, configure-, and engineer-to-order fulfillment strategies (see Figure 1). This requires investment in agile customer-driven processes, digital infrastructure, and disruptive business models.

The goal is to be able to quickly shift attention and resources to react to customer requests,

Changing Order Fulfillment Strategies

Figure 1. Order fulfillment strategies are changing. Source: IndustryWeek.

capitalize on growth opportunities, and mitigate risks. This is driven by frameworks that evaluate the ecosystem, technology, and business case in order to shorten the time it takes for products to reach customers.

Take the case of additive manufacturing, which provides such benefits as improved material selection, time to market, and quality. It’s not just a manufacturing process as it also changes how products are designed and distributed. For instance, the GE90 jet engine fuel nozzle uses additive manufacturing to combine all 20 parts of the old design into a single unit that weighs 25% less and is five times as strong (Kellner, 2017). This opens the door for lot sizes of a single unit, which will disrupt existing business models and create more innovative ones.

New business models increasingly rely on newer physical assets and stronger networks. Firms like Boeing are reinventing themselves with service-driven offerings like engineering design packages for upgrades and data-driven fleet operations. OEMs are engineering deep digital connections with their suppliers, to transform supply chains into value networks using key digital technologies like the cloud, big data, and IoT to support planning, logistic,s smart procurement, warehousing, and analytics.

CLAAS

Figure 2: CLAAS uses a suite of digital technologies to provide precision farming solutions. Source: CLAAS of America.

This is a profound change, an “Industry Renaissance,” if you will. Organizations now have access to infrastructure that allows them to create complete digital ecosystems that can simultaneously imagine, map, model, and engineer new products and experiences. Dassault customer CLAAS, for instance, uses a virtual experience platform to design its products and to enable its customers – farmers – to shop, customize, and test-drive new products on the company portal. CLAAS provides a suite of technologies to deliver precision farming solutions. CLAAS also uses IoT-connected devices on their harvesters and combine to send valuable data back to the company so it can be sold as a new service (Industry Renaissance, 2019).

There is a profound shift happening at warp speed driven by demanding buyers and the relentless pace of innovation. Customers demand a more personalized experience. The rapid pace of technology advancement has reduced barriers to entry, leaving us with even more direct and indirect competitors. For example, according to Business Insider, 14 major global corporations control more than 60 auto brands around the world, then add in the rise of public transportation and ride-sharing options.

Industry must embrace change in order to survive. According to IndustryWeek:

Manufacturers of all sizes share a common focus on (2) improving production processes, (2) strengthening customer relationships, and (3) finding talented people. The leaders of smaller firms (less than $100 million are paying more attention to meeting customization demands and improving productivity. Interestingly, maximizing capacity utilization and achieving annual cost reductions, which are always a priority regardless of company size, become even more important as annual sales grow.

While innovation is always a strategic priority, a surprisingly large percentage of manufacturers (45%) have not yet set a specific goal for reducing new product development cycle times. Among those working to shorten product development cycles, they’re trying to better understand customer and market needs, improve professional labor productivity and create prototypes faster.

Industry in the 21st century faces a complex set of challenges that requires a multi-discipline, multiscale approach to innovation where most of the work to harmonize product, customers, and suppliers will occur in a digital environment. This is the era of digital transformation where we will (ideally) be freed from routine tasks. An accurate digital thread along with real-time collaboration will improve design efficiency and product quality, ultimately resulting in more and happier customers.

References

Gould, S., and Zhang, B. (Feb. 15, 2018). These 14 companies dominate the world’s auto industry.