How to achieve and sustain the impact of digital manufacturing at scale

Although manufacturing leaders see the potential of digital, few have a clear strategy to capture its value. Three principles can help turn optimism into action.

Several terms are used to describe the combined impact of digital connectivity, advanced analytics, artificial intelligence, and new cyber-physical systems in the production of physical goods. But whether it’s dubbed Industry 4.0, the industrial Internet of Things, or digital manufacturing—as we use in this article—expectations remain high regarding the benefits that disruptive technologies will create for manufacturers and technology providers.

For some manufacturers, the primary benefits relate to improved productivity and reduced cost, but others expect more wide-ranging impact such as shorter time to market, more agile operations, increased ease of product customization, and even the opportunity to generate additional revenue streams through value-added services.

Many companies are embarking on the journey to integrate digital and production, but approaches to capturing its value differ significantly. A few companies have gained senior-management attention and committed significant resources to driving progress, including the creation of “lighthouse” facilities as a test bed and future showcase for a range of solutions. The majority, however, seem to be adopting more of an incremental approach, with individual plants or business units selecting pilots in a less coordinated manner.

Gauging attitudes, documenting progress

To understand how leaders in various manufacturing industries are thinking about digital manufacturing and determine how far they’ve progressed in adopting it, we conducted our Digital Manufacturing Global Expert Survey for a third time in the first quarter of 2017. The survey engaged a panel of 400 industry experts in China, Germany, Japan, and the United States and focused on potential changes in attitudes on digital manufacturing, progress made in implementation, drivers of and barriers to implementation, and organizational approaches to scaling impact from disruptive technologies in manufacturing.

Growing optimism. The buzz around digital manufacturing continues, with respondents from all four countries showing a higher degree of optimism than they did one year ago (Exhibit 1). In China, Germany, and the United States, over 60 percent of respondents are more optimistic about the potential of digital manufacturing than they were a year ago, with a particular surge in China, where more than 80 percent of respondents are more optimistic. In Japan, only 40 percent are more optimistic—but in last year’s survey, that figure was 8 percent. The main reasons for this global optimism cited by respondents are greater opportunities, higher return on investment, and less difficulty in capturing this value than initially expected.

Respondents from China, Germany, and the United States expect this potential to translate into double-digit revenue and cost improvements over the next three years, although those from Japan are more cautious. While increases in machine and labor productivity, in delivery performance, and in the customer base are some of the more common drivers of improved financial performance, significant numbers of respondents also cite reduction in input costs, improved quality, decreased maintenance costs, and lower working capital as important factors.