It is crucial to rebuild the future in terms of digital transformation, not to solve the problems of the past, because digitisation will clearly shape the next normal.
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Many corporate heads are now rightfully asking themselves whether their industry will recover quickly from the economic shock of the pandemic or whether there will be permanent damage. The answer probably lies in assessing the extent to which the industry is vulnerable. Companies that prove to be less resilient may struggle to regain their reputation after the pandemic. Those that rely on just-in-time supply chains, for example, are under pressure to change, as the continuity of supply is likely to be evaluated in the same way as the cost and speed with which a new product is introduced to the market.
Even if the barriers are gradually being lowered, companies will have to consider how they can operate and be successful in the future. The current situation shows that the resilience of many companies needs to be strengthened, i.e. their ability to absorb a shock and come out of the situation better than their competitors.
Automation technology as a turning point?
The COVID pandemic could prove to be a decisive turning point, especially in the field of digital commerce and automation technology. Many employees, so-called knowledge workers, are now working from home. What until recently was considered controversial between management and employees has suddenly become the norm. The first major US company to authorize its employees to work permanently from their home office was Twitter. Video conferencing tools such as Microsoft Teams, Zoom, Whereby and Jitsi as well as collaboration tools such as Slack or Teamviewer have assumed a level of system relevance. Employees access corporate systems and cloud apps from home to complete their tasks, allowing the so-called "Enterprise 4.0" to become reality. This is at least true for the office area. And the trend is rising. A study by the Institute for Employment Research (IAB) of the German Federal Employment Agency has shown that in Germany alone, around 4.4 million jobs can be performed by computers. Worldwide, there could even be between 400 and 800 million jobs by 2030.
In fact, today one can imagine a business world in which human contact, from the production floor to the consumer, is greatly reduced.
Digitalisation as a crisis aid?
For Swiss manufacturing companies it is no longer a question of whether digital transformation is a necessity. The fact that it is important can be seen today on the screens of senior executives and from the lists of participants in the promoted IoT webinars. Nevertheless, many projects have come to a standstill and one wonders how the digital transformation can bring the economy out of the crisis. "Wait and see" is not an option. Take a deep breath and deal with the following questions, advises Tobias Harland from the Industry 4.0 Maturity Center in Aachen:
Where can savings in digitisation be realised in the short term?
Which digitital technologies can help to overcome the Covid-19 crisis?
Which currently unused capacities of the workforce can be mobilized to accelerate digitisation?
What can digitisation contribute to making the company more resistant to crises?
Cost-cutting, but where?
In the past, some companies have spent large amounts on digitisation projects that were doomed to fail from the start. They were often initiated by individual employees who wanted to implement their ideas. In our daily work, we are constantly confronted with prototypes that were developed for predictive maintenance, for example, but
without connectivity to maintenance planning and other important systems. While the development of such stand-alone applications is interesting to deal with, it fundamentally contradicts the core idea of industrial IoT or Industry 4.0, namely complete integration. Such individual projects, unfortunately, do not allow the untapped potential for added value to be exploited. In order to recognise and implement the possibilities, companies must increase their digital maturity. The new technology used for this purpose must, however, fit the current status quo. It is of little use to implement a new radio technology-based real-time tracking system for mobile stainless steel storage tanks if there are no IT systems to control and document their contents.
Prioritise projects that have a positive short-term impact on EBITDA
Especially in days when every Franc counts, priority must be given to projects that help the company to secure the basis for the digital transformation. Studies show that many manufacturing companies in Switzerland still have some homework to do. Money does not even need to be raised for this. Examples include master data management and cleansing, standardization of documentation and work instructions, and the implementation of existing modules for data acquisition from machines and controls. Such projects are an important prerequisite for the next steps on the digitisation path.
Another option is the integration of turnkey, scalable complete solutions with real-time dashboards such as downtime viewers, piece counters, progress checks (day-by-the-hour), energy consumption by machine state, device monitoring, etc. Correctly implemented and connected to enterprise systems, such a complete solution can have an exciting impact on productivity and ultimately on EBITDA (earnings before interest, tax, depreciation and amortisation). When purchasing a software solution, every entrepreneur inevitably thinks of high installation and maintenance costs. Especially in times of economic tension, hardly any financial resources are left over for large IT investments, but turnkey IoT systems, in contrast, purchased under a Software-as-a-Service model, offer a considerable economic advantage; high initial investments are not required, payment is simply made monthly. This has a positive effect on cash flow.
Mobilise unused capacity
At present, over 27,000 companies in Switzerland have reported reduced working hours, a situation we have not seen in last few decades. So what happens with the unused resources? What can be done with the idle capacities? There are various tasks that are helpful for an effective transformation strategy. As already mentioned, the basis includes master data management & cleansing and the creation of standardisations, for which the time can now be used. Furthermore, the existing steps in the production process can be re-examined with the goal of creating value without waste. Not only with regard to a possible redesigning of the workspaces due to "distancing" and safety, the time can now be used for the offensive search of waste in the company. This includes movements, stocks, transports, waiting and idle times, overproduction, processes and energy. Questions for this could be: Which work areas, machines and equipment are particularly critical for quality? Which workplaces need to be designed in a way that protects health, is flexible and at the same time failsafe? Which problems could not be solved sufficiently so far? This process can certainly be seen as a preparation for digital upgrading.
The IT architecture should also be reevaluated. Current IT systems are designed for efficiency and largely based on a static business model. Today, however, flexibility is required to provide the right information in real time, namely when it is needed. In a later article we will discuss this topic.
Companies are vulnerable if they cannot obtain the necessary parts or raw materials. Supply chains that rely on just-in-time inventory and distributed procurement may need to be redesigned in light of the disruptions that many have experienced. Instead, replacement and safety plans must be established. In general, supply chains and all outsourcing must be reassessed. It is possible that the production facilities that are being outsourced today will come back, even to high-wage countries like Switzerland. Industrial IoT is likely to play a major role here. Examples show that a modern Industrial 4.0 plant can easily compete with a conventional plant in a low-wage country.
The silver lining
The Corona crisis will force companies to re-prioritise their digitisation activities and focus on realistic projects that will create added value in the short term.
Despite the reopening of some lines of business, there is a silver lining. However, it’s insignificant compared to the Corona Virus catastrophe. The creation of a next "normal" will be a long-term project for all companies. It is crucial to rebuild the future in terms of digital transformation, not to solve the problems of the past, because digitisation will shape the next normal.
Author: Peter Zahnd