The Executive Interviews at the ARC Industry Forum 2021 elicited interesting perspectives on the acceleration in digital transformation in the post-pandemic business environment. Greg Gorbach, Vice President, Digitization & IoT, ARC Advisory Group, and Mike Lackey, Global VP, Solution Management for Digital Manufacturing at SAP, discussed how companies have adapted to the reality of the pandemic, how digital transformation has impacted the entire supply chain, and the value of being resilient and adaptable. This blog captures the highlights of the interview; the video can be viewed below and/or here.
Acceleration in Digital Transformation
Mr. Gorbach stated that industries have seen an unmistakeable acceleration in digital transformation activity, and many companies have realized the value of digital and Industry 4.0 technologies and are unlikely to go back to their old ways. He asked about SAP’s experience on the digital transformation journey.
The journey has been going on for the last six years, and the pandemic has definitely accelerated the need and the movement toward this digital transformation, said Mr. Lackey. Manufacturers ran out of material and plants were shut down, so SAP had to start with understanding and catering to the new customer demands and get the plants running again. However, as the pandemic affected the entire supply chain, SAP’s solution encompassed all aspects from design to operate/consume. SAP’s customers really wanted five years of innovation in 18 months, and that was a big challenge, he explained. To meet this demand, SAP rolls out its applications in the cloud, which is faster and enables quicker innovation. Every 90 days, SAP updates applications with new features, functionalities, and user experience. This improves speed of delivery for the customer.
“Business is changing and that means process has to change with it.” There is a big movement in automating processes too, as personnel had to work remotely, explained Mr. Lackey. At SAP, it was more about automating business processes with technologies, like machine learning and artificial intelligence. This means that the data from the equipment on the shop floor could be linked to other business aspects to help derive value. “In the future, the intelligent enterprise, the connected factory, is going to be more like a network than just an entity by itself.” Further, he said that today’s competitors will be tomorrow’s business partners; owners will still take advantage of third party contractors and third-party factories; and all these will network and help companies innovate faster.
Value of being Resilient and Adaptable
Mr. Lackey stated that resilient and adaptable means you have the agility and ability to respond to dynamic changes. So, to create resiliency in operations or the supply chain, the focus has to be on business outcomes and automating end-to-end business processes. It is about quickly responding to changing customer demand or unforeseen downtime in the factory.
SAP talks to customers about their future plans and tries to help them on their journey. A food manufacturer told Mr. Lackey that before the pandemic 80 percent of business came from bulk orders from restaurants. But today, 70 percent of the business is from grocery stores in smaller quantities for families. So, the business and process has changed to support the new customer demand. The value of being resilient is knowing when these changes happen across multiple plants and operating as one entity to deliver on global demand. A lot of data is being accumulated, but knowing how that data impacts different aspects of the business is the key to driving resiliency and sustainability into not only the supply chain, but business operations.
Mr. Lackey explained that you cannot have silos of data, it must all converge to provide a holistic view. Manufacturers are realizing the importance of bringing manufacturing into the enterprise and into the supply chain, and that is a big change. “It’s not only about profitability, but the ability to survive in these unprecedented times.”
Impactful Change not Incremental Change
This is the first time in the last 20 years that industry was caught unprepared for a pandemic. Very few people saw it coming, and no one envisaged the global impact it would have, said Mr. Lackey. But history could repeat itself, so we have to check on how to improve and adapt processes and operations. There is no need to panic, but future plans and investments must be made in building the connected/intelligent enterprise. Digital transformation initiatives must see a double digit growth. There is tremendous opportunity working with partners, customers, and other automation companies to collaborate and strategize and help companies chart their roadmaps.
Corroborating this, Mr. Lackey gave the example of Continental, a tire company that makes automotive air springs that wanted to standardize processes across global operations. The company wanted to know the capability of every plant and ensure that every plant was harmonized in standards to improve the efficiency and digitize the production process. This was a big project across multiple manufacturing plants and multiple product segments. After it was tightly integrated with machine and operational data knit with business data, efficiency improved, there was better visibility, and the company was able to fine-tune and replan production orders across global plants. Process control gave them the much required flexibility, and they began collecting the “right data.” This had a huge impact on ROI.
Mr. Lackey said that digital transformation is a journey, and that every customer is at a different milestone. This is the time to invest and plan for the future, he said. Industry 4.0 is about building resiliency in the factory of the future.
Highlighting some key takeaways:
- Get started on the digital transformation journey and accelerate
- An ecosystem of strategic partners and automation vendors is invaluable to help implement digital transformation strategies
- Dream big about the company’s future
- Build the infrastructure and operational processes
- Engage with customers and look at business outcomes