One of the challenges when considering a major technology expenditure is the apparent risk that it carries. What if you invest in technology and it doesn’t work out? What if you take a wrong turn? What if you move too fast and serve as the guinea pig for an industry? What if users don’t accept it and it goes under-utilized? All valid concerns, of course, as part of an appropriate risk management assessment.
But in the case of moving away from paper-based to digital operations management systems – such as those that are driving today’s Industry 4.0 movement – presents a compelling case. Not only does this type of application upgrade promise important operational advantages, but a strong case can be made that it is one of the best risk reduction investments a manufacturing organization can make.
Here are a few examples of why CFOs and other financial leaders responsible for the budget should consider the move to digital operations more as a risk management investment versus just a technology expenditure.
Reduce the Risk of Downtime
While every manufacturer is different, one thing is constant. Unplanned downtime is to be avoided at all costs. Lost production time is an opportunity cost that can never be replaced with a real impact on the bottom line. According to Deloitte in the research report, Predictive Maintenance and the Smart Factory, unplanned downtime is costing industrial manufacturers an estimated $50 billion each year. Reducing the likelihood of this incurring is a highly effective risk management strategy that can be implemented when moving away from paper-based systems and manual processes.
Reduce the Risk of Poor Quality
Quality issues are damaging to profits and reputation. They erode client and investor trust and impede revenue. Major or prolonged quality problems can even cause permanent damage to a company. Investing in a digital production system provides far greater visibility and advance notification when out-of-compliance activities are occurring to then trigger remediation. Using Technologies like predictive analytics, AI, and the Digital Thread, manufacturers can build quality into every design, process, product, and even customer interaction – but only when operating with a digital infrastructure where information can be shared seamlessly.
Reduce the Risk of Surprise
In corporate planning, ignorance is not bliss. CFOs and other decision-makers must sometimes make decisions based on obsolete, stale, or out-of-date information. Reporting and visibility with traditional methods are equivalent to flying blind in today’s fast-changing environment. One of the great advantages of embracing an Industry 4.0 strategy and implementing a digital operations infrastructure is that decision-makers will now have access to accurate and more timely information. In a digitally transformed organization, the latest manufacturing data is available to everyone who needs it—collected, analyzed, and presented in the format and context that executives need. This information is quite valuable in that it can be used to improve efficiency, reduce costs, or increase marketplace advantage in a way that their less digitalized competitors cannot.
This article might be of interest, Reduce the Risk of an MES Deployment by Thinking like a Venture Capitalist.
Conclusion
A digital strategy for production management is not just a decision to add new technology to the shop floor. Instead, it is an investment in building resilience and improved visibility on overall manufacturing performance. This type of strategy can deliver an ecosystem of solutions that are scalable, agile, interoperable, and built for the future. Whether a given investment in this technology is the right move must be weighed, as it always has been, by comparing benefits and ROI with the short-term and long-term costs. Be sure to remember to place risk reduction on the scales too, because it might be one of the best reasons of all to commit to embracing a future without paper or manual processes – as a digital future where new levels of risk reduction can be more readily achieved.
