Digital Transformation in Manufacturing

Key Takeaways

Technologies that automate workflows, operational processes and data collection have the highest rates of use among survey participants.
Back-end systems are among the top three “essential” applications cited by survey participants.
Mid- to mature-stage companies are using more smart technologies, such as virtualization, artificial intelligence, and machine learning.
A significant percentage of manufacturers are reporting that KPIs have at least “somewhat improved” after implementing digital solutions.
59% of respondents already have or plan to implement a platform that fully integrates their business systems.

Manufacturers recognize the need to be nimble in today’s uncertain world. Industrial firms, large and small, have responded by adopting smart technologies to bring more visibility and flexibility into their operations. In recent years, major supply chain disruptions and changing customer demands have driven an increased sense of urgency among manufacturers to undertake a complete digital transformation.

To help manufacturers benchmark their digitalization efforts, IndustryWeek and SOLIDWORKS & DELMIAworks created The Digital Transformation in Manufacturing: 2021 State of the Industry Report. The survey findings and analysis provide insight into manufacturers’ key pain points and how they’re addressing them through technology.

Digital Transformation in Progress: Race to the Top

The majority of respondents identified themselves as being in the early to mid-stages of the digital transformation. Advanced and mature-stage manufacturers represented 13% of total participants. Technologies that automate workflows, operational processes and data collection have the highest rates of use among survey participants.

What type of technologies are you currently using in your digital transformation efforts?

Ninety-three percent of respondents indicate the use of one or more of the technologies listed below in their digital transformation efforts. Respondents who have moved into the mid to advanced/mature stages of digital transformation are more likely than those in the early stages to use each of the technologies listed below.

Digital Document Management

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 67%

Respondents in the Early Stages of Digital Transformation - 49%

Cloud Computing

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 54%

Respondents in the Early Stages of Digital Transformation - 30%

Robotics and Automation

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 42%

Business Intelligence/Advanced Analytics

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 56%

Respondents in the Early Stages of Digital Transformation - 12%

IoT

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 40%

Respondents in the Early Stages of Digital Transformation - 21%

Virtualization/3D Modeling

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 35%

Respondents in the Early Stages of Digital Transformation - 23%

3D Printing

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 31%

Respondents in the Early Stages of Digital Transformation - 25%

AI/Machine Learning

Edge Computing

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 25%

Respondents in the Early Stages of Digital Transformation - 7%

Other

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 3%

Respondents in the Early Stages of Digital Transformation - 2%

None of the Above

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 1%

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages of Digital Transformation}
■ ^{Respondents in the Early Stages of Digital Transformation}

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages}
■ ^{Respondents in the Early Stages}

Base: All respondents (n=131). Multiple answers allowed.

As expected, respondents who identified as being in the mid to mature stages are using more smart technologies, such as virtualization, artificial intelligence, and machine learning. But early adopters are also making strides in their digitalization efforts.

60% of midsize and 42% of small manufacturers are in the mid to mature stages of their digital transformation.

Technology Essentials: What Matters to Manufacturers

Back-end systems, such as enterprise resource planning (ERP), customer relationship management (CRM), and quality management software are among the top three “essential” applications cited by survey participants. However, early-stage adopters haven't fully implemented technologies that will put them further on the digital transformation journey, with 54% ranking spreadsheets among their top three applications. They’re also more likely to cite design/CAD software as one of their top apps.

Which 3 applications do you consider essential to your manufacturing business?

Regardless of digital transformation progress, ERP and CRM applications are considered essential to respondents. Those in the early stages of digital transformation are also likely to rely on applications such as spreadsheets and design/CAD, while those further along in the process rely on more advanced applications such as QMS and MES.

Enterprise Resource Planning

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 43%

Respondents in the Early Stages of Digital Transformation - 42%

Spreadsheets

Respondents in the Early Stages of Digital Transformation - 54%

Customer Relationship Management

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 33%

Respondents in the Early Stages of Digital Transformation - 39%

Quality Management Systems

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 36%

Design CAD

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 22%

Respondents in the Early Stages of Digital Transformation - 33%

Manufacturing Execution System

QuickBooks or Similar Entry-Level Accounting System

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 14%

Supply Chain Management

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 18%

Respondents in the Early Stages of Digital Transformation - 16%

Warehouse Management Systems

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 24%

Respondents in the Early Stages of Digital Transformation - 11%

Product Lifecycle Management

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 19%

Simulation

Other

Respondents in the Early Stages of Digital Transformation - 0%

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages}
■ ^{Respondents in the Early Stages}

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages of Digital Transformation}
■ ^{Respondents in the Early Stages of Digital Transformation}

Base: All respondents (n=131). Multiple answers allowed.

Businesses that are more mature in their digital transformation are likely using more additive manufacturing and virtualization technologies. When it comes to data storage, 48% of respondents use cloud-based file management systems. Advanced to mature-stage manufacturers are using more cloud-based systems and shared file-management systems versus local file systems.

Adoption Drivers: Profitability and Competitiveness

The reasons for investing in technologies are nearly identical across the board. Manufacturers in all stages of their digital transformation rank growth and profitability, changing customer demands, and competitive pressures as the top three business drivers impacting their technology decisions.

What business drivers are impacting your technology strategies/decisions?

Regardless of the digital transformation progress, respondents are likely to indicate growth and profitability and changing customer demands impact their technology strategies/decisions.

Growth and Profitability

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 61%

Respondents in the Early Stages of Digital Transformation - 60%

Changing Customer Demands

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 66%

Competitive Pressure

Respondents in the Early Stages of Digital Transformation - 40%

Quality Issues

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 39%

Respondents in the Early Stages of Digital Transformation - 32%

Regulatory, Compliance and EHS Challenges

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 27%

Respondents in the Early Stages of Digital Transformation - 28%

Supply Chain Visibility

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 37%

Respondents in the Early Stages of Digital Transformation - 19%

Labor Shortages

Other

Respondents in the Early Stages of Digital Transformation - 5%

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages of Digital Transformation}
■ ^{Respondents in the Early Stages of Digital Transformation}

Base: All respondents (n=129). Up to three answers allowed.

Key Business Drivers to Consider

Digital technologies provide visibility and analytical insight into many key performance indicators (KPIs) that manufacturers value.
Overall, respondents selected on-time delivery and quality as their most important KPIs.
Significantly more digitally mature companies rank cycle times, quality defects/rework, inventory levels and supplier quality as the most important KPIs they track compared with early-stage respondents.
When manufacturers integrate sensing, data collection, virtualization and analytical capabilities across their enterprise, they enable more opportunities to track KPIs.

37% of organizations in the mid to advanced stages indicate that supply chain visibility is a motivating factor for tech investments compared with 19% of early-stage adopters.

Breaking Through: Overcoming Digitalization Challenges

Manufacturers cite several hurdles in their ability to achieve a return on their investment in these digital technologies. Budget constraints, employee reluctance to change, a challenging learning curve, outdated technologies, and technology silos ranked as the top five challenges from all respondents.

What are your biggest obstacles to leveraging technology?

Fifty-nine percent of respondents currently have or plan to have a technology platform that fully integrates their business systems. Among respondents in the mid to advanced/mature stages of digital transformation, 70% currently have or plan to have a technology platform that fully integrates systems. This group of respondents are also likely to currently have an ERP system that provides visibility into multiple functionalities.

Budget Constraints

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 55%

Employee Reluctance to Change

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 45%

Respondents in the Early Stages of Digital Transformation - 35%

Challenging Learning Curve

Respondents in the Early Stages of Digital Transformation - 37%

Outdated Technology

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 20%

Technology Silos

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 30%

Cyber Security Risks

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 23%

Lack of IT/Vendor Support

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 17%

Lack of Corporate Support/Buy-in

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 10%

Other

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 4%

Base: All respondents (n=130). Multiple answers allowed.

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages}
■ ^{Respondents in the Early Stages}

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages of Digital Transformation}
■ ^{Respondents in the Early Stages of Digital Transformation}

Base: All respondents (n=130). Multiple answers allowed.

Technology Success—By the Numbers

Effective

Average

Highly Effective

Below Average

Technology Impact: Driving Efficiencies form Design to Manufacturing

Survey responses support the case for digital investments. A large percentage of manufacturers are reporting that KPIs have at least “somewhat improved” after implementing digital solutions.

To what extent have each of the following changed as a result of the technologies used in your digital transformation efforts?

Respondents have likely seen improvements across a variety of metrics as a result of technologies used in their digital transformation efforts.

Production Metrics

14% Greatly Improved, 49% Somewhat Improved, 36% No Change, 2% Worsened

Mfg Cycle Times

15% Greatly Improved, 44% Somewhat Improved, 37% No Change, 4% Worsened

Quality/Defects/Rework

13% Greatly Improved, 43% Somewhat Improved, 41% No Change, 3% Worsened

On-Time Delivery

13% Greatly Improved, 38% Somewhat Improved, 41% No Change, 8% Worsened

Yields

14% Greatly Improved, 36% Somewhat Improved, 45% No Change, 4% Worsened

Inventory Levels

12% Greatly Improved, 37% Somewhat Improved, 43% No Change, 8% Worsened

Machine Perform/OEE

9% Greatly Improved, 33% Somewhat Improved, 55% No Change, 3% Worsened

Scrap/Wasted Raw Mtrls

9% Greatly Improved, 32% Somewhat Improved, 56% No Change, 3% Worsened

Product Design Changes

3% Greatly Improved, 29% Somewhat Improved, 64% No Change, 4% Worsened

Supplier Quality

3% Greatly Improved, 28% Somewhat Improved, 63% No Change, 6% Worsened

■ ^{Greatly Improved}
■ ^{Somewhat Improved}
■^{No Change}
■ ^Worsened

Base: All respondents (n varies from 115 to 119).

KPIs By Maturity Level

Respondents rated their ability to leverage technology as:

of respondents indicate that production metrics have “somewhat” or “greatly” improved.

of advanced to mature organizations report improvements to production metrics.

of early-stage respondents report improvements to production metrics.

of respondents indicate that production metrics have “somewhat” or “greatly” improved.

of advanced to mature organizations report improvements to production metrics.

of early-stage respondents report improvements to production metrics.

Breaking Down Silos: End-to-End Visibility

The digital transformation isn’t fully realized until manufacturers connect their back-office, operations, and supply chains to achieve a holistic view of “all revenue and expense streams.”

Getting there means connecting everyone across the organization with the same digital thread of consistent and timely information. A single, integrated platform can save weeks or even months of time and expenses.

Do you currently have a technology platform that fully integrates your business systems, including ERP, PLM, and MES databases?

All Respondents

Respondents in the Mid to Advanced/Mature Stages

Respondents in the Early Stages

■ ^Yes ■ ^{No, but we plan to.} ■^No

Base: All respondents (n=130). Multiple answers allowed.

Does your ERP system provide visibility into any of the following functionalities?

Regardless of the digital transformation progress, respondents are likely to indicate growth and profitability and changing customer demands impact their technology strategies/decisions.

Order Processing

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 68%

Shipping

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 58%

Production

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 59%

Scheduling

Respondents in the Early Stages of Digital Transformation - 26%

None of the Above/Not Applicable

Respondents in the Mid to Advanced/Mature Stages of Digital Transformation - 13%

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages}
■ ^{Respondents in the Early Stages}

■ ^{All Respondents}
■ ^{Respondents in the Mid to Advanced/Mature Stages of Digital Transformation}
■ ^{Respondents in the Early Stages of Digital Transformation}

Base: All respondents (n=130). Multiple answers allowed.

Opportunities to gain additional flexibility exist by also connecting product design software with enterprise systems using an integrated platform.

58% of all respondents say they haven’t connected their design software to their enterprise systems, 42% say they either have or plan to in the future.

The Digital Future: Considerations and Next Steps

The digital transformation isn’t fully realized until manufacturers connect their back-office, operations, and supply chains to achieve a holistic view of “all revenue and expense streams.”

Leveraging technology is about evolving and learning. Manufacturers need to examine their legacy systems and evaluate whether they’re still sustainable. Key steps to consider in this evaluation process include:

Click the + indicators for additional details.

Look at Existing Technologies and Their Overall Impact on Operations

Identify which systems can continue to perform at a high level and replace or update outdated or underperforming technologies.

Demonstrate Value to Gain Buy-in from Staff

Explain how the technologies will bring more value to the company, provide more opportunities for them, and create a safer work environment.

Learn the Technology

Organizations must have a formal training program in place—whether it’s conducted internally through the IT team or led by a vendor or third-party integrator.

The digital transformation doesn’t happen overnight and doesn’t always require a major upfront investment. Manufacturers can take an incremental approach and build upon small wins.

Understanding existing gaps will help organizations prioritize which systems require immediate upgrades, so they can begin building a foundation for a long-term digitalization strategy.

The digital transformation doesn’t happen overnight and doesn’t always require a major upfront investment. Manufacturers can take an incremental approach and build upon small wins.

Understanding existing gaps will help organizations prioritize which systems require immediate upgrades, so they can begin building a foundation for a long-term digitalization strategy.

Additional Resources

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