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Factories of the Future

Factories of the Future
January 19, 2021


In this fast-moving and a digitally literate world that we live in, consumers want everything ‘now.’ There is no space for complacency for the manufacturers, especially with Industry 4.0 coming into picture, allowing access to technologies such as artificial intelligence, augmented/virtual reality, blockchain, cloud computing, computer numerical control, machine learning, internet of things, and additive manufacturing, etc. So, with the changing environment, easy access to services and products, and knowledge of the technologies available, consumers today expect superior product quality and experience of consuming the product/service. To meet these demands, manufacturers must also evolve their production techniques and business models. This evolution of the production techniques and business models requires a transformation of the factories and production sites leveraging the digital technologies at disposal.

Digital factories act as manufacturing sites and incubators for innovation that drive agility.

What are Digital Factories?:

Digital factories are a construct or model that bring changes in organizational culture and adopt digital transformation. It allows organizations to integrate processes, machinery, computer systems, and technologies such as RPA, AI/ML, cloud, AR/VR, Big Data Analytics, etc. which enables manufacturers to prototype, produce, and fabricate molds within the same process and deliver products in a few hours. These factories act as manufacturing sites and incubators for innovation that drive agility in working methodologies, unique solutions, and cross- functional teams. Also, the organizations are investing heavily on digital transformation projects. One of the biggest challenges is the need to do away with the traditional way of doing things and be flexible in terms of funding initiatives to implement new technologies and allocate resources. To address this challenge the digital factory comes into play. It allows for an agile, adaptive, and dynamic environment for materializing concepts/ideas to tangible products.

The ecosystem of the fourth industrial revolution

Figure 1: The ecosystem of the fourth industrial revolution

Image Source:

Why implement Digital Factories?:

Though the digital factory is flexible and adaptive, it does require a certain operating model that is adhered to by all the teams working in these factories. These factories may be concentrated or spread across the locations that the organization operates. Depending on the objectives and the goals set by the organization, the required deliverables, governance, and working procedures are defined. As depicted in Figure 2, this allows for continuous optimization of the manufacturing processes through continuous feedback that drives innovation, and fast internalizing of the same drives higher performance. The continuous collaborative thinking, easy design and redesign of products, and faster production time cater to customer needs better while optimizing the entire production process. This allows the organizations to inculcate a new digital culture in a planned and phased manner while leveraging the power of the digital and gradually adopting new processes.

The optimization loop

Figure 2: The optimization loop

Image Source:

If this can be implemented successfully in organizations, it will lay the path for future ways of working while creating an environment of creativity, co-creation, and innovation. This propels the production rates much higher than the current, to the extent of new products being available in a matter of weeks, drastically reducing the time to market.

Digital factories pave the way for smart factories of tomorrow to bring in added benefits for the manufacturing industry. According to a report by Capgemini, smart factories are expected to add $500 billion to $1.5 trillion in value to the global economy and are expected to drive significant performance improvements. With the digital technologies at our disposal, the early adopters are expected to have higher gains. We can observe from Figure 3 from the same report published by Capgemini that the Industrial manufacturing sector has had the highest gains. Also, according to an article by IndustryWeek, the economic impact of adopting digital technologies such as additive manufacturing led to industry growth of 31.5% from 2012 to 2016. Today, digital twin technology is also gaining momentum with IoT coming into picture, allowing it to be a more cost-effective implementation. It also allows manufacturers to interact with their facilities at all times through their devices and have a view of the real-time data and processes.

Digital factories pave the way for smart factories to bring in added benefits for the manufacturing

Not only does it make real-time tracking and data sharing seamlessly easy, it also makes prototyping and training on new products much easier. According to a report published by PWC in 2020, technologies such as digital twin and co-bots, etc., are driving more lean and productive operations. The report also states that companies implementing digital factories expect efficiency gains of about 12% over the next five years.

Average realized overall productivity & quality gains from smart factories

Figure 3: Average realized overall productivity & quality gains from smart factories.

Some of the extended benefits of implementing Digital Factories:

  • Accelerated on-time delivery
  • Assured improvement in product quality
  • Reduction in direct costs such as CAPEX and Inventory, materials, logistics, and transportation
  • Reduced labor costs
  • Improved productivity

Pre-requisites for implementation:

Digital factories 2020 key messages

Figure 4: Digital factories 2020 key messages.

Image Source: future-of-manufacturing.pdf

To successfully implement digital factories and scale the cultural changes, organizations need to ensure certain factors:

  1. Top management should lead the transformation and think like venture capitalists for fast decision making and clear objectives. The projects should be jointly handled by the business owners and the project heads, and the progress should be tracked with set KPIs. Minimum Viable Product (MVPs) should also be quickly materialized to ensure success.
  2. Attracting the right talent is imperative for the successful implementation of digital factories. It requires skilled professionals, but such a resource pool is more often short on supply. This may pose a challenge.
  3. Building small but effective and efficient squads with the right set of complementary skills helps drive the transformation in the right direction.
  4. Creating an environment for collaboration ensures that there is enough space for ideas and innovation fueling the digital factories. Such an environment also attracts talent while ensuring that there is room for cross-disciplinary conversations and creativity.
  5. Setting clear purposes helps to align the internal process changes with the organization's goals. This helps the management prioritize the tasks and achieve what needs to be done.
  6. Optimizing investments is extremely important as having access to the right technologies help achieve the goals and speed up digitization. Fewer funds will mean lesser access to technologies that can drive the digitization process faster.
  7. Integrating new products into business is a challenge that organizations often face. This is a change management challenge that needs a plan to be tackled.

These dimensions, once well-aligned, accelerate the digital transformation journey by leveraging digital factories and ensuring that the culture gets deep-rooted in the organization.

The six-step ladder to success:

Six step ladder to success

Figure 5: Six step ladder to success

Image Source: future-of-manufacturing.pdf

Leading industrial companies have committed to building and enabling digital factories to increase production efficiency. The path to success is, however, challenging due to uncertainties and lack of clarity. To address this, PWC proposes a six-step blueprint.

  1. Mapping out the digital factory strategy to ensure that the goals and objectives are aligned with the company vision and overall level of maturity that it currently possesses and the level it wants to achieve.
  2. Creating initial pilot projects as securing funds might be a challenge to demonstrate the economic benefits associated with it. Pilot projects will help assess the approaches that work for different organizations.
  3. Defining the capabilities needed is important as they evolve with time, and having them aligned to the organizations’ intended outcome is the larger goal at hand. A clear roadmap of the required capabilities and how to build them is imperative for success.
  4. Becoming a virtuoso in data analytics and connectivity since organizations today are leveraging data-driven technologies for process and quality improvement and resource management it is imperative that expertise in the domain is at par with competitors.
  5. Transforming factories into digital factories requires a cultural change that needs to happen organization-wide, starting at the top. The leadership must take the initiatives and drive the transformation forward, ensuring the cultural changes are in place, and the pre-requisites are met.
  6. Integrating digital factories in respective digital ecosystems that is integrating MES systems with ERP systems enables significant improvements in the manufacturing process. However, the digital factory should be a part of the larger ecosystem of increasing efficiency across the value chain

Several leading organizations have invested in digital factories of the future. They have embarked on their digital transformation journey, thereby drastically reducing their operational costs and increasing their production efficiencies. Nokia, for instance, set up “The Conscious factory”- supply chain management of the future. The journey started in 2012 with a clear vision of the factory and supply chain of the future. The result is a “dark” factory with minimal electricity consumed and manpower required and zero emissions, zero waste, and no stocks. As a result of these implementations, Nokia has been able to achieve its vision of factory in a box.

Several leading organizations have invested in digital factories of the future.

Another such example is Bosh Rexroth in Hamburg, Germany, where they have established a leading factory for industry 4.0 solutions. It is both a user and an internal provider of industry 4.0 solutions. It essentially produces industrial and mobile controls as well as hydraulic motion equipment and is a global pilot plant for the Bosch group. In the plant, they have implemented new technologies alongside maturing technologies such as RFID, E-Kanban, and pick to light, which has resulted in improved efficiency while increasing their variants produced at their assembly lines.

Many such examples of smart factories showcase how it has benefitted them and helped them gain a competitive advantage in the market. The early adopters seem to have gained a lot from their investments in digital factories and therefore seem to be in a comfortable space for the coming few years.