Get­ting low returns from high technology?

November 6, 2019

The wide­spread adop­tion of dig­i­tal tech­nol­o­gy in man­u­fac­tur­ing is bring­ing about a rev­o­lu­tion that com­men­ta­tors have named Indus­try 4.0. Robots are replac­ing humans and smart devices are using data to take pro­duc­tion deci­sions, mov­ing man­u­fac­tur­ing ever clos­er towards 100% automa­tion. With indi­vid­ual cus­tomiza­tion now pos­si­ble even with large scale pro­duc­tion runs, this rev­o­lu­tion is promis­ing to take both cus­tomer sat­is­fac­tion and oper­a­tional excel­lence to the next level.

Man­u­fac­tur­ers first began using com­put­ers to auto­mate the pro­duc­tion process and resource plan­ning back in the 1970s. Then in the 1990s, enter­prise resource plan­ning (ERP) sys­tems start­ed mak­ing auto­mat­ed strate­gic plan­ning pos­si­ble. By 2000 the annu­al world­wide licens­ing and main­te­nance rev­enue for ERP sys­tems had reached USD 21.5 bil­lion and was grow­ing at a com­pound annu­al growth rate (CAGR) of 13.1%. While the advent of ERP was respon­si­ble for many man­u­fac­tur­ing suc­cess sto­ries, there are lots of tales of mis­for­tune out there too.

Nike spent $400 mil­lion dol­lars updat­ing their sup­ply chain sys­tem and ERP imple­men­ta­tion. They were sur­prised when this project result­ed in a 20% dip in their stock, $100 mil­lion in lost rev­enue and a myr­i­ad of class action law­suits. And HP’s North Amer­i­can division’s move to a sin­gle cen­tralised ERP sys­tem end­ed up cost­ing the com­pa­ny $160 mil­lion in back­logged orders and lost rev­enue – more than five times the esti­mat­ed cost of the project.

Now as we enter the Indus­try 4.0 rev­o­lu­tion, com­pa­nies like GE and Siemens have declared it a core part of their strat­e­gy. Bosch is set to imple­ment smart man­u­fac­tur­ing at all its plants in India and Europe. The Ger­man gov­ern­ment has even allo­cat­ed €200 mil­lion of fund­ing as part of its high tech strat­e­gy action plan for 2020. With so much ener­gy behind the adop­tion of the lat­est man­u­fac­tur­ing automa­tion tech­nol­o­gy, there are cer­tain­ly great gains to be had.

How­ev­er it’s impor­tant to learn from the fail­ures of the past and to take a more con­scious approach to imple­men­ta­tion. In the age of smart man­u­fac­tur­ing, advanced tech­nol­o­gy is eas­i­ly avail­able, for a price, but the real chal­lenge is max­imis­ing the benefits.

Many of our clients have shared sto­ries with us of dis­pro­por­tion­ate­ly low returns on their invest­ment in tech­nol­o­gy. The miss­ing link is usu­al­ly a com­pre­hen­sive approach to change man­age­ment – a must for any major change with­in an organ­i­sa­tion to go smooth­ly. Our method­ol­o­gy ensures the stream­lined run­ning of each change man­age­ment pro­gramme and makes sure the ben­e­fits are sus­tain­able. Tech­nol­o­gy alone won’t improve your busi­ness’ per­for­mance. How­ev­er, after work­ing with us, our clients con­sis­tent­ly expe­ri­ence real improve­ments in capac­i­ty and oper­at­ing performance.

Are you look­ing to realise the val­ue from your invest­ments in data and tech­nol­o­gy? We’ll be more than hap­py to share our expe­ri­ence with you.

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