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McKinsey: digital manufacturing, preparing for a new normal 

As COVID-19 continues to change the manufacturing industry like never before, we look at how digitalisation can provide a speedy recovery for the indust...

Georgia Wilson
|May 12|magazine15 min read

As COVID-19 continues to change the manufacturing industry like never before, we look at how digitalisation can provide a speedy recovery for the industry.

While the impact of COVID-19 is presenting many challenges to the industry, such as health and safety; supply chain shift impacting sourcing and distribution; supplier resilience and labour shortages, McKinsey highlights the importance of production facilities moving quickly to respond to new sources of supply and shifting customer demands when the crisis eventually resolved. 

“It is these types of pressures that make digital capabilities so critical, providing flexibility and resilience manufacturers need to mobilise and operate in unfamiliar territory,” says McKinsey.

In a recent study conducted by McKinsey, the organisation uncovered new insights into the challenges and success factors for European companies looking to implement digital manufacturing at scale. “The time for organisations to act and to implement digital is now,” states McKinsey who reports that only 17 out of the 44 members of the Global Lighthouse Network are in Europe, and only three are using industry 4.0 tools across their end-to-end value chains.

“Our research has revealed five fundamental principles that translate into tangible actions for scaling and sustaining digital technologies, regardless of a manufacturer’s starting point,” added McKinsey.

These five principles include:

Image source: McKinsey

The value of industry 4.0

Industry leaders within manufacturing are harnessing the capabilities of digital transformation to develop new or enhance the ways in which their organisations operate. These organisations are using a variety of capabilities including:

  • Data, computational power and connectivity: sensors, the internet of things (IoT), cloud technology and blockchain

  • Analytics and intelligence: Big Data, advanced analytics, artificial intelligence (AI) and knowledge-work automation

  • Human-machine interaction: virtual reality, augmented reality, robotics, automation, robotic process automation (RPA) and chatbots

  • Advanced production methods: additive manufacturing and renewable energy

By harnessing these types of industry 4.0 tools, companies have reported a 30 to 50% reduction when it comes to machine downtime; a 15 - 30% improvement in labour productivity; a 10 to 30% increase in throughput; and a 10 to 20% decrease in the cost of quality. 

“Although all of the manufacturers we assessed are transitioning to digital manufacturing, they are not deploying these technologies at the same rate. In fact, most organisations find themselves stuck in ‘pilot purgatory’,with no clear approach for quickly scaling up innovations across the manufacturing network,” commented McKinsey, who highlighted that according to findings from the Global Lighthouse Network, at least 70% of manufacturers are stuck in ‘pilot purgatory’. 

Among the most significant challenges, McKinsey reports that Culture is considered the highest when it comes to success at scale, in addition to the absence of several fundamentals: 

  • Strategic direction: where and how digital manufacturing will bring business value, as well as the incentives for people to make it happen

  • The required capabilities: technical, managerial, and transformational, in order to understand and execute the changes

  • Robust data and IT infrastructure: to mitigate bottlenecks when scaling successful pilots

To find out more about accelerating digital transformation to prepare for the new normal post COVID-19, click here!

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For more information on manufacturing topics - please take a look at the latest edition of Manufacturing Global

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