The digital revolution, industry 4.0, digital first, the fourth industrial revolution – whatever you want to call it, investment in digital technology is without a doubt a major draw for manufacturers.
A recent survey from Fujitsu found that nine in 10 firms (89 per cent) are currently planning, testing or implementing digitalisation initiatives.
The questioning of business leaders in 15 countries worldwide also found that digitalisation is boosting business, with cited benefits including an increase in revenue, enhanced competitiveness of products and strengthened relationships with customers.
Many are hoping that investing in digital will go a long way to fixing the productivity puzzle currently perplexing politicians and business leaders alike.
Economists warn that the UK's productivity, for example, continues to lag behind its major trading partners such as the US, France and Germany. While the most recent quarterly figures show a small rise in productivity for manufacturers – of 0.2% year on year – the industry is no doubt keen to ensure stagnant productivity doesn’t hold it back.
So, why is it that an analogue approach is holding businesses back? Because the world as we know it has changed. Across all industries, technology and digitisation have become fundamental to organisational success.
In fact, research and advisory firm Gartner even went so far as to predict that a lack of digital competence could cause 25 per cent of businesses to lose their competitive ranking this year.
What does this mean for manufacturers? In my view, the most important message to take on board is that digitalisation isn’t just about the production line, it’s about all those behind the scenes functions that keep businesses operating day to day.
Take the accounts payable process as one example. Every day, businesses waste time and energy manually checking invoices received from an increasingly complex supply chain. Later, a mass of unanalysed procurement data lies stagnant in these paper invoices.
Turn this process digital and technology like Tungsten Network’s can reject incorrect invoices before they even arrive. We can then also use analytics to gain insight into spending trends and inform procurement decisions.
It would be foolish to insist that there are no barriers to implementing digital technology, however, the first being the initial investment. Budgets, legacy systems and organisational silos also play their part, along with company culture and individual attitudes.
The economic benefits of digitalisation mean the first hurdle is quick to overcome – research has shown that digitising 10,000 invoices, for example, will likely save £58,000. What can be a struggle is how to overcome old fashioned manual processes that have been deeply ingrained.
This is where it’s important while embarking on any transformation to remember that digitalisation is fundamentally about removing friction. Recently, Tungsten Network launched its inaugural Friction Index report, to highlight how much time is spent on inefficient payment practices.
The publication highlights that the average UK business loses £88,725 per year through supply chain inefficiencies, while in the US, the figure stands at $171,340 per year. This equates to thousands of team hours wasted every year dealing with payment issues.
These include everything from chasing for purchase order numbers to processing paper invoices and responding to supplier enquiries. Understandably, given the wasted money and man power, 36 per cent of businesses stated that removing friction from the payment process is a top priority for 2017.
If businesses aren’t tied up chasing invoices or receiving phone calls from suppliers, they have more time to dedicate to expanding their global operations and driving growth. If all the data from past invoices is easily accessible, opportunities to identify variances that target efficiencies are more easily visible.
To me, industry 4.0 means allowing data-empowered growth strategies to pick up pace. Digitalisation should be revolutionising all aspects of the way we do business, just as it is revolutionising the way we live our personal lives.
For the manufacturing industry, collaborating with digital platforms will help manufacturers better manage not only their production lines but their supply chains. The benefits? You stop the bleeding, you have better visibility and control, and your productivity skyrockets. What does that say about digitising your supply chain? It’s no longer a strategic advantage. It’s an operational necessity.
By Stanley Chia, Vice President and Global Head of Sales, Tungsten Network