Digitizing value streams is the key to efficiency, competitiveness, and growth for mid-market manufacturers.
In mid-market manufacturing, the absence of standardized processes and limited system capacity pose significant challenges, particularly in the face of evolving customer demands and intense competition. Notably, delays in on-time delivery can trigger a 10% surge in operational costs and a 9% increase in associated expenses, encompassing freight and overtime costs, as well as the loss of sales and customers [1]. Make-to-order manufacturing further complicates matters, requiring seamless coordination from initial quotation to final delivery. To address these complexities, "digitized" value stream mapping (VSM) becomes crucial, offering a visual and analytical tool to optimize information, materials, and processes throughout the organization, vendors, and customers.
The Consequences of Not Digitizing Value Streams
The reluctance of many mid-market players to embark on the digital journey places them at a significant competitive disadvantage. Insufficient processes lead to lost sales opportunities, pushing potential customers towards more streamlined competitors. Manual processes not only extend the sales cycle, leaving customers waiting longer, but also contribute to an increase in Days Sales Outstanding (DSO) due to late or incorrect invoicing, impacting cash flow and financial stability. The lack of real-time manufacturing insight effects on-time delivery (OTD), eroding client trust. Additionally, outdated systems and manual data entry make financial closing and reporting time-consuming, while inefficient production and inventory control result in higher carrying costs, reduced cash flow, and aging inventories. Without alignment between IT investments and digitization efforts, businesses risk not realizing the desired results.
The Missing Piece: Technology
In the Industry 4.0 era, organizations ignoring the need for change and adaptation will be forced out of the market rapidly [2]. However, the challenge lies in addressing human resistance to change during digitization efforts. Overcoming this barrier requires a focus on technology as the linchpin for transforming value streams. Mid-market manufacturing organizations can utilize workflow automation, compliance management systems, and data analytics tools to enforce controls, facilitate change management, and standardize SOPs, fostering a culture of change and adaptability.
Maximizing Potential
Maximizing potential demands a strategic approach. Peter Drucker's maxim, "What can be measured can be improved," underscores the importance of leveraging VSM to identify inefficiencies, bottlenecks, and flaws. However, true empowerment comes with combining measurement with workflow automation, fostering effective coordination and data-driven decision-making.
The Roadmap to Digitization
Digitizing value streams is not a one-and-done solution. It is both a strategy and a practice. Here’s a strategic roadmap to assist decision-makers in leading their organizations through a successful digital transformation:
Understand and organize the organization’s imperatives, aligning them with strategic plans like DevOps and Agile for improved business outcomes.
Utilize process mining and digital tools to gain data-driven insights and make informed decisions.
Use intuitive tools to reduce reliance on IT and accelerate organization-wide digitization.
Use a solid data governance model and value assurance mechanism to ensure automation aligns with strategic objectives and quantifiable value.
Assess the impact of digitization regularly and adapt strategies accordingly.
To optimize potential, standardize processes, secure a position in the market, and simply thrive in the age of Industry 4.0, the time for digitizing value streams for the mid-market manufacturing industry is now!
[1] Poor on-time deliveries? Learn about strategies to improve performance. https://www.orkestrascs.com/blogs/poor-on-time-delivery-performance
[2] Digitizing Manufacturing: Ready, Set, Go! https://www.capgemini.com/consulting-de/wp-content/uploads/sites/32/2017/08/digitizing-manufacturing_0.pdf
Comments