Six trends challenging the factory of the future

According to Capgemini, the factory of the future – often called the smart factory – could add $1.5 trillion in value to the global economy…

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November 27, 20186 minute read

According to Capgemini, the factory of the future – often called the smart factory – could add $1.5 trillion in value to the global economy by 2022. Using digital technologies to transform factory operations has become imperative for every company – whether in automotive or high tech manufacture – but achieving success can be elusive.

Automation is far from new in the manufacturing sector but it has been focused on discreet operational improvements. The factory of the future will move beyond traditional automation to create a fully intelligent and connected system, driven by a constant stream of data from business, operational and production applications to rapidly learn and adapt to new and changing demands.

The benefits of moving to the smart factory are many. Deloitte sees the power of the factory of the future coming from ‘its ability to evolve and grow along with the changing needs of the organization – whether they be shifting customer demand, expansion into new markets, development of new products or services, more predictive and responsive approaches to operations and maintenance, incorporation of new processes or technologies, or near-real-time changes to production’.

Capgemini has attempted to put figures against the benefits and they are pretty extraordinary. “Manufacturers expect on-time-delivery of the finished products to accelerate by 13 times, while quality indicators to improve at more than 12 times the rate of improvement since 1990. They predict the cost items such as Capex & Inventory to be rationalized at 12 times and material, logistics & transportation cost to be rationalized at 11 times the rate of improvement since 1990. At the same time, overall productivity and labor cost improvements are reported to accelerate at 7 times and 9 times the rate of growth since 1990, respectively.”

The consulting firm identified only one small problem: The manufacturers they spoke to weren’t very good at it! Though 76% said that they had already, or were working on, launching a smart factory initiative, only 16% were happy with their efforts.

So what are the challenges?

Supply chain digitization

Many manufacturers – especially in automotive – have began to leverage smart factory components in areas such as planning and maintenance. However, the factory of the future has to be much larger and holistic than just the factory floor. It has to reach beyond the four walls to integrate with customers and suppliers. The entire supply chain is changing through digitization from a traditional linear and sequential operation to an interconnected, open and multi-layered ecosystem of trading partners. You must work out how to integrate your smart factories into your new digital supply chains. 

Data monetization

Data is the lifeblood for the factory of the future. Through applied AI and advanced analytics, data will drive all processes, detect operational errors, provide user feedback and improve the volume and quality of production output. Looking an automotive again, the future factory will see far more customization facilitated by data that identifies demand, minimizes the downtime needed for retooling and resetting, and enables the ‘run of one’. This, in turn, allows manufacturers to look at how the can exploit the data they have to create new data-driven products and services, such as predictive maintenance capabilities within connected cars.

Digital transformation

Digital transformation is sometimes considered the move from paper-based to digital processes. However, the factory of the future takes this one stage further. It relies on the convergence of operations technology (OT) with information technology (IT). The rapid growth in Internet of Things (IoT) is driving this transformation. It enables every aspect of factory operations to be connected and monitored. This IoT data can be used to simply feed operational systems to improve performance, or blended with data from other enterprise systems to begin to change how the entire factory and supply chain operates.

The connected floor of the factory of the future
Figure 1: The connected factory floor

Disruptive technologies

IoT is only one of the many disruptive digital technologies that every manufacturer is faced with. Companies also have access to technologies such as advanced analytics, AI, drones, Blockchain, robotics, 3D printing and wearables. Production process requirements within every company are different so there is definitely no ‘one size fits all’ for the factory of the future. Each individual company will have to work out which combination of disruptive technologies will meet their specific business goals.

Disruptive digital technologies in the factory of the future
Figure 2: Disruptive digital technologies

Growing skills gap

People, as Forbes points out, not technology are the key to successful digital transformation – and this is especially true in the smart factory. Increased digitization is unlikely to reduce headcount but it will radically change the roles and responsibilities of your people as OT and IT more closely integrate. Some roles will disappear but these are likely be the mundane and repetitive tasks best completed by robots. Other roles will emerge and these will be high value and knowledge-based to exploit the data within the system. Agile and adaptive change management is required to ensure that you effectively move between roles and gain access to or develop the new skills you need.

Governance, risk and compliance

Deloitte points out that one of the most valuable features of the smart factory – its ability to self-optimize, self-adapt, and autonomously run production processes – can fundamentally change traditional governance, risk and compliance models.

Automated systems reduce the need for human intervention so there are fewer errors and less risk. However, governance and compliance policies have to establish how you can monitor and audit the machines that now fulfill this aspect of your business. In addition, the connectivity of the smart factory extends into your trading partner ecosystem. The GRC policies, procedures and technologies you put in place have to take full account of this new, interconnected and collaborative way of working.

Unified GRC platform in the factory of the future
Figure 3: Unified GRC for the smart factory

 There’s no doubt that the factory of the future will be intelligent and connected. The doubt arises when we ask how long it will take to get there. I think that the word ‘future’ is misleading and we’ll see the factories I’ve described above appear in the next few years. The benefits are just too substantial for this not to happen.

I’ll leave the last word to Capgemini: The firm suggests that implementing a smart factory approach can lead to operating margin gains of over 100% and quickly turn an average manufacturing into a segment leader.

You can gain some more insight about the challenges from our 8 Trends Challenging the Factory of the Future infographic. To find out some of the answers and learn how companies like yours are overcoming these challenges, we’re created an invaluable Digital Manufacturing eBook.

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