We’re now well into 2018 already, but I thought it was still worth putting together a blog on the trends I see affecting manufacturing over the coming year. I’ve chosen two legislative changes and three technology-driven trends. Taken together, I think they add up to great opportunities for manufacturers, but in an increasingly challenging business environment for many companies in the sector.
First, the good news: global economic growth – driven by increased manufacturing activity amongst other things – hit a seven-year high at the end of 2017. Now the bad: The banks say that’s pretty much it – mature economies have reached the limit of their potential for growth. What I take from this is that manufacturers have to create ways to increase production efficiencies, improve responsiveness to customers and, most importantly, find room for innovation. However, the legislative changes are likely to pose real challenges to achieving these goals.
Brexit continues to breed uncertainty
The final Brexit settlement will not take place until 2019 but the entire process is likely to hang over most industries. What will happen remains shrouded in uncertainty and this is already leading to companies putting their plans on hold. For example, UK investment in plant fell from 7.5% in 2016 to 6.5% in 2017 as a result of this doubt. No business likes uncertainty, but it can’t be an excuse for inactivity when companies need to advance their digital transformation initiatives.
While we can’t know what we don’t know, there’s plenty about Brexit that we can be sure of. Cross-border trade and the freedom of movement will both be affected. That means how you structure your supply chains in Europe, how you employ European staff and the contracts that you have with suppliers and customers all have to be considered as they will change. Manufacturers can consider 2018 as a good time to re-assess and audit their business in Europe so that implementing the final changes becomes less of an unforeseen burden.
OpenText has recently launched this Brexit microsite to help you understand the issues surrounding Brexit and begin to prepare for the change.
GDPR becomes real and starts to bite
There’s no confusion around the EU General Data Protection Regulations (GDPR). It comes into force in May and a company can be fined €20 million or 4% of annual turnover – whichever is greater – for a data breach. The obligations are stringent. A company has to know exactly what data they have, where it is, why they have it and what it’s used for. Yet, companies in every industry have been slow to react. One piece of research found that only 6% of companies thought they would be ready for GDPR.
As manufacturers get better at handling Big Data, GDPR raises another data management challenge. This time it’s about personal data. Any company that has employees, suppliers or customers in Europe must comply with the regulation. Any manufacturing company that ships or sells directly to customers, employs staff in Europe, has suppliers or trading partners in Europe or use personalized and targeted marketing to European prospects will need to comply with GDPR. Manufacturers will have to start to show quickly that they are making good faith efforts towards meeting GDPR requirements. The first step is to identify what personal data you have, where it is and who’s using it.
OpenText has a GDPR discovery and analysis service to help organizations understand what personal data they have and where it is.
The advance of AI and analytics
Forbes suggests that smart factories with integrated IT systems that provide relevant data to both sides of the supply chain can increase production capacity by 20%. Manufacturers understand that AI can drive the automation to increase efficiency, reduce waste and quickly and accurately respond to customer demand. But AI is only part of the equation. Its power comes from the combination with analytics. Big data analysis is challenging for manufacturers faced with the exponentially increasing volume, velocity and variety of product, operational and customer data.
Over the next 12 months, AI and analytics will become just a normal business operation. The companies that will succeed most will be those that build the machine and deep learning capabilities into their existing BI and predictive analytics systems. We’ll also see more manufacturers move toward Cloud to manage and process their data and content making it easier to conduct in-depth analytics at an enterprise–level.
I have discussed the topics of analytics and manufacturing in a few blogs last year in March June, and October. And I expect more to follow on this leading trend in the coming months. Watch out for our Analytics in Manufacturing white paper soon on how analytics is transforming manufacturing.
The rise and rise of Industry 4.0
AI and analytics are two of the technologies that are underpinning the rapid acceptance of Industry 4.0. The manufacturing industry is at the forefront of the Internet of Things (IoT) usage and IoT is growing quickly. Research showed that there were 8.4 billion ‘things’ connected to the network in 2017 – a 30% rise on the year before. Industry 4.0 uses IoT and analytics to create ‘smart factories’ that can radically change how products are made, shipped and sold.
This year, more manufacturing companies will begin to implement their version of Industry 4.0 to achieve improvement in production and operational areas such as engineering, maintenance, asset performance, product lifecycle management and the supply chain. A few forward-thinking companies will look to the potential of Industry 4.0 to develop and introduce new business models such as mass customization and the development of data-driven products and services.
Convergence is king
IDC forecasts that, by 2021, 20% of the largest manufacturers will depend on a secure backbone of embedded intelligence to automate large-scale process and speed execution times by 25%. To achieve this, there needs to a continuing convergence between operational technology (OT0 and information technology (IT). Little surprise then that IDC also suggests that, by 2019, over 30% of all IT and OT technical staff will have direct experience in both areas. Whether you trust analyst predictions or not, the digital transformation of manufacturing necessitates greater IT/OT convergence.
We all know that manufacturing creates a lot of data that then sits in silos and much is rarely used for anything past its original purpose. To embrace Industry 4.0 companies have to be able to collect, integrate, interoperate and analyze data from all relevant sources from the ERP system to the IoT sensor to customer feedback on social media. That’s about more than technology. People and processes have to change too. But this is happening and it’s likely to accelerate over the next 12 months.
We’ll be covering more on all of these trends during the OpenText™ Innovation Tour in March and April. You can also place the trends in the context of the latest Digital Transformation developments at OpenText™ Enterprise World in July.