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Implementing the Smart Factory New Perspectives for Driving Value About the Deloitte Center for Integrated Research

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Implementing the Smart Factory New Perspectives for Driving Value About the Deloitte Center for Integrated Research A Deloitte series on Digital Supply Networks Implementing the smart factory New perspectives for driving value About the Deloitte Center for Integrated Research Deloitte’s Center for Integrated Research focuses on developing fresh perspectives on critical business issues that cut across industries and functions, from the rapid change of emerging technologies to the consistent factor of human behavior. We look at transformative topics in new ways, delivering new thinking in a variety of formats, such as research articles, short videos, in-person workshops, and online courses. Connect To learn more about the vision of the Center for Integrated Research, its solutions, thought leadership, and events, please visit www.deloitte.com/us/cir. The US Supply Chain & Network Operations practice advises, implements, and operates transformational solutions that bring world-class supply network capabilities, operational know- how, digital technologies, and advanced analytics to deliver unprecedented client value. Contents Smart factories have arrived 2 Positioning smart factory initiatives for value 4 Turning lessons into outcomes: Realizing the value of smart factory transformation 9 Applying lessons to scale up 12 Endnotes 13 Implementing the smart factory Smart factories have arrived HE STRATEGIC IMPORTANCE of smart succeed, and—most importantly—realize value in factories is undeniable, as early adopters these efforts? What can leaders pursuing smart Thave reported operating more efficiently and factory deployment learn from those who have driving more to the bottom line. In the United already done it? And how can leaders then States alone, 86 percent of manufacturers believe translate those lessons into value—not that smart factories will be the main driver of only for their smart factories, but for their competition by 2025. Furthermore, 83 percent broader organizations? believe that smart factories will transform the way products are made.1 To better understand the outcomes from organizations that have undergone smart factory Research consistently reveals improvement in cost, transformations, we interviewed leaders with throughput, quality, safety, and revenue growth hands-on smart factory experience. For the through the deployment of smart factory companies and smart factory deployments we technologies that combine capabilities in industrial studied (see the sidebar, “Our research approach”), internet of things (IIoT), cloud and edge the results have been powerful indeed. computing, robotic process automation (RPA), artificial intelligence (AI) and machine learning, Drawing from those interviews and building on vision systems, and augmented and virtual reality Deloitte’s in-depth, collaborative study with the systems, among others.2 Leaders have a broad Manufacturers Alliance for Productivity and range of choices and opportunities with respect to Innovation (MAPI), which investigates the state of smart factory transformations, both in terms of smart factory deployment across the United States, which technologies to use, and how to deploy them. and our initial 2017 smart factories study, which Despite all of this, however, many are still only just getting started. For example, only 5 percent of US manufacturers surveyed in a recent study reported OUR RESEARCH APPROACH full conversion of at least one factory to “smart” Deloitte conducted more than 40 status, with another 30 percent reporting they are qualitative interviews with a global array currently implementing initiatives related to smart of manufacturing leaders, staff, and factories.3 This means that nearly two out of three professional services providers with (65 percent) manufacturers surveyed report no hands-on experience of smart factory progress on initiatives that they overwhelmingly transformations across diverse industries point to as their main driver of near-term such as chemicals, paper, aerospace, plastics, competitiveness in five years.4 consumer products, and life sciences and health care.5 The topics discussed here That’s a significant percentage of companies emerged as common themes, both across the different deployments and among the leaving substantial and demonstrated value on the many study participants that we engaged. table. So how do leading companies get started, 2 New perspectives for driving value offered an initial exploration of the concept, this interviews to uncover the key elements of smart paper offers insight into lessons that can be drawn factory transformations. from leaders’ experiences with smart factory transformations. • Turning lessons into outcomes: Realizing the value of smart factory Despite the range of industries of those we transformations. Here, we examine the interviewed, an overarching set of considerations, question of “what’s next?” Now that challenges, lessons learned, and strategies for organizations have positioned their factories for success remained consistent. We’ve divided our value, how can they make that transformation findings into two sections: pay dividends? These opportunities result from the data, improved processes, and optimization • Positioning smart factory initiatives for opportunities that smart factory deployments value: Lessons in smart factory illuminate. Each builds upon the one before it, transformations from those who have amplifying value and driving results at scale. done it. This section relates common themes Early identification of potential pathways and encountered and lessons learned when their impacts can be critical to maximizing the transitioning to smart factory functionality. value delivered by smart factory efforts. In this section, we take insights from our 3 Implementing the smart factory Positioning smart factory initiatives for value N OUR RESEARCH, several common themes who embrace it. Others are far more specific and emerged. Some are the same that emerge in any unique to the smart factory and its technologies, Itransformation: those related to culture and and can be critical considerations that leaders change management and rooted in the notion that should address (figure 1). transformation is only as successful as the people FIGURE 1 Themes from smart factory initiatives The familiar themes: Discovering underlying change management themes Human-centered design Top-down, bottom-up Diverse teams with a Ongoing support based on real user needs approach broad variety of skill sets and learning Focus on the needs of end Prioritize support at a Identify and deploy the many Develop and access the users and enabling them leadership level, as well unique skill sets required for skills required for the long to harness the value of as on the ground, to gain smart factory success, such term to ensure ongoing data that comes from a organizational buy-in and as engineering, master data success as the smart factory connected facility. strategic consideration, and management, and analytics, evolves. ensure adoption. to ensure the value extends far beyond the four walls of the facility. The “smart factory–specific” themes: Integrating information technology (IT) and operations technology (OT) in the smart factory Connectivity as Managing the reality of Bridging the IT/OT critical multiple devices divide Before focusing on adding A variety of different Cultures differ across different parts of the company. smart capabilities, make equipment, sensors, and Bringing together the IT and OT communities can be critical sure the internal digital other devices means a to ensuring not only that smart factory transformation infrastructure, whether variety of issues need to be initiatives are successful, but that they can scale on a wired or wireless, is in resolved on the shop floor broader level to other areas of the network and Digital place to support it. to maximize results. Supply Networks (DSNs). Source: Deloitte analysis. 4 New perspectives for driving value The familiar themes: Change element is the critical ingredient that if you don’t management in smart get right can lead these projects to the point where factory transformations it was an investment without value.”8 TOP-DOWN, BOTTOM-UP APPROACH “How do you make sure that you can change LED BY CHANGE CHAMPIONS your processes and people when they have Change champions inside the business can provide been working for so many years, and give support at a leadership level as well as on the them tool[s] engage them?”6 ground to remove roadblocks, gain organizational buy-in, and outline the business case for smart factories. Leaders stress the importance of HUMAN-CENTERED DESIGN executive-level sponsorship as these initiatives BASED ON REAL USER NEEDS often require large investments of resources— Many successful smart factory transformation whether people, time, assets, or financials. They leaders point to the need to consider user-oriented spoke frequently about the need for a project perspectives to achieving business objectives when sponsor to drive projects forward, and the designing smart factories. One study participant importance of strong leadership for successful described the approach as taking the time to transformations. understand how individual roles work and what tools they need, employing a “human-centered approach to If any factory wants to introduce understand what [the user’s] pain [Industry] 4.0 or a smart factory … points are, making sure we understand how they need to use it has to be a top-down, bottom- information, what they need to look for, why they need to investigate it, up approach ... It must be both and how they need
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