Connecting the enterprise - Digital Transformation Technology report

Manufacturing & Logistics IT spoke to a number of experts from the vendor and analyst communities about current and possible future trends and areas of development within the world of Digital Transformation – including those concerning Artificial Intelligence, Analytics, Robotics, Cloud and Edge Computing.

Developments concerning concepts such as Industry 4.0, the Industrial Internet of Things (IIoT), Machine Learning, Smart Factory, Artificial Intelligence (AI), Blockchain, Big Data etc. are all making headway. Moreover, Karthik Sundaram, program manager – industrial, Frost & Sullivan, observes that digital talk has moved forward from larger visions like Industrie 4.0, IIoT, etc. to more contextual interpretations. “We see a marked movement towards evolving visions for each industry,” he says. “Terms like Aerospace 4.0, F&B 4.0, and Pharma 4.0 are quite commonplace.

This is a positive development, one that was much needed, since the larger agnostic paradigms (like Industrie 4.0) had served their chief purpose of bringing the need for innovation into the mind space of end-customers. At the same time, digital strategy is increasingly gaining more traction in company board rooms. Designing digital strategies around products, services, production is fast gaining shape and customers are not anymore discussing about whether or not digital, but rather asking more pertinent questions on value derived and ROI.”

Mark Hughes, regional vice president UK & Ireland, Epicor Software, reflects that we hear many terms used within the context of Digital Transformation; the Industrial Internet of Things (IIoT) (which is essentially a method of collecting data) and machine learning being just a couple of examples. “However, the key thing to remember is that digitalisation is essentially about enabling the connected enterprise,” he explains. “It’s about having the ability to collect pieces of data that are pertinent, relevant and useful in order to do help a business operate more efficiently, with minimal manual intervention. So, it's about understanding what really adds value to the decision-making process within a business and be able to collect and use that information in a timely way.”

Arno Ham, chief product officer, Sana Commerce, makes the point that while manufacturers are employing new technologies to meet increasing competition, the impact this is having on the supply chain is much broader. “Not only are businesses interacting with customers in different ways, but the way that manufacturers are doing business with wholesalers and distributers is changing too,” he says. “Digital transformation, namely the adoption of ecommerce technology, is shaking up the traditional supply chain as manufacturers take advantage of the opportunity to open a web store and sell directly to the end customer. This is driving mass consolidation of business as traditional partners now compete against each other to stay afloat in the ever-competitive market landscape.”

James Hendrickson, director of product and offering management, Honeywell, sees a progression beyond Industry 4.0 to what he refers to as Industry 5.0. “Industry 4.0 focused on the Internet of Things (IoT) and interconnectedness of systems, but the real value comes from putting the worker at the integral centre of those interconnected systems,” he says. “Digital transformation will continue throughout the value chain with things like robotics, artificial intelligence (AI), machine learning (ML), augmented reality (AR) and other major trends, but those trends can now incorporate the worker in the centre of those systems. Viewing the world through a worker-centric lens means we create and deploy technologies very differently. By keeping the worker at the centre of the conversation, Industry 5.0 enables strong collaboration between humans and robots and other systems. This provides the foundation for the rise of the worker-centric value chain and ultimately a happier, more productive workforce.”

Hendrickson explains that Honeywell’s view of Industry 5.0 means that there are significant advances in robotics – not just in the robotics, but in building robots that empower the human workers in the value chain. “It’s easy to look at the technologies alone without considering the workers,” he says. He adds that the major technologies on the horizon that Honeywell is looking at are more robotics and more automation, “but these systems will be deployed differently at a smaller scale and with more flexibility in the approach”, he points out. “We see voice systems as key to integrating with tech throughout the value chain to control robots, to check on the status of shipments, or to direct workers through tasks. This directed work concept allows organizations to firmly establish standard operating procedures (SOPs) for best in class performance but to execute it at scale. We also see voice systems and the voice user experience as foundational to things like assisted or augmented reality. Those AR systems really only reach their potential when deployed with a robust voice user interface. Once AR systems reach broader adoption you will see more diverse user interfaces using voice or screens or sensors to provide the right data, at the right time, to solve the right business problem.”

Definition

Michael Dominy, vice president, supply chain research, Gartner, explains that, with regard to transformation and optimisation, Gartner has specific definitions for these terms. “Transformation is where the business model is fundamentally changing, while optimisation is more about how to apply digital technologies through a company’s existing business model. “The mast majority of digital activity is around applying digital technologies within the existing business model,” he says. “Companies are using digital mainly to drive down costs, change the customer experience and so on.” Dominy adds that firms utlising digital technology are using it in two main ways. “In some instances they are using digital capabilities to disrupt other markets or other industries,” he says. “They're leveraging digital and then going into other markets.

A classic example is Amazon. Other companies are using digital to disrupt the way they run their business, using innovative capabilities to change the way their operations are run in order to, for example, change how the customer experience is being delivered. But in terms of operations around manufacturing and logistics another big area is around the Internet of Things; applying IoT within the manufacturing environment to drive down costs, drive efficiency, improve that connection between IoT plus advanced analytics to give companies greater insights into what's happening operationally through access to more granular data.” In warehouses and DCs, Dominy observes that there is growing use of intelligent robotics such as self-guided vehicles with intelligence built in to improve flexibility and reduce labour and cost.

Eric Klein, director, enterprise mobility & connected devices, VDC Research, observes that the capabilities of solutions that are able to realise Digital Transformation have improved immensely over the past few years. He believes this is due to a variety of factors. “It’s largely due to the fact that many of the leading solutions vendors are really furthering their roadmaps and engineering new and innovative technologies and bundling together well-established IT elements to make new and better integrated solutions,” he says. “For example, the leading ERP vendors have done really good work moving to the cloud and helping to move their customers to the cloud where it’s most appropriate. Many of these vendors have made acquisitions along the way in order to get there technologically, but they’ve done it successfully, investing in things such as analytics platforms and sophisticated automation. So, they've really taken their software to the next level.”

Where to start

Bryan Ball, VP & group director – global supply management practices, Aberdeen Group, makes the point that Digital Transformation has become an often-used term, but asks whether people really know what it means in the real world. “One of the most fundamental ways to transform digitally would be to get to a position where you are able to eliminate paper from your operations,” he points out. “However, when companies talk about becoming digitally transformed at a higher level they really need to ask the question ‘where do we start?” There are some companies who are actively involved in enterprise-wide Digital Transformation projects and doing well, but I think most need to break it down into pieces and attack it that way.

There may be a few that think they can adopt more of an umbrella-type approach with digitalisation within the context of, say, a five-year plan, but that’s a very broad strategy that will involve a considerable budget. So, I think most companies probably should think more about where the best place to start would be for their business. A good place to start would be to focus on what give the company its competitive edge; whether it’s the product, the service, the delivery model and so on. It comapnies start making sure their competitive edge as optimised and digitally transformed as it can possibly be then they can work their way up the transformative chain from there.”

Chris Devault, head of software selection, Panorama Consulting Solutions, considers that while Digital Transformation is currently a commonly used phrase, many companies remain largely uneducated as to what it really means. “We often talk about the difference between digital transformation and digital optimisation, and among our clients looking to improve processes or source new ERP systems around 80% are really focused on digital optimisation and are using these types of toolsets to get there,” he says. “Also, around 20% are looking to add new revenue streams through technology.

A few years ago, vendor portals and EDI was very prevalent, but companies are now taking things to the next step where it’s not just a case of transferring information but being able to actually suggest the information that should be transferred in order to help workflow automation.” Additionally, Devault explains that vendors are starting to implement more artificial intelligence and many of Panorama’s clients are starting to understand more of what it is and what it means for them. “Integrating machine learning and having automated processes within the system using workflow technology – that's a combination that we're seeing more of,” he points out.

ROI-driven

Jean-Pierre Petit, director of digital manufacturing, Capgemini, observes that an increasing amount of digital transformation within the manufacturing space is value or ROI-driven, with companies needing to deliver value within 12 to 18 months. “Many companies can’t enter into three-year projects without delivering value very quickly - that's one of the first characteristics of manufacturing transformation at large,” he says. Petit adds that over the past few years many initiatives in various industries around the world have been limited in scope and the big issue that many Capgemini customers are facing concerns upscale deployment. “Within the context of upscale deployment, many companies are facing two main issues. The first is IT-OT conversions at large, meaning things such as data readiness, cyber security and digital platform deployment of IoT, AI, remote and mobile apps,” he explains.

Another motivator for digitalisation is capability, states Petit. “This is because as soon as you are entering into the digital world you have to move from a management by experience into a real data driven way of working which is not always that obvious. So, that could also mean that in order to move forward, companies need to have in-house capabilities; people with hybrid capabilities – such as: engineering-manufacturing, manufacturing-maintenance, safety-security as well as soft skills in addition to digital ones. So, in order to move upscale deployment forward, these companies need to solve this IT-OT convergence and data driven culture issue in order to succeed.”

Glenn Graney, advanced technologies lead, QAD, has the opportunity to visit with a significant number of manufacturers and considers that there is still a fair amount of unevenness and uneasiness around Industry 4.0. “It is surprising that many at the execution planning level and at the plant level are still unaware or indifferent to the term,” he says. “Others in the strategic IT community have either been burned by non-sustainable pilots or have become bored waiting for the technology to sweep in and change their world. I have even met senior manufacturing individuals who will hand me a business card with a title like ‘Director – Industry 4.0’ that has been crossed out with a pen. That title has been replaced with some new title like ‘Manager, Manufacturing Systems’ that often has a clearer purpose. Unfortunately, some of the perception of Industry 4.0 has been at best underwhelming in terms of real documented benefits.”

Graney believes it may be the term itself that contributes to the perception problem. “Specifically, the ‘point 0’ in Industry 4.0 is problematic,” he says. “The modern vernacular is inundated with a version mentality that defines everything in very exacting terms that contrast a new version with a previous version. The current version of my smartphone is 13.1.2 and implies some distinction or incremental improvement from 13.1.1. I am certain that there is some very precise record of exactly what constitutes the current version. It is not clear to me what that distinction is but I have confidence that someone out there could send me a very precise and lengthy comparison spreadsheet.”

Redefining the fourth great industrial revolution

In Graney’s view, it can be detrimental to think of the fourth industrial revolution in terms of exacting versions. “The term Industry 4.0 is supposed to represent the fourth great industrial revolution,” he says. “This revolution is really concerned with an age of experimentation with emerging technologies, reconsideration of past approaches and iterative advancement of processes and techniques. History does not look back at the previous three industrial revolutions as pinpoints in time but as decades-long periods of significant progress. Is there really anyone who could identify the release date of the steam engine that is associated with Industry 1.0?  History has shown that even then there were competing technologies and, in some cases, massive failure for some of the ideas that were intended to move everything forward. But by the end of the era there was a truly revolutionary change that defied any specific version ID.”

Graney adds that when we use the phraseology of exactness it can set inappropriate expectations. “Industry is in the midst of an exciting time but without a helpful map locator that says ‘you are her’,” he remarks. “The precision nomenclature too often brings with it the need for exacting solutions. ‘Industry 4-ish’ more accurately defines the state of activity and the progress being made. Industry 4-ish includes the concept of connecting people, devices and their associated rich data sets to increase understanding and impact business outcomes.”

Successfully implementing Industry 4.0-ish concepts in manufacturing

Graney maintains that the possibilities around Industry 4-ish are unbelievably compelling. “There are real projects being implemented using advanced technologies, such as IoT, DataLakes, Digital Twins and machine learning analytics to move the art of manufacturing forward,” he explains. “I have yet to meet one of these project pioneers that claim that their selected technology stack is perfect or that their progress completely aligns with their expected results. Industry 4-ish progress to date is lumpy and will in nearly every case require some iterations. Unfortunately the legacy IT pressures of only having one chance to choose the technology combined with the pressure of launches and releases often runs counter to the revolutionary aspects of our time.”

Identifying automation opportunities to solve business problems

In Graney’s view, it is also imperative that these efforts be centered around a business problem that can benefit from technology. “Starting with technology in search of a business case puts the emphasis on possibility and not capability,” he says. “This is almost always a formula for disappointment with technology because of an unclear final benefit. Many of the early efforts revolve around the automation of some existing function or process. It could be the evaluation of volumes of data that couldn’t be evaluated with previous approaches. I think these Industry 4-ish efforts lay the necessary foundation for the real revolution that will come from applying the same energy and techniques to solutions that have never been previously considered. Real process change and disruptive business model changes will ultimately be the reward for these pioneers.

“QAD has established QAD Labs in an effort to collaborate with our customers during these revolutionary times. Projects are underway around applying IoT, machine learning, RPA, Digital Twins, automation solutions and other technologies that have great promise for manufacturers. It is essential that these efforts are founded on rapid and agile premises. As partners with our customers we want to experiment, fail fast and pivot to improved approaches. Ultimately the results of these efforts will make their way back into standard QAD offerings that will provide benefits to our larger manufacturing customer base. QAD is confident that history will show that Industry 4-ish was a time of great change and positive benefits for both QAD and our manufacturer customers.”

Drivers for change

What have been the key drivers for the change? Ham observes that while organisations principally invest in new technology to evolve and expand their business empires and drive sales strategies, the adoption of technology to reach new markets has seen a rise in competition from unlikely sources. “Access to better technologies and comprehensive ecommerce solutions have paved the way for manufacturers to sell directly to the end customer so they no longer have to lose out on incremental revenue at other stages of the supply chain,” he says. “However, digital transformation isn’t just being driven by increased competition between traditional partners but changing customer demand and a need to deliver an improved buying experience through personalisation.”

Hendrickson believes the upstreaming of technologies from the consumer space to the industrial space has accelerated a lot of this transformation. “The technologies have stabilised and standardised especially in mobile with the rise of industrial grade Android,” he says. “Android in industry creates a platform or a blank canvas on which vendors can paint from a full palette of colours to solve business problems. This palette of colours and brushes means that more innovation can occur more quickly, and that innovation can come from more diverse sources because the barrier of entry is lowered.

All the technologies now need to evolve and grow around the worker in these environments. In fact, workers often drive these environments by pull technologies from their personal lives. Organisations also need to be more aware of the power that their workers bring to their businesses and use those workers to extend their businesses. It is even more important to empower your workers with unemployment so low in much of the world. The cost of training and hiring a new worker grows when the available workforce is already employed.”

In Hughes’ view, drivers for change don’t always revolve primarily around money. “I think the key driver is the desire or need for greater efficiency,” he says. “We are living in difficult times and when I talk with manufacturers one of the biggest challenges they cite is the skills shortage. I think the skills issue has come about for two main reasons; first, manufacturing is not always seen as a particularly glamorous industry and finding people with the right skills, together with the ageing workforce problem, can be a major burden. Many companies need to find more efficient ways of operating because they don’t have the required human capital any more to do things the way they have historically. Also, finding lower cost labour from outside the UK is becoming increasingly difficult. Most manufacturers I speak with tell me they are struggling to find this type of resource and therefore need to find ways of doing things.”

According to Hughes, another big driver for change is the media. “Some of our customers say what they read in the press concerning concepts around Digital Transformation is making them think more about it,” he says. “Even though many of these companies may consider themselves to be good at what they do and don't have particular problems they still feel they should start thinking about digitalisation more.

Of course, this is really relevant for Epicor because companies need a backbone around which all this type of technology can operate. Indeed, a state-of-the-art ERP system can facilitate a host of activities; everything from bills of materials, purchase orders, shop floor activity through to things such as accounts and scheduling maintenance intervals. All these transactions are typically created by the ERP system. So, when companies roll out a modern ERP system they are actually taking a big step towards Digital Transformation because it gives you the ideal platform for all those related business processes.”

Real deployment

To what extent are end users or prospective end users in deploying or looking to deploy this type of technology in the real world? Arno Ham reflects that while advanced technologies such as voice search, AR, VR, AI and machine learning all appear among the projected tech trends for 2020, many B2B organisations are still a long way off being able to implement them effectively. “In fact, the research we conducted of over 550 global B2B organisations found that many are still focusing on getting the basics right; almost half of the organisations we surveyed admitted their main objective for their ecommerce solution is to drive sales, rather than to enhance their sales proposition,” he says. “While some organisations have successfully implemented advanced technology into systems and processes, our research highlighted that many are still in the planning stages; just under one third of respondents said they had already implemented fully automated or predictive ordering using the IoT or M2M, while 41% said they were intending to in future.”

Hughes makes the point that the level of adoption in the UK is lower than in many other places in the world. He believes this is for two main reasons. “Much of the manufacturing done in the UK is low-volume, high-value in nature; for example, bespoke, discrete, prototyping, design-based,” he says. “This type of work is often highly sophisticated where direct human interaction is still very relevant. So, in this type of scenario, Digital Transformation becomes less relevant because it's much more about that ability to design and create quality one-offs in many instances. It's when you get into the more mainstream mass production type of manufacturing that a lot of the shopfloor-type technology really comes into its own. Maybe things will change post-Brexit, but currently there aren't many factories in the UK that create thousands or millions of widgets because it's simply not an economical place to do that.”

In instances where Digital Transformation is more relevant, Hughes makes the point that many SMEs are actually ahead of the curve compared with some of the more enterprise-level organisations. “Many of the larger companies have digital strategy teams and have extensive plans to move into robotics etc. However, these projects are often quite long-term and quite high investment. Some SMEs on the other hand are seizing the opportunities around Digital Transformation in a very speedy way, enjoying a shorter time to value. With regard to the large enterprise companies making the larger investments in this type of technology, they need to build a business case, look at the ROI in considerable detail and then get buy-in from management and investors. So, this can naturally take quite a long time to come to fruition.”

Ceremony

Sundaram believes SMEs (or the Mittelstand as they are known in Germany) are at a crossroads. “Most SMEs, especially mid-caps, are clear that they need a Digital Strategy in place and have created in-house Digital team that can oversee Digital Strategy formulation,” he says. “However, in our discussions with many of these teams, it has become clear that these are largely ceremonial teams that cannot exercise a veto internally. We believe this would change in the next 2- to 3 years as many SMEs are likely to see a heavy upsurge in competition and a huge decline in their profit margins. Premium companies in discrete industries (like Automotive, O&G) have developed a number of use-cases on topics like AI, Digital Twin, Cloud Platforms, Edge analytics, Autonomous Systems, etc. These are still not scaled up to meet a large volume, but that I believe is a mere question of time.”

Hendrickson sees a faster democratisation of technology between the enterprise businesses and SME companies. “The technologies like warehouse management systems (WMS) and enterprise resource planning software that were only available to large customers are bring their best in class capability to smaller customers,” he says. “They often do this with less customisable solutions which forces best practices across the value chain. This allows SME companies to achieve a level of parity with the enterprise companies that was previously unheard of.” Hendrickson also sees a stronger innovation to production loop than in the past. “Firms are investing in innovation teams and projects – not as standalone functions considering the misty future, but teams that are closely aligned with the business itself.

This allows for faster innovation cycles and a higher risk tolerance to bring technologies into their environments. AR and robotics as examples are leapfrog technologies that replace other technologies in a nimbler, more scalable way that benefits smaller firms. Enterprise firms have already implemented automation if they were going to (or in the process of it) but robotics levels the field a bit for the SME. An SME firm can deploy robotics in a much more nuanced and specific way without a large capital investment and then scale it with more elasticity as their business needs ebb and flow.”

Getting on the same page

Klein sees deployment taking place, but believes it is largely about getting IT personnel and business personnel on the same page in terms of goals and priorities. He adds that organisational and process changes have to be implemented to get the technology up and running, and in this regard user buy-in is needed, along with management buy-in. “You need champions to evangelise these types of changes, and if this isn’t achieved this can hold companies back,” he says. “There are many choices and different things to evaluate, including available pricing and licensing models and so on. Nevertheless, I think companies are doing meaningful things around Digital Transformation, particularly in manufacturing.”

Petit makes the point that technology concerning digital transformation is becoming more familiar to manufacturers and more widely deployed even with scope for improvements. “PLM, MES, SCADA and certain types of robotics can be considered to be mature and widely used,” he says. “However, there are technologies that have more recently been brought to market – around AI, machine learning, IoT, analytics and remote apps and so on – this type of technology will be increasingly invested in and deployed over the coming years. We will also see a more consistent and standardised way of using this technology in the cloud and at the edge.”

Another area of technology that Petit believes will be increasingly deployed is remote and mobile. “Many industrial companies are losing valuable knowledge with people leaving the company and so they need at the same time to monitor operations remotely and ‘augment’ their workers in mobility ; sharing experiences from one factory to another about the same process, for example,” he explains, “or ‘equip’ operators with mobile apps and leverage remote access platforms to allow them to share what is happening and what to do on a production line – sharing videos, 3-D models or work-instructions, for example, on a real-time basis – with remote experts.” Petit also sees an acceleration in the use of intelligent automation and robotics.

Remaining barriers to adoption

Are there any notable remaining barriers to adoption of these types of technology? Devault believes the biggest barrier to greater adoption is companies not fully understanding what outsourced IT can do for their business. “I believe this is one of the biggest disconnects in the world of Digital Transformation,” he says. Sundaram maintains that data harmonisation in brownfield installations is the weakest link in the chain when it comes to end-to-end digitalisation. “As an analyst, I have tried to bring this issue to the fore in my discussions with some of the leading vendors in the space,” he says. “But the issue is still the proverbial ‘elephant in the room’ that no one wants to talk about. It is up to leading industry suppliers to find a solution. My belief is that many suppliers today want to focus on creating digital greenfield installations than take the trouble of converting legacy assets in old plants. If this continues, some of the leading industrial economies of today are likely to lose out their advantage to newer ones, especially in Asia.”

Hughes explains that many of his SME customers tell him their single biggest constraint is time. “Pretty much all of them are running very lean businesses with low staff levels,” he says. “So, like any operation that’s more pre-active than reactive it requires time for them to really sit down and think and plan for things such as Digital Transformation. This can be done, but it’s often not a major priority. However, because of the technology’s increasing user-friendliness and lower cost point, it will certainly become a focus for more companies over the next year or two. So, many of the barriers to adoption are disappearing. However, I believe the first wave of Digital Transformation has got to be ERP because companies need that backbone in place in order for everything else to work effectively, whether in terms of more straightforward transactional data or more high-end AI and analytics functionality that can really bring digitalisation to life.”

Ham comments that while ecommerce and automation are hardly new trends their adoption is slower than one might think. “During our research, we asked which features respondents were looking to introduce to improve the customer experience, and simple order and payment functionality and easier navigation topped the list,” he explains. “In contrast, features synonymous with ecommerce 3.0, such as data insights into buying history, personalised customer management and customisable products, came last. So, with so many online sellers seemingly still focusing on getting the basics right, the adoption of advanced new technology may be too great a leap. To aid adoption in these areas, it’s important for vendor communities to offer detailed analytics and data insights.

Forward-thinking businesses looking to implement advanced new technology need to ensure that it will enhance their business; establishing whether there is particular customer demand for it or a significant productivity benefit to be realised. Businesses need to make sure they’re implementing new technologies strategically and using them to their full potential. Otherwise, they risk blindly implementing new features in a bid to advance their digital transformation, but waste crucial time and investment. Data insights and analytics are crucial here and can help businesses establish key trends and benchmark performance to measure the impact of new technology against. Integrating your key business systems and engaging with data insights is the vital steppingstone to a successful digital transformation.”

Hendrickson maintains that change remains hard for many companies and believes workers in these environments need to be brought along on the journey from the beginning. “Not only are they the closest to the problem and can provide valuable insights into the design and deployment, they can also be the projects biggest advocates or their biggest problem,” he says. “Designing a careful change management process is key to any innovation team so that the change and innovation become part of the organisational muscle memory. There are still barriers around inter-connecting systems that are hard for organisations to overcome. Because of this it is important to partner with a vendor that can grow with you and has the flexibility to scale and to integrate to your other systems. As a customer, you must demand flexibility and open systems from your vendors so that you are future proofing your decisions.”

Petit believes there are two main barriers to greater adoption. The first is the need to invest in industrial architecture platforms that are very scalable, and the second is the need to put in place a more value-driven approach, “This is because you cannot deliver digital transformation like we delivered ERP transformation a few years ago,” he says. “You need to deliver value month after month, year after year. In order to achieve this, you need to be able to combine smart business and technology skills in order to improve upscale deployment.”

Reliability

Dominy points out that Gartner ran its ‘The Impact of Digital Business on Supply Chain Strategy and Operations’ survey for a third time and asked a specific question around remaining barriers. “What showed at the top of the list was the reliability of these newer digital technologies in particular to support scale,” he explains. “That response is shows some of the barriers companies face as they move from exploring and piloting these newer technologies for broader adoption. So, the reliability of the newer technologies will be one of those barriers from a technology perspective.” Another barrier highlighted by Dominy relates to transformation regardless of whether it is digitally enabled or driven or not – namely, that around process and people change, and specifically around things such as metrics and how people can be measured and incentivised.

Ball considers that some of the barriers to adoption relate to where a company should begin. “There’s a strong argument for focusing first and foremost on what you do best as a business when you begin the digital journey,” he says. “It’s important to think about the criteria to help figure out where to begin. What’s your ‘crown jewels’ as a business – is it your product, is it your service and so on? This is probably the best place to start, and then make sure you’ve gone to the nth degree to optimise your USP aspects of your business. Then, you can develop things from there.”

Klein makes the point that different companies have different priorities and different levels of interest and commitment to digital technology. “But it ultimately comes down to ensuring that you’re servicing your customers well and taking advantage of the opportunity of digital technologies in terms of meeting your customer expectations through better engagement,” he says."

The cloud

How important is cloud/SaaS with regard to the adoption of Digital Transformation-related technologies? Sundaram’s view is that cloud/SaaS is at the heart of digital transformation. “This should and will be the end goal,” he says. “But the industry is not ready yet, as there are challenges both in terms of perception and technology infrastructure. In this regard, at least in the short term (2 to 3 years) the on-premise model would be more suitable. The obvious advantages include data security, greater operational control and higher process safety. But on-premise models involve a high CAPEX, making it untenable for large scale adoption.

This would be the biggest disadvantage for the larger industry. I believe that once the idea of using cloud platforms and deriving value out of it becomes common place, the shift towards SaaS models will become spontaneous for SMEs. It is akin to the reticence many of us had when it came to using Internet banking 10 to 12 years ago. But once that initial reticence wore down and the value became evident, the push toward mobile banking witnessed a major upsurge and in course becoming the new normal. A similar path is what I envision for cloud/SaaS in manufacturing.”

Hughes points out that Epicor’s strapline is ‘the cloud vendor of choice in the markets we serve’. “To me, the key word here is choice because when I talk to any of our more service-based businesses, cloud is without doubt their preferred strategy,” he says. “I think this is for two main reasons. From an ownership perspective, with the Software as a Service (SaaS) model, service-based companies can rent it and use the software to great effect because that's the world that they are living in; they operate in a virtual-type environment and this software also operates in a similar way.”

However, Hughes adds that for a lot of our manufacturing companies they've got big pieces of kit and their world is much more physical than it is virtual. “So, I think it’s almost unnecessary for them to put all their software out into the cloud because the main activity is happening on the physical shop floor – the requirement to be virtual is less,” he says. “Think of applications such as Microsoft Word and CRM; cloud is perfect for those types of applications. However, many manufacturers need applications that are perfectly customised and configured to their specific requirements. Their manufacturing process is their uniqueness and that requires configuration and tailoring of systems to match what they want them to do. Therefore, their USP is in the ownership of that integration. It can be done in the cloud but it's not so easy to do in the public cloud because you're operating in a common environment. So, an on-premise tailored solution may be the better option.”

Ham believes SaaS is largely advantageous for manufacturers, wholesalers and retailers, helping them stay ahead of new developments in the fast-moving online sales market and future-proof their long-term digital strategies. “Opting for a SaaS or cloud-based ecommerce solution means that they can benefit from automatic, continuous updates to their chosen platform and eliminate the need for large scale upgrades,” he says. “The flexibility of SaaS can be hugely beneficial to manufacturers on their digital transformation journey, as it means users have access to new features, performance upgrades and security updates as and when they’re released, rather than having to go through time-consuming and onerous manual upgrades.”

Unique values

Hendrickson maintains that having more purchasing and deployment options are always major enablers for businesses and cloud/SaaS are no exception. “Cloud and SaaS are often included together, and they are very separate things with unique values to each,” he says. “Our customers are most excited about more options to purchase and engage with a vendor that comes with SaaS. This allows them a great level of stability from a budget perspective as well as the ability to stay on the leading edge of technologies. It’s not often that you find something that makes IT and Finance teams happy, but SaaS is something that gets close to that.”

Klein considers that once organisations are willing to trust their data in the cloud, trust their vendor and essentially change the way they do business and how they access and store data, then this type of big leap of faith can reap major dividends. “There’s no question that most companies are moving in that direction and they are being helped along by the ERP vendors. “Cloud can make a big difference on the administration, management and maintenance side of things,” he says. “And on the cost side, it can be more efficient than having to administer and maintain the solutions on premise.”

Petit believes that for various reasons – such as those concerning sourcing, ecosystem management and continuous need for change – we will see more and more customers preferring to have hybrid -public and private- cloud infrastructure, to be able to distribute and change when required data and processes with respect to use cases, as well as security and performance requirements. At the same time, some applications will stay or will migrate back on traditional data centre, on premise infrastructure.

Dominy observes a strong move of applications across the supply chain to the cloud. However, he still sees differing degrees of adoption. “The more transactional or operational systems were quite late in shifting to the cloud/SaaS model – WMS and then MES, for example,” he explains. “And from what we see there's still less adoption in particular around manufacturing technology. It tends to be more around reporting or analytics. And levels of adoption can vary by manufacturing type. In the case of heavy process type manufacturing moving everything to the cloud doesn't make sense in many instances because a lot of the data needs to be at a more local level.”

Devault reflects that it’s interesting to see how well Salesforce and NetSuite have performed; examples of solutions truly built in the SaaS model. “I think the marketplace is finally catching up to them,” he says. “Those types of companies are thriving and through acquisition and resource changes they will continue to grow. More and more ERP vendors, for example, are realising the benefits of these resources that have been out there for some time. All the main vendors are fully on board, building up that true multi-tenant SaaS model.”

Ball discusses the concept of Platform as a Service. He makes the point that in the past ERP has often been thought of as a something that contains just about everything. However, because of the increased move to the Cloud, he believes it’s going to become more a case of platforms connecting with other platforms in a very horizontal fashion as opposed to ERP having all or most of the pieces contained within it. He also believes that with the growth of this integrated platform-to-platform model, the partner network will become increasingly important. “So, we’re moving to this horizonal platform-to-platform model versus the older approach of having all or most of the architecture under one roof,” he said. Ball adds that the platform could include much of the technology cited as helping to realise Digital Transformation – AI, machine learning, IoT etc. so that any application that runs on that platform can make use of those things in terms of the native architecture.

Edge computing

Hughes makes the point that edge computing is being talked about a lot now, especially within the context of analytics and more time-critical applications. “Edge is essentially about taking large amounts of data and processing it as close as you can at the point of collection, but not necessarily as far as that point,” he explains. “Rather than sending the data miles away to process, it's about finding processing power that's as close to the edge as possible. So, in the case of the more time-critical applications, making use of available processing power as close to the edge as possible can be a great time saver.”

What to watch

What might be the next key developments and innovations to look out for over the next year or two within the world of Digital Transformation? Ham considers that among the numerous trends and innovations being rumoured to make an impact in 2020 and beyond, the ecommerce roadmap is set to see predictive analytics get even smarter, with product catalogues or even entire websites being generated for a specific user based on their behaviour and order history. “Some sophisticated models may even tailor navigation to a specific user based on how they need to move around the website,” he says. “Not only will this optimise the user experience, but it’s also likely to be a favourable development for time-poor B2B buyers that need to procure goods quickly and effectively. While other more advanced technologies are enhancing B2C shopping experiences, we’re also expecting to see technologies such as AR and VR emerge more frequently in B2B. This is most likely to be the case in bespoke product design or intricate, detailed product needs, such as spare parts.”

Sundaram believes the general industry approach to Digital Transformation is parochial. “We are trying to use Digital to solve problems of yesterday,” he says. “While it sure can, the potential of Digital is manifold. Each organisation must also evaluate on how digital can disrupt their overall market – especially when it comes to business model innovations (like Uber in Automotive or BlueApron in F&B) and customer experience management. These 2 would be the digital innovation frontiers for the future.”

Hendrickson believes the trends that have been happening in the supply chain will continue to extend and accelerate across the value chain. “You will see much of the retail and distribution centre best practices become pervasive in manufacturing and transportation,” he says. “These trends will be driven by the technology as well as by customer demand for faster, more accurate and more sustainable deliveries but they will also lead to a need for a better view of an organisation’s value chain. A single pane of glass view into your wholistic value chain to be able to seamlessly identify and address issues before they happen will drive the innovations over the next few years. This single pane of glass view builds on the technology that is already there but allows the organisation a better glimpse of the future every single day.”

Ball believes speed is going to drive our behaviour everywhere – at the scheduling level, application level and procurement level. “For example, speed continues to drive consumer behavour – ‘I want it, I'm going to order it on my cellphone from Amazon and I want it delivered same day’,” he says. “So, from a technology perspective, people don't have time to access, say, the analytics package, take it offline, massage the information then in a couple of days have the information you want telling you what you should do. You need the information right away. In fact, working with people on enterprise performance management (EPM) – they are saying they want their EPM solution to cross any ERP system or any other operating system they have so they can pull in all the data, synthesise that and create very timely information at the financial level so they can, for example, see their profitability in near real-time so that making decisions becomes easier and much quicker.”

Dominy makes the point that IoT has been a top priority for a few years and he believes this is largely because the technology is safer to apply to companies’ existing facilities and locations. He adds that another top priority was Big Data, but he has seen this move down the list a bit to a certain extent. “In terms of this question around edge computing and intelligence at the edge, it’s not now so much about moving or taking all this data into a data lake and analysing it. As one CIO of a large consumer products company described it, Big Integration is where things will go. So, we will move more from Big Data to Big Integration.”

Devault reflects that two or three years ago many companies were focusing on standardisation, but he notes that more and more companies now realise they need to be able to change and adapt very quickly – and technology is an enabler of that. “So, the question is how can they make their organisational processes simpler and then have that parallelled with technology. I see more complex organisations adopting practices to make them simpler and in some instances outsourcing some of what makes them complex to experts such as 3PLs.”

Petit believes efficiency by design will become increasingly important. “When we speak with customers, we clearly see that in years to come efficiency by design and operational excellence will equally contribute to performance improvements,” he says. “Efficiency by design could also be referred to as the digital twin; it's essentially being able to design and simulate your products, your processes and your industrial ecosystem, meaning you not only need the tools to be able to design and simulate but also to have loopbacks from operations in order to improve the design of the future generation of your products or factory or production line.”

Klein considers that the ‘elephant in the room’ is how progressive or how quick companies will be in terms of moving towards wearables. “I think that's there the next frontier on the device side,” he says. Klein also anticipated further uptake of IoT and embedded technology within the context of the smart factory. “That means instrumenting all this equipment and getting it online essentially, being able to do more preventive maintenance and things of that nature,” he says. However, he believes the more progressive developments will be around companies continuing to develop technologies for us to work alongside robotics, making this type of technology complementary to the workflow.

Mark Hughes: The technology around AI, analytics, machine learning, robotics etc, are all becoming increasingly refined and will continue to be so. In terms of future levels of adoption, it’s going to come from the fact that the physical devices needed to do a lot of this stuff, including robotics, is becoming much more widely available, much more flexible, earlier to use and available at a much lower cost. These real benefits will be major motivators for companies to look more seriously at Digital Transformation going forwards.

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