How Manufacturers are Adapting to Industry 4.0 Advancements
Industry 4.0 is a topic commonly discussed within the manufacturing community. Centered on advanced robotics and automation, new ways of human-machine interaction, and vast amounts of data and boosted connectivity, Industry 4.0 is poised to modernize manufacturing and boost industrial competitiveness. The Internet of Things, Robotics, artificial intelligence, and Cloud Computing are major components paving the way to creating a high-tech ecosystem of smart devices that achieve an optimized, efficient workplace.
That being said, often the voice of experience gets lost in the mix of today’s crush of information. SC&H recently held our third event in a series titled “Manufacturing a Smarter Future” in which manufacturers shared their experiences of making changes to their operations, and ultimately people, and products too.
In the following “Now to Next,” podcast Sarah Sedlak, Vice President of Business Development, and Jeff Bathurst, Director of our Technology Advisory practice share their thoughts post-seminar on “Innovation in Action,” and what that means for manufacturers.
Our Speakers
- Sarah Sedlak | Vice President, Business Development
- Jeff Bathurst | Director, Technology Advisory
Transcription
Why We Started This Series
Sarah: Sure. Thanks, Jen. So as you mentioned, this is our third event in the series. And we got started with this trying to help manufacturers think about prioritizing and selecting the investments that they were trying to make in innovative advancements. It can be an overwhelming process to be completely changing operations and taking a scalable approach in these investments and thinking about the long-term strategy and the incremental steps to get there.
That’s really what we’re focused on. And I think the educational and tactical takeaways that we’ve been providing, the speakers who have been down this road before or are walking down it now have been really valuable to the attendees. That’s why we get a lot of repeat attendees. The community that we’ve developed has been really instrumental in the success of the events.
We’ve got a brain trust of people that show up each time and share ideas with each other as well as with the speaker. So I think we’re seeing some real developments in the way people are changing their thinking here, but I think I’d like to get Jeff’s perspective on this, seeing as you’re the technology expert here at SC&H. Why don’t you tell us a little bit about what you heard today? There was a lot of really interesting takeaways, so what stuck out to you?
Our Takeaways From the “Innovation in Action” Seminar
Jeff: With the panel of representatives from Arnold Packaging, Independent Can Company, TIC Gums, and InSource Solutions, it was interesting to see the wide range of technology implementation and advancement and maturity across those four organizations. You know, one of the things that we continue to see and why I think we get repeat customers in terms of attendees, and actually it’s growing, is because, for these types of organizations, technology, they can no longer ignore it.
It was something for many, many years that was not germane to making the widget or the product that they were experts at the manufacturing. But because technology is pervasive and continues to expand into every part of life, they are one of the last industries that are implementing and using it to their advantage.
And frankly, when you’re looking that this type of manufacturing in this part of the country, a lot of them are family-owned businesses who have spent their entire careers working for these organizations, and so there’s a lack of awareness, there’s a lack of knowledge, there’s a lack of experience with technology, and they are in urgent need of some guidance and that’s something that really kind of jumps out at me.
Sarah: I think one of the things, I believe it was Mick from Arnold Packaging mentioned was the fact that manufacturing has been a little bit slower to the table with adopting innovation and the technology, puts the folks that were in this room today at an advantage because they’re not really that far behind. If they can get started now in making some this incremental change, they have put themselves at a tremendous competitive advantage by adopting some of this innovation. And I think the other point to this is it is being forced upon them. If they’re going to stay competitive and compete with this changing labor force, they’ve got to adopt this technology.
The trend towards outsourcing has completely shifted towards insourcing and the technology and the innovation is going to make that possible to attract best talent, to insource operations, to streamline processes. And if they don’t start thinking about this now, they are going to fall behind. But key message, it’s not too late.
Jeff: You know, you make up a good point. The externalities that are influencing and, in fact, forcing these companies to change, the people who they’re hiring, their customers are expected to be engaged in different ways now. They want to be able to get a status on their order through their mobile phone, not have to call and talk to somebody and say, “What’s the status of my order?” “Oh, let me find out and get back to you.” They don’t want that.
Sarah: The concept of customer service has changed.
Jeff: Drastically. And what has driven that is the commercial side of customer service. You know, as Amazon customers, we expect a level of service in our daily lives, and that has transcended into the business world and a lot of manufacturers are not equipped to support that level of expectation. Fair or unfair, that’s what people have become accustomed to as part of daily life when it comes to customer service. And as you’ve said, that’s a great way to put it.
The definition of customers has shifted and these manufacturers, unfortunately, a lot of them don’t have the foundational technology, much less the differentiators, you know, for their particular business to support that. And that’s going to be one of their bigger challenges because, you know, you want to hire people, they’re expecting to have all these technology tools at their disposal that they have every day, that they use every day.
Well, they’re not there, okay, and so they think, you’re right, they can no longer ignore it. Because one of the things I noticed is how advanced some of these products are that these companies make. We’re talking some cutting edge stuff with their products that they deliver, but if you look at their internal technology environments, they are so far behind the advancement of their own products. It’s an interesting story.
The Importance of a Solid Infrastructure Foundation
Sarah: So one of the things that you just mentioned that I want to ask you to talk a little bit more about, because it came up again and again today, was the idea of the foundation. So it’s great to buy the greatest newest widget or a remote sensor or whatever it is that you want to invest in, but unless the foundation, the infrastructure foundation is solid and the processes that you’re trying to automate are solid, you’re just going to be spinning your wheels. There’s no sense in automating a bad process because you’re going to go backwards faster.
Every one of the speakers talked about both of those pieces today. So talk a little bit about putting that foundation in place. What does that look like for these companies? Because I think that’s the scariest thing. The flashy object, that’s fun, that’s easy, but ripping out the foundation and building something new can be intimidating.
Jeff: I don’t want to be stereotypical of a lot of these firms, but in many cases, these are things that their infrastructure has been built over decades, okay, and it ends up with computer systems and servers and applications residing in a closet in their main manufacturing facility. And if you ask them the question, “Well, what happens if that room goes dark or there’s a catastrophic event with the building? Where does that leave you?”
And it gets them thinking about, well, what if you have a cyber-attack or some sort of compromise of your technology? Think about what happens if you were without that for several days. And it puts a different context to the story. And so what we do is we use those questions to drive the point home that, look, you have to create an environment that has drastically different than what you have today because, to your point, you can’t build on a shaky the foundation, right?
You can make all this investment in the greatest application, but if your network doesn’t perform, you’re going to assume the application failed, when in reality, your network was never designed to actually support that because why? It was created 20 years ago and it did everything it was supposed to do for that need, but not for tomorrow’s need.
And so it’s an opportunity for organizations to evaluate how are they connecting their facilities? How are they using it? What do they own? What do they operate? Is it appropriate to get rid of some of those responsibilities? Not because you’re not good at it, it’s just because it’s not mission-critical to what you’re trying to accomplish. And so that’s where you have to go through a process of understanding what is it that’s important to all of the differentiators to your business?
The commodity levels, organizations are streamlining them and moving them to third parties, simply because it’s more cost-efficient, they get better performance, they get better availability. And it’s not a one size fits all, but you’re asking the same set of questions for every organization and the answers will be different, but by a margin, you will see a lot of opportunity to move things to the cloud, to work with partners, and to be able to get significant jumps forward with their technology environment without having to, as they did in the past, build it from scratch.
What Questions You Should Be Asking When Thinking About Technology Transformation
Sarah: So I want to circle back because you said these organizations should all be asking themselves some questions. The answers are going to be different depending on the organization, but I want to talk a little bit about what some of those questions should be. Because I think it was Ann who said today, “Always go into this with the business outcome in mind. This is not investment in technology for technology’s sake.” Again, the shiny object. So for the benefit of our listeners, what are some of those questions they might going to be asking as they’re kicking off this journey or moving down this road that might help them think about what that business objective is?
Jeff: So part of the way we frame this conversation is around risk. What is the risk profile to the organization as it relates to their technology investment? Can they afford for it to be unavailable? Are they aware of the risk that are out there in today’s world that could negatively impact their technology environment?
So you have to ask yourself, where are they willing to take more risks? Where do they need to be conservative? What is it from a business opportunity that they’re trying to capture? So for example, many of these organizations have one or two IT people, okay, and they’ve been working with these organizations for many years. The cost to attract and retain employees in this space or actually in this geographic segment is very, very difficult. Okay?
Because number one, you have the federal government, you have the technology industry itself. You put those together to equal the demand on these resources, trying to attract and retain talent is very difficult. All right. Now you have a manufacturing company, there’s not a lot of growth for them for an IT person, right? It’s a one or two-person shop. They’re there to support the company’s operations. So how do you attract people to come work for you? Well, that is a fundamental problem.
So people, the first question is people. Do I have the right people to get me to move forward? All right, because in many cases, those IT people have not been exposed to different things, to the newest technologies, to the newest services. So number one, do I have the right people? And so if I can’t hire them, where do I partner? Finding that strategic partner is really, really important, not for a particular product or service, but someone who can help you evaluate those things. So that’s number one.
Number two is education. Okay? Is my organization educated about what technology is out there today? Do I know what’s possible? The art of the possible. Do I know? Because in many cases, there’s a lack of awareness about what’s out there today. In many cases, we’re talking to manufacturers who are running 15, 20-year-old ERP solutions. What’s out there today? So education, what do I need to know? Do I have the people to support it?
And then lastly is what is it that I’m trying to accomplish in terms of your business goals, as they pointed out? Am I my looking to expand? Am I looking to diversify? Am I looking to optimize? What are my business goals? Because technology will support any of those things, but they will support them differently. So it’s organization, business goals, and education and knowledge about today’s capabilities.
Sarah: Well, and the idea that technology can support all those different avenues of business goals, all those different pieces, goes back to putting a strong foundation in place. Because if you build a scalable foundation, you can attack sort of one at a time, but you don’t have to change foundation each time you kind of pivot.
The Cultural Impact of Changing Technology
Jeff: Correct. The industry is going to change and the change cycles are happening so much faster these days. I mean, part of what we do as a practice is keeping current on what’s out there. The other thing that organizations… And I want to make sure… This is one of the things that I noted in today’s event, is around the cultural impact of technology change. People and organizations underestimate it. Okay?
Because you’re talking about many of these manufacturers who have people who have been there for their entire careers and they’ve been successful. Some of these manufacturers are hugely successful. And now, all of a sudden, you’re talking about fundamentally shifting the way that they do their job. And there is a level of, I don’t want to say fear because it’s a strong word, but there’s a level of concern within the organization when they see significant technology change because they fear for their job, right? Am I going to be replaced? Or are we going to be doing things differently? Am I going to get…? Are we outsourcing this function?
And I forgot who the one of the panels who mentioned it, but around change management, organizational change management, that, especially for this particular industry, these types of companies, the impact to the culture is significant and it cannot be underestimated. And that’s one thing that needs to be taken into account, whatever level of technology investment is made.
A lot of these are family-owned businesses or generational businesses who take care of their employees and pride themselves on employee retention and they want to take care of these people and their employees. And well, in order to do that, you have to be able to manage this change effectively because in many cases, the change is significant to everyone’s daily roles and responsibilities within the company. And that’s something that appears is not really on many radar screens.
Sarah: Every single one of the panelists said that. The expected turnover seems to be one of the pitfalls that came up. You have to be prepared for people to dig their heels in a little bit. On the other hand, it opens up a lot of exciting doors. One of my favorite comments today was from Mick, where he talked about, “I try really, really hard to hire smart people. And when you hire smart people, they get frustrated when you ask them to do dumb, redundant stuff.” And that’s a good sign because you want those people in there that are looking to automate and innovate and drive better business processes. So it is a hard transition for this industry, but it seems like a necessary one.
The Challenge Leadership is Facing
Jeff: Well, one other point around this is that it’s a challenge to the leadership of these organizations because they have to ask the hard questions. Do I have the right people in the right seats on the bus? And in many cases, they don’t, for whatever reason. Either employees can’t make the change, they don’t want to make the change, they don’t like the way the direction the company is going, for whatever reason. But they have to ask themselves the questions once they make a determination around what level of technology they’re going to implement or whatever it is.
But whatever change you’re managing, you’ve got to ask the question, “Do I have the right people?” Because you can have the perfect technology solution, the perfect use case, the perfect ROI, but if you don’t evaluate the people that are sitting on the bus and being responsible for using it to help you deliver those goals, that’s a big miss if you don’t ask those questions.
And we’re not advocating to get rid of people. No. You just have to ask yourself, “As these roles change, are these people capable of actually adopting that change and embracing it?”
If you are considering making a change in your operations to meet Industry 4.0 standards contact SC&H Group’s Technology Advisory team to learn about building the right foundation for change.