Digital transformation and digital continuity: how can manufacturers embrace change with confidence?

The current landscape

We’ve seen more and more manufacturing businesses realise the need to integrate digital operations into their processes. This need for ‘smart’ systems is part of a drive to remain globally competitive in a rapidly changing landscape. The use of Internet of Things (IoT) enabled technology, AI and machine learning can speed up the manufacturing process, get products onto the market faster and drive client satisfaction. By 2025, it’s estimated that the IoT will be worth $1.6 trillion¹, more than 350 manufacturers across the entire spectrum of the UK manufacturing industry were surveyed for the Annual Manufacturing Report 2020² and it was found that 81% said of respondents said digital technologies will enable all manufacturers to open up new markets and find new customers. Far from the popular myth that “robots will steal our jobs”, 89% of manufacturers said the replacement of many shop floor jobs by automation means new recruits need to be even more highly skilled to operate our digital future, while pledging to retrain and upskill their existing workforces. When deciding to introduce new technologies you should speak to your insurance broker so that they can check you are adequately insured for any liabilities from the beginning. It is easier to proactively prevent issues than try to retroactively solve them.

What makes a factory ‘smart’ anyway?

Smart factories use digital technology to improve efficiency, reduce costs and to design and implement new ways of working to give manufacturing businesses a competitive edge. The biggest benefits of smart methods include improved design and production processes, and streamlining of internal company procedures – better systems relieve administrative burden and allow everyone to focus on where they’re best placed.

Despite the obvious benefits of harnessing new technology one of the main hurdles to embracing new technologies is a considerable lack of information on how to do so – and which technologies are worthwhile investing in.

This is worrying, as being slow to respond can result in manufacturers losing their competitive edge and being left behind as they struggle to enhance their digital products and services while maintaining an affordable rate compared to other countries. So, how can companies begin to capitalise on the benefits that smart factories can offer? A top down approach is the only way to effectively do so, with a clear strategy and strong leadership from management, who will have the understanding required to allow their employees to improve customer service and reach more markets through new technologies. Your insurance broker can help you to implement a digital strategy which works to mitigate the risks that robotics, analytics and AI can introduce to your business.

Creating a capable workforce

Simply introducing AI and robotics technology is no good if you lack employees with the skills needed to utilise these tools. There is currently a skills gap in the UK workforce, with few employees having the broad range of skills needed to harness the technology required to create smart products through hybrid manufacturing techniques. Fortunately, the use of modern technology helps to attract talent to the sector meaning that those willing to invest in connecting their factory will draw the workforce required to maintain it. Connected factories aren’t just able to gather data, self-monitor and issue reports on the production line either, factory workers can also benefit from wearable technology and mobile devices. With these technologies widely available, they offer a straightforward way to maintain a competitive edge.

The supply chain is changing

No longer is the supply chain a straight line from supplier to company to customer. Now the digital supply chain has broken down barriers and allows communication between all parties. Plus modern manufacturing methods such as 3D printing make it easier to customise a product than ever before, allowing you to cater to clients as individuals.

Digital continuity – enabling technology

Digital continuity gives everyone working on a product or design access to the same version of data and models, helping to prevent silos of information and improving teamwork between departments and entire businesses. In turn this allows for more productivity, smarter connected products, the development of new business models, clearer financial visibility and shorter lead times to get a product on to the market. While digital continuity makes manufacturing better for everyone, there are some barriers to its introduction. Some manufacturers struggle to synchronise the different departments during the design and development stage while others fail to log how a product was designed, manufactured and serviced so the information cannot be reused.

When it does work however, digital continuity is an asset to manufacturers. Take Michelin’s ‘Smart Tyre’ for example, which uses RFID technology to monitor the driving experience, road conditions and tyre itself including temperature, pressure and wear. Rolls-Royce is another early adopter of digital continuity technology, using information from sensors fitted inside their jet engines to track engine health, air traffic control and fuel use to help diagnose potential faults before they become a major issue. The engine even does this mid-flight and can carry out proactive maintenance based on the information it receives. This in turn helps Rolls-Royce to reduce the likelihood of severe faults and improve engine efficiency and fuel use.

Cyber is an issue – but one we can help you mitigate

Many manufacturers have admitted that they are unwilling to use the data they receive from products and customers as they fear the significant reputational and financial harm that can be caused if cyber criminals accessed the data. A study by PwC³ found that while 91% of manufacturers were investing in digital technology and 82% of respondents of the Annual Manufacturing Report 2020 say they have a clearly defined, articulated and enacted cybersecurity strategy, however the report suggests manufacturers still have some distance to travel before achieving robust cyber defences in order to completely digitalise their factory.

According to the report, Cyber-Security for Manufacturing, published by EEF, The manufacturers’ organisation, over 48% of manufacturers⁴ having experienced a cyber-attack already and 24% of those targeted experiencing financial loss of some kind. There is a chance these statistics are at the low end of the spectrum too, as some businesses may not have realised that an attack had been attempted or occurred.

Manufacturers need to display digital competence not just by taking advantage of the advanced data, analytics and AI capabilities available to them but also by ensuring they have the correct security controls to address cyber threats. The further companies lean on technology, the bigger their need for a knowledgeable risk manager will be. While the technologies (and therefore risks) are changing all the time, there are key areas which you should build into your risk management programme. The bottom line is new technologies generate new risks, and that’s where your insurance broker comes in. It can be tough to know what needs to change in your business and how to go about it and we can help you with this too. As specialists in manufacturing insurance and risk management, we can support your business to plan and assess the unique risks and liabilities that your business could face as it becomes digitally enhanced. Cyber insurance is one key area of cover, which can help your business to anticipate, respond and recover to a cyber-attack but there are other products which can be useful – Directors’ & Officers insurance and Professional Indemnity for example. We can guide you through the multitude of covers available so that you can face the future with confidence.

To find out more about how insurance and risk management can help you to utilise digital technologies, please get in touch with your local Gallagher representative.

Sources:

1. Statista, https://www.statista.com/statistics/976313/global-iot-market-size/, June 2020
2. The Manufacturer, https://www.themanufacturer.com/articles/annual-manufacturing-report-2020-what-are-manufacturers-saying-about-their-future/, February 2020
3. Manufacturing Global, https://www.manufacturingglobal.com/technology/pwc-digital-factories-shaping-future-manufacturing, March 2020
4. Zenoot, https://zenoot.com/report-shows-50-of-uk-manufacturers-victim-of-cyber-crime/, June 2020