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| Source: Microsoft. The impact that digital transformation will have on the manufacturing sector. |
GDP in the Asia Pacific region could gain US$387 billion by 2021 and grow by extra 1% annually if the region’s manufacturing sector embraces digital transformation, according to the new figures released by Microsoft.
The results for manufacturing are outlined in the study Unlocking the Economic Impact of Digital Transformation in Asia Pacific*, which was produced by Microsoft in partnership with IDC Asia/Pacific. It was based on the survey of 615 business leaders from the manufacturing sector across 15 markets in the region.
“The study finds that escalating costs of operations are a number one concern among C-level executives within the sector. At the same time, they are increasingly aware of the need to develop new business models to grow the business to counter the rise of growing number of competitors in markets,” said Victor Lim, VP, IDC Asia/Pacific.
“Embracing digital transformation is a critical imperative for manufacturers. Those organisations that had already embarked on their digital transformation journeys gained improvements in the range of 13% to 17% the last year. They will see at least 40% improvements in three years, with customer advocacy registering the highest improvement rate.”
The study identifies the top three benefits of digital transformation that have a direct impact to bottom line performance as productivity improvement, profitability improvement, and cost reductions. However, these businesses are also seeing long-term benefits when they embrace digital transformation. Increased revenue from new products and services and improved customer advocacy rounded up the top five benefits tracked from digital transformation.
Scott Hunter, Regional Business Lead, Manufacturing, Microsoft Asia said: “Looking ahead, digital transformation in Asia means moving the focus from process automation, optimisation and productivity improvement efforts into developing new business models to stay competitive.”
The study finds that manufacturing organisations realise the importance of data today. In fact, 44% of respondents pointed out one of their key performance indicators (KPIs) used to measure digital transformation today is tracking how data is being used as a capital asset.
“It is no surprise that businesses are still focused on tracking process effectiveness as the manufacturing sector is one that relies heavily on time-to-market strategies for first mover advantage. However, as manufacturing organisations realise the value of data in the long term, they are likely to unlock the potential of digital transformation in helping them create new business models,” said Hunter.
Manufacturing organisations are going to invest in cloud and big data analytics, followed by artificial intelligence (AI), cognitive and robotics, and Internet of Things (IoT) solutions this year. In fact, by 2019, IDC predicts that 40% of digital transformation initiatives will be supported by artificial intelligence/cognitive capabilities** providing timely, critical insights for new operating and monetisation models in Asia Pacific (excluding Japan).
The study also pinpointed key traits of the 30 manufacturing leaders as identified out of the 103 respondents classed as leaders***. According to the research:
When it comes to key challenges identified in embarking digital transformation initiatives today, the top three factors are:
“Digital transformation should be viewed as a team sport, not an independent business operation. Manufacturing organisations need to address culture and skills challenges through developing a digital culture and address organisational shifts required for a change to happen,” added Hunter. “First and foremost, organisations need to address the skills gap within the industry. In fact, respondents highlighted that they expect 85% of jobs within the sector to be transformed in the next three years.”
“Ultimately, manufacturing organisations need to move from process automation to a holistic, enterprise-wide transformation in order to attain competitive advantages,” shared Lim. “There are three approaches to this – first, the organisation needs to develop a digital culture, followed by having a structured approach to the use of data, which is supported by introducing new technologies into the workstreams. Ultimately, a successfully transformed manufacturer will see the development of a digital supply chain whereby there is a fully automated feedback loop within the ecosystem to allow for full control, coordination and visibility across all parties Additionally, working with a trusted technology partner is crucial for the success of organisations in their digital transformation journeys.”
The study recommends that organisations adopt a three-step data strategy to become a digital transformation leader:
Data collection
Toyota Material Handling Europe worked with Microsoft for advisory and development services to create T-Stream, a brand-new all-in-one solution. Built on Microsoft’s Azure cloud, it runs on Windows, uses Bing Maps and GPS systems to provide technicians with an improved, proactive service that can carry out maintenance for customers before breakdowns occur.
In the future, the company will be able to change its business model completely thanks to data. Connected trucks will also allow Toyota to move towards predictive service, repairing trucks before anything can happen, aiming for zero breakdowns.
The company is planning its vision for the factory of the future by evolving its traditional lean processes and boosting efficiency within warehouses.
Toyota Material Handling Europe also uses machine learning to train its autonomous vehicles to safely and efficiently navigate in warehouse environments. Microsoft’s AirSim simulation technology is used to verify AI in forklifts. Using AI capabilities, vehicles such as the pallet drone can be trained to recognise patterns, automate processes and learn the flow on the plant floor safely alongside humans. This solution would drastically speed up the installation and deployment of autonomous systems at the end-customer site.
*Unlocking the Economic Impact of Digital Transformation in Asia Pacific conducted with 1,560 respondents in 15 markets: Australia, mainland China, Hong Kong, Indonesia, India, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.
***The study identified a total of 103 leaders among the 1,560 respondents across Asia Pacific polled across six verticals, which included: manufacturing, finance, securities and insurance (FSI), retail, health, public sector and education.
The results for manufacturing are outlined in the study Unlocking the Economic Impact of Digital Transformation in Asia Pacific*, which was produced by Microsoft in partnership with IDC Asia/Pacific. It was based on the survey of 615 business leaders from the manufacturing sector across 15 markets in the region.
“The study finds that escalating costs of operations are a number one concern among C-level executives within the sector. At the same time, they are increasingly aware of the need to develop new business models to grow the business to counter the rise of growing number of competitors in markets,” said Victor Lim, VP, IDC Asia/Pacific.
“Embracing digital transformation is a critical imperative for manufacturers. Those organisations that had already embarked on their digital transformation journeys gained improvements in the range of 13% to 17% the last year. They will see at least 40% improvements in three years, with customer advocacy registering the highest improvement rate.”
The study identifies the top three benefits of digital transformation that have a direct impact to bottom line performance as productivity improvement, profitability improvement, and cost reductions. However, these businesses are also seeing long-term benefits when they embrace digital transformation. Increased revenue from new products and services and improved customer advocacy rounded up the top five benefits tracked from digital transformation.
Scott Hunter, Regional Business Lead, Manufacturing, Microsoft Asia said: “Looking ahead, digital transformation in Asia means moving the focus from process automation, optimisation and productivity improvement efforts into developing new business models to stay competitive.”
The study finds that manufacturing organisations realise the importance of data today. In fact, 44% of respondents pointed out one of their key performance indicators (KPIs) used to measure digital transformation today is tracking how data is being used as a capital asset.
“It is no surprise that businesses are still focused on tracking process effectiveness as the manufacturing sector is one that relies heavily on time-to-market strategies for first mover advantage. However, as manufacturing organisations realise the value of data in the long term, they are likely to unlock the potential of digital transformation in helping them create new business models,” said Hunter.
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| Source: Microsoft. Direct impact of digital transformation to bottom line performance for manufacturers, and to long-term performance. |
Manufacturing organisations are going to invest in cloud and big data analytics, followed by artificial intelligence (AI), cognitive and robotics, and Internet of Things (IoT) solutions this year. In fact, by 2019, IDC predicts that 40% of digital transformation initiatives will be supported by artificial intelligence/cognitive capabilities** providing timely, critical insights for new operating and monetisation models in Asia Pacific (excluding Japan).
The study also pinpointed key traits of the 30 manufacturing leaders as identified out of the 103 respondents classed as leaders***. According to the research:
- Manufacturing leaders are more likely to have a key executive leading their digital transformation efforts than other leaders.
- Leaders in the manufacturing sector are less likely than other leaders to have an allocated budget set aside for digital transformation as part of their existing profit and loss statement.
- In addition, manufacturing leaders are likely more siloed in their organisational behaviour than other leaders, whereby there is less agility and collaboration across teams in the change cycle.
When it comes to key challenges identified in embarking digital transformation initiatives today, the top three factors are:
- Lack of skills and resources
- Cybersecurity and growing threats
- Siloed and resistant culture
“Digital transformation should be viewed as a team sport, not an independent business operation. Manufacturing organisations need to address culture and skills challenges through developing a digital culture and address organisational shifts required for a change to happen,” added Hunter. “First and foremost, organisations need to address the skills gap within the industry. In fact, respondents highlighted that they expect 85% of jobs within the sector to be transformed in the next three years.”
“Ultimately, manufacturing organisations need to move from process automation to a holistic, enterprise-wide transformation in order to attain competitive advantages,” shared Lim. “There are three approaches to this – first, the organisation needs to develop a digital culture, followed by having a structured approach to the use of data, which is supported by introducing new technologies into the workstreams. Ultimately, a successfully transformed manufacturer will see the development of a digital supply chain whereby there is a fully automated feedback loop within the ecosystem to allow for full control, coordination and visibility across all parties Additionally, working with a trusted technology partner is crucial for the success of organisations in their digital transformation journeys.”
The study recommends that organisations adopt a three-step data strategy to become a digital transformation leader:
Data collection
Organisations need to have in place a data strategy to manage structured and unstructured data within the workstreams. By investing in big data analytics and IoT solutions, manufacturers are better able to collect and sort data in a cohesive manner.
Optimisation of existing products and services
Leveraging data, manufacturers can seek to optimise their processes, supply chain and ultimately deliver improvements to their existing product and services. Using big data analytics, machine learning and AI, businesses are able to improve efficiencies through predictive analysis.
Creating new business models
Ultimately, data should be used to create new value chains and services such as predictive maintenance, 3D modelling and smart operations.
One such example is Toyota Industries through its Toyota Materials Handling Europe. Toyota Material Handling Europe is investing in technology and embarking on a digital transformation journey to become a market leader in material handling solutions and services.
One such example is Toyota Industries through its Toyota Materials Handling Europe. Toyota Material Handling Europe is investing in technology and embarking on a digital transformation journey to become a market leader in material handling solutions and services.
Toyota Material Handling Europe worked with Microsoft for advisory and development services to create T-Stream, a brand-new all-in-one solution. Built on Microsoft’s Azure cloud, it runs on Windows, uses Bing Maps and GPS systems to provide technicians with an improved, proactive service that can carry out maintenance for customers before breakdowns occur.
In the future, the company will be able to change its business model completely thanks to data. Connected trucks will also allow Toyota to move towards predictive service, repairing trucks before anything can happen, aiming for zero breakdowns.
The company is planning its vision for the factory of the future by evolving its traditional lean processes and boosting efficiency within warehouses.
Toyota Material Handling Europe also uses machine learning to train its autonomous vehicles to safely and efficiently navigate in warehouse environments. Microsoft’s AirSim simulation technology is used to verify AI in forklifts. Using AI capabilities, vehicles such as the pallet drone can be trained to recognise patterns, automate processes and learn the flow on the plant floor safely alongside humans. This solution would drastically speed up the installation and deployment of autonomous systems at the end-customer site.
- Business and IT leaders from organisations with more than 250 staff were polled.
- Industries polled included education, financial services, government, healthcare, manufacturing, and retail.
- Respondents are decision makers involved in shaping their organisations’ digital strategy.
***The study identified a total of 103 leaders among the 1,560 respondents across Asia Pacific polled across six verticals, which included: manufacturing, finance, securities and insurance (FSI), retail, health, public sector and education.
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