Q&A: Digital Strategies for Manufacturers

What are some ways a digital strategy can help our manufacturing business?

Having a detailed digital strategy can help manufacturers lay out a roadmap for the future by addressing areas to improve financial and operational performance, which in turn, can improve competitiveness in the market, increase efficiency and drive long-term, sustainable growth.

Once implemented, here are some of the ways a digital strategy can help manufacturers in today’s business environment:

I. Improving operational efficiency - Digital solutions can help manufacturers streamline their operations, automate processes, and reduce costs. One example is an enterprise resource planning (ERP) system, which can help manufacturers manage their supply chain, inventory, and production processes more efficiently.

II. Enabling data-driven decision making - Digital solutions can provide manufacturers with real-time data and analytics, which can enable them to make quicker and more informed decisions about their operations. Digital strategy can also provide improved visibility into inventory levels and other key metrics.

III. Improving cybersecurity - Digital solutions can help manufacturers protect against cyber threats by implementing cybersecurity measures with the end goal of keeping your data secure. A comprehensive plan can include penetration testing to reduce risks on the front-end and an incident response plan to swiftly respond to incidents that do arise.

What are the steps our company can take to develop our own digital strategy?

It is important for a company considering developing a digital strategy to first define its goals by identifying what it is they are trying to achieve. A digital readiness assessment is a discovery session that can help your organization evaluate your current digital capabilities and identify areas for improvement based on your goals. This process sets a baseline for where your organization is today and will help to develop a roadmap for what needs to be done to accomplish your goals and objectives in the future. 

Through this process you will be able to explore the possibilities a digital transformation can bring to your business and come up with a methodical approach to implementing the various action steps necessary to meet your goals. Once the digital roadmap has been completed, it is time to allocate resources to it and begin to execute.

Our company has a lot of outdated and manual processes. It sounds like this is something a digital transformation can help with.

Automation is a small piece of the many capabilities a digital transformation can lead to for a business, but it can have a direct benefit for an organization in a variety of areas, such as accounting and inventory management through increased efficiency and quality. Some of the major benefits include:

IV. Increased efficiency - Automation can help manufacturers streamline their production processes, reduce waste, and increase output. This can lead to lower costs related to labor and materials and result in higher profitability. Increased efficiency is becoming more important as labor costs increase and hiring is more difficult. 

V. Improved quality - Automation can help manufacturers improve the quality of their products by reducing errors and defects. This can lead to lower costs associated with rework, scrap, and warranty claims. In regard to accounting, manual processes are high risk areas for errors and mistakes. Automating processes such as Accounts Payable can reduce the risks of human error, while increasing employee morale by removing monotonous tasks.

VI. Reduced downtime: Automation can help manufacturers reduce downtime by minimizing the need for manual intervention and maintenance. This can lead to lower costs associated with equipment repairs and maintenance.

VII. Faster time-to-market: Automation can help manufacturers bring products to market faster by reducing the time required for production and testing. This can lead to lower costs associated with product development and launch.

VIII. Better inventory management: Automation can help manufacturers optimize their inventory levels by providing real-time data on production and demand. This can lead to lower costs associated with excess inventory and risks of not having inventory on hand when it is needed.

What is an example of a success story around automation?

A metal products manufacturer with complex production processes requiring advanced levels of materials management, engineering, and institutional knowledge needed help to streamline the production process. The business uses continuous production flow versus stock-keeping units and lots, which involves significant tracking at each stage of the production process. One process was based on the experience of metallurgists, who determined production variables using a combination of anecdotal information and educated estimates. They manually worked out complex parameters involving customer requirements, machine capacity, raw material characteristics, and more. Inaccurate order recipes would result in significant scrap, and time-intensive rearrangement of schedules caused delays for other orders.

Working side by side with the metallurgists, CLA’s digital team gathered three years of historical data and built a custom machine learning model for production management. The model was fed with chemical and physical properties of materials and each customer’s required specs — which created a bottom-up view of how to efficiently drive each order. But that provided only half the picture, and engineers were concerned about balance. So CLA expanded the model to include a top-down inverse view of an overall production parameter target and its downstream impact on the day’s blend of customer specifications.

With balanced bottom-up and top-down views, the client is now driving production based on data science instead of guesswork. What used to take a metallurgist a full day — an average of 15 orders at 30 minutes each — now requires just 30 minutes to plan all 15 orders. More accurate recipes resulted in 75% reduction of scrap and improved factory floor scheduling, which reduced disruptions and created capacity to scale the business. Metallurgists are now spending their time improving testing in the lab to continuously refine the model for even better results. ABI

For more information on Digital Strategies for Manufacturers in Iowa, contact Tyler Lind at tyler.lind@claconnect.com.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com.

CLA exists to create opportunities for our clients, our people, and our communities through our industry-focused wealth advisory, digital, audit, tax, consulting, and outsourcing services. CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.