How to win in manufacturing operations of the future?
Picture the manufacturing landscape in 10 years. Imagine the maturity and impact of new technologies and ecosystems that have recently been taking their first steps and are experimented with on the surface. One of these is the Cloud Factory, a concept that has recently been elaborated in our previous Cloud Factory blog. This concept totally disrupts our way of thinking of the manufacturing business as status quo, giving opportunities for small entrepreneurial asset owners and gives challenges for the established order of large asset owners and supply chain specialists. In this blog we explore a number of choices that need to be made at this front today, which will impact organization’s strategy, tactical positioning and capabilities over the next decade. In the diversified landscape of manufacturing not all segments will be equally influenced though. For this blog we’ve taken a perspective of consumer goods manufacturing where client customization is essential.
Ivo Rothkrantz & André Barneveld Binkhuysen - 29 march 2017
- Comply small or oppose big
- Vacant: marketplace
- Optimize versus digitize
- What does it take to win in tomorrow’s marketplace?
Comply small or oppose big
Let’s start off with strategy. Cloud Factory will cause a polarization in the market where two strategies will flourish. The first strategy is to adopt to the industry 4.0 reality, a strategy especially applicable for organizations with superior customer intimacy and product leadership through flexibility and customization.
The second strategy which could be followed is to oppose the current trends. A strategy aimed by asset heavy factories, focusing on mass production in segments with homogeneous products, large volumes and large volumes as producers of semi-conductors on the one hand side, but also asset heavy companies relying on extremely large, specialized customization projects with an important certification element, such as aerospace and ship-building. These manufacturers are able to survive by integrating other organizations into their own organization, opposing the Cloud Factory movement in which specialization and co-operation is key.
We envision that, depending on the industry a new balance between the two strategies will be established. So manufacturing companies should ask themselves which of these strategies to choose to avoid become stuck in the middle. As a guideline, industries like consumer products will see the first and strongest impact due to the level of customization and high competitiveness. In the automotive and apparel industry you already have examples of disruptive new entrants like Local Motors who use co-creation and micro factories to design and build new customizable cars.
When it comes to positioning in the Cloud Factory, the right tactical decisions are to be made concerning the involvement with- and configuration of the Platform. Depending on the company’s strategy the company should position itself in one of the quadrants. Each organization can become the owner of the platform. The way an organization shapes its role in the Cloud Factory platform depends on choices on two dimensions. The first crucial choice regards the ownership of the platform – organizations can either choose for in-house or third-party ownership. Secondly a choice needs to be made on the openness of the marketplace; making it either open source or private.
Considerations for this choice regard: do I have the right capabilities to develop or even join a platform? Would the investment harm other (innovative) investments? Do I trust the marketplace enough to independently set up a platform that is able influence my demand, pricing and marketing?
The first organizations have already boldly chosen a direction: a global manufacturing & electronics company has recently invested in a production platform that uses an internal marketplace for its own production facilities and is looking to connect third parties to the platform; AliBaba launched AliSourcePro to find suitable suppliers, and Local Motors has created an open source platform.
Optimize versus digitize
The strategical and tactical decisions a company makes decides the competitive position in the next years, in other words, where you will play. Yet the real added value comes from organizations that differentiate in their configuration of capabilities. These are the organizations that know how to win.
In designing the winning organization capabilities, organizations can distinguish themselves by either optimizing their physical capabilities, as training personnel at a production line, or by boosting their digital capabilities by making the production connected and data driven. The optimizing approach focuses on developing extensive trainings to optimize the current process. With the pace in which the organizational context will change, optimizing yet might not be enough to adopt these changes. Lead times of drawing flowcharts, optimizing processes and training will be decreased from months to minutes, favoring a digital approach in which we do not look at current processes, but rather at future demand. Such a digital approach requires an organizational digital transformation, which will impact the whole organizational spectrum; from human capital to plant configuration and from databases to skills, challenging the capabilities which have been surviving or winning for a longer time.
What does it take to win in tomorrow’s marketplace?
Organizations need to make choices now that will affect their strategy, tactical positioning and organizational capabilities in the next decade. Strategy is key here, if you see a growing need for flexibility and customization your business model should reflect it. The winners of the future will not be the ones who protected their (factory) walls the strongest but the ones that were able to transcend these walls, overlooking the organizational landscape and identifying possible ecosystems. Smart ecosystems that are interconnected and based on co-creation are a first step towards the future of cloud factory and towards getting closer to the customer. Digitalization of core activities is a prerequisite for participation in an ecosystem. So to all the traditional asset owners in the manufacturing industry: “Disrupt yourselves, before someone else does”.