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Perspectives

Digital supply networks in industrial products manufacturing

Getting started with digital transformation

Today’s industrial products manufacturers face productivity, labor, and trade policy challenges within an already demanding environment. Navigate through this uncertainty with our practical digital transformation framework to find sustainable growth opportunities in today’s increasingly global market.

New expectations for industrial products manufacturers

Understanding how to harness the power of advanced technologies is critical in enabling industrial products manufacturers to meet customers’ demands and create new revenue streams. B2B customers are increasingly expecting products tailored to their preferences and swiftly delivered to their doorsteps anywhere around the globe. The growth in spending on manufacturing e-commerce platforms1 is an example of just how accustomed B2B customers have become to speed, personalization, flexibility, and transparency from the consumer market, and how they’re now expecting the same capabilities from their industrial vendors.

Empowered by digital transformation, manufacturers are turning to selling outcomes2 for their customers. As a result, companies are driving an increasing share of value through services versus products themselves. These new revenue streams enable companies to rethink long-held business models and change the basis of competition.

Surviving—and thriving—as an industrial products manufacturer requires the digitalization of your supply network and the creation of a dynamic, data-sharing web connecting customers, vendors, and partners. Those that wait risk losing growth opportunities and market share to those able to integrate the digital supply network (DSN) and provide net new value to customers with a continuous and seamless engagement model. In short, there’s no time to stall— industrial products manufacturers must evolve now.

Deloitte has helped corporations navigate through uncertainty thanks to a practical framework

Digital supply networks in industrial products manufacturing

Digital supply network-enabled services

Organizations that adopt evolving digital technologies are breeding grounds for new business models. Industrial products manufacturers are shifting their attention from making products to enabling outcomes for their clients. Some companies have also recognized a critical opportunity to monetize the vast amounts of data being collected and transmitted by new sensors that have been integrated into a wide array of products. Some organizations are already adopting new opportunities to directly or indirectly provide customers (B2B and B2C) with these value-added services:

  • Asset-as-a-service model
    GE Aviation has taken a completely new approach to the capital leasing model with its TrueChoice™ Flight Hour power-by-the-hour service, where it sells its customers the service of using one of its engines.3 DSNs can enhance such services using predictive maintenance and design simulation.
  • Internet of Things (IoT) services
    IOTA is a major blockchain platform offering a distributed ledger for data monetization using micropayments. DSN-generated data can have multiple purposes with smart-connected products, real-time product intelligence, and predictive/sensor-driven replenishment.
  • Rapid-response manufacturing
    This technology can now take a product from design to display in just a few short weeks. DSNs can enable faster and more efficient operations by offering capabilities such as demand and supply sensing and synchronization, additive manufacturing (AM), and intelligent procurement operation management.

DSN can—and must—be used for efficiency, customer experience, and growth. The digital supply network looks different for every company, as it solves different issues and applies different technologies. But it has some key characteristics that apply across industries and sectors. No matter the application, the DSN provides benefits not only to the organization but also to the customer. In all the decisions about where and how to play in this new environment, there is no master playbook—and no single path to success.

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Getting started with digital supply networks

Once there’s a goal in mind and clear measurement criteria, the next step is to understand the constraints. Companies should tailor their DSN journey and individual implementations to meet their own specific needs, based on their existing infrastructure, talent base, culture, and technological requirements. Larger organizations tend to be reluctant to abandon the “tried and true” in favor of new, disruptive technologies.

One of the most effective ways to get started is to use the adage “think big, start small, scale fast” to accelerate meaningful results to help move toward the path of digital transformation. This process helps clients:

  • Think big and develop a comprehensive strategy.
  • Start small by narrowing the scope.

This enables clients to develop an approach that’s strategic, agile, fast, affordable, adaptable, and repeatable. After establishing what works, it’s time to:

  • Scale fast by applying those same tactics and principles, as well as the lessons from preceding projects, to enable larger-scale transformation that no longer carries the same financial or organizational risks.

Before starting any digital transformation, clients should understand and outline what they’re solving for to identify the guiding principles they’ll use to define success.

The most effective path toward DSN implementation

The most effective way to introduce digital supply networks is to adopt a “digital foundry” approach, where ideas that have breakthrough potential in terms of business impact are generated and screened before being prototyped and piloted in a sequence of sprints. Successful ideas where tangible benefits can be demonstrated are then launched and scaled throughout the organization. In this way, companies can reduce the barriers to DSN implementation and effectively manage their exposure to risk by validating ideas in a controlled environment.

At its core, the digital foundry methodology is an aggregation of services that blends strategic expertise, governance, agile delivery methods, and innovative thinking with enabling technologies. The goal of the digital foundry is to enhance decision-making, inject energy into converting ideas into actionable plans, increase efficiency, and deliver measurable value.

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The core elements of a digital foundry

Moving forward with digital transformation

Manufacturing organizations should take heed of the evolving competitive landscape of their operating environment. Given today’s unpredictable economic and regulatory climate, B2B customers expect a more connected, responsive, and proactive supply chain where a sale goes beyond the product and enables better outcomes—for them and their customers. DSNs offer industrial products manufacturers the ability to meet these evolving needs in a variety of ways, all while unlocking the potential for additional revenue streams. Those that are not able to sift through a barrage of technology solutions and build a comprehensive digital strategy for their supply networks potentially risk falling behind.

Ultimately, a series of small wins can create large-scale, meaningful, and lasting digital transformation for clients’ supply networks, allowing them to not only compete but also lead. Digital transformation creates significant value, but it requires practice and a targeted approach. By leveraging the “think big, start small, scale fast” approach, as well as various Deloitte tools such as the digital foundry, clients can start driving impact quickly. In the exponentially evolving digital world we live in, it’s critical to act now.

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1Forester, "US B2B eCommerce Will Hit $1.2 Trillion By 2021", June 5, 2017, https://www.forrester.com/report/US+B2B+eCommerce+Will+Hit+12+Trillion+By+2021/-/E-RES136173.

2Harvard Business Review, "Manufacturing Companies Need to Sell Outcomes, Not Products", June 02, 2016, https://hbr.org/2016/06/manufacturing-companies-need-to-sell-outcomes-not-products.

3GE Aviation, TrueChoice™ Flight Hour web page, https://www.geaviation.com/commercial/truechoicecommercial-
services/truechoice-flight-hour.

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