Smart manufacturing: tangible results will be achieved in a year

Engineer manager checking and controling automation robot arms machine
Sheila Zabeu -

May 31, 2023

Smart manufacturing projects are recording higher success rates recently, with productivity gains, cost reduction and supply chain resilience being named as the most sought after benefits. However, there are still challenges to be faced.

A study by Information Services Group (ISG) recently revealed that the first tangible results of smart manufacturing are achieved within 12 months in 81% of reported cases. “Smart manufacturing is relatively new and decidedly successful. Over 60% of respondents in our study have started initiatives in this field in the last four years, and the investments seem to be paying off, with over 70% reporting success as measured by cost reduction and quality of manufacturing processes,” details Gaurav Gupta, partner and global head of ISG Digital Engineering.

Smart manufacturing initiatives are gaining traction, with 75% of programmes employing at least 100 professionals by 2023, up from 40% last year. The proportion of programmes with 2,500 or more employees has doubled in this period.

The biggest obstacle faced by companies in the last two years is change management, with 58% placing it among the top three challenges and 22% as the most important issue. Regionally, the challenges vary. US-based companies highlight legacy equipment as the second biggest challenge, behind only change management, while European companies point to financing, Return on Investment (ROI), scalability, training and IT/OT/ET (Engineering Technology) integration as top challenges also behind change management.

 Information Services Group (ISG) Report one
Source: ISG

“Smart manufacturing is changing the workplace and the way business is done, and while companies have achieved the technical goals, these initiatives will not succeed without a strategy to ensure the technologies are used as intended,” warns Alex Bakker, ISG research director and coauthor of the study.

The research highlights that it is critical to have a change management strategy that connects all elements of the value chain. Companies that are resistant to change or have conflicting priorities or unclear change management strategies should develop an operating model that synchronises teams, processes and technology to increase the value that smart manufacturing can generate.

Smarter with more technologies

By 2023, 75% of respondents said they have increased or maintained investments in Artificial Intelligence and Machine Learning. However, decision-makers are split on digital twins-60% are expected to make more or the same level of investments, while 32% have not yet invested in this class of technology. In the field of Virtual or Augmented Reality, the majority have not yet started to invest or at least maintained investments, while 11% have reduced spending.

Manufacturing companies are using a multivendor ecosystem to accelerate their initiatives. The top five partners are platform providers, Big Techs, strategy consultants, service integrators and tier 1 MS providers. The characteristics sought in partners vary greatly by vertical, but 63% prefer a highly personalized service over teams for rapid project implementation.

 Information Services Group (ISG) Report two
Source: ISG

Understanding the challenges better

Why do smart manufacturing initiatives face so many challenges? According to Gartner, because they require cultural and operational transformations that are slow in nature and, in many cases, need entirely new organizational models to integrate supply chain characteristics.

Research from Gartner has identified the top five Risks to Avoid when launching smart factory initiatives:

1. Confusing factory optimization with business model transformation: The benefits from optimizing a smart factory are confined to that location. When smart manufacturing initiatives are disconnected from the rest of the supply chain, local benefits can come at the cost of costly constraints elsewhere in the business. This risk can be mitigated by ensuring that factory objectives are synchronised with the supply chain operating models, digital ambitions, flexibility and automation opportunities of the enterprise.

2. Neglecting the scope of change management: Acquiring new technology can be straightforward and relatively inexpensive. However, underestimating the resulting changes to existing processes, integrations and new performance targets can impact both cost and time. This risk can be partially managed by treating these changes as part of an enterprise-wide initiative, with the necessary alignment between senior leadership and continuous improvement teams to ensure initiatives are driven appropriately.

3. Underestimating the complexity of IT, OT and Engineering Technology convergence: Smart factories do not only depend on alignment between plants and business units, but also with Information Technology, Operational Technology and Engineering Technology. To mitigate the complexity of convergence between these links, governance and organisational structures need to be developed according to the new production models.

4. Insufficiently fund qualification, re-skilling and talent development: It is essential to modernize learning and development programmes to help teams absorb new experiences.

5. Focus on a single use case and technology: There is no single dominant technology or vendor that meets all smart factory requirements. Therefore, technology purchases need to be balanced between strategic considerations, such as scalability, along with more pragmatic ones, such as operational downtime planning.