McKinsey: five principles for scaling digital manufacturing
Amidst the outbreak of COVID-19, McKinsey reports that achieving digital at scale can make European manufacturers resilient and flexible for recovery at speed.
The Coronavirus (COVID-19), a pandemic that is changing the ways in which organisations operate all over the world, like never before. During this pandemic Enno de Boer, Søren Fritzen and Rehana Khanam (partners at McKinsey) have witnessed organisations and leaders striving to not only ensure the health and safety of their people, but to react to shifting supply chains impacting sourcing and distribution logistics. As a result supplier resilience is being brought into focus with labour shortages bringing production lines to a halt.
However the partners at McKinsey, stress that when the pandemic resolves, production facilities will need to move quickly to respond to new sources of supply, as well as shifting customer demand. As a result digital capabilities are going to be critical to providing flexibility and resilience for manufacturers to operate in unfamiliar environments.
“Yet most companies that have attempted enterprise-wide “digital transformation” have failed to capture the full business opportunities available from new technologies,” says McKinsey.
In its recent research, the company has uncovered new insights into the challenges and success factors for implementing digital manufacturing at scale, highlighting that only 17 out of the 44 members of the Global Lighthouse Network are in Europe, with only three using fourth industrial revolution (Industry 4.0) tools across end-to-end value chains.
“This lagging behind could be a result of many European manufacturers operating on brownfield sites,” says McKinsey. As a result the task of enhancing legacy processes, systems, and machinery with Industry 4.0 tools can seem more daunting than building a digital production facility from the ground up.
However, McKinsey stresses that it is time for organisations to adopt these digital technologies revealing five fundamental principles for scaling and sustaining digital technologies, regardless of how digital they are.
Unlocking value with industry 4.0
Currently, McKinsey has identified a select group of industry leading manufacturers using digital transformation to develop new ways of conducting business operations by using: sensors, Internet of Things, cloud technology, blockchain, Big data, advanced analytics, artificial intelligence, virtual reality, augmented reality additive manufacturing, renewable energy, robotics automation and robotic process automation (RPA).
The reported benefits:
Between 30% and 50% reduction in machine downtime
Between 15% and 30% improvements in productivity
Between 10% and 30% increase in throughput
Between 10% and 20% decrease in quality cost
The result of these benefits impact the entire value chain which McKinsey says could be even more important, by increasing flexibility to meet customer demand, providing a faster speed to market and better integrated within the supply chain.
Although McKinsey reports that manufacturers are transitioning to digital manufacturing, it is not being deployed at the same rate, with most finding themselves stuck in a ‘pilot purgatory’ and no clear approach for quick scale.
Latest research conducted by the organisation confirmed that at least 70% of manufacturers are in ‘pilot purgatory’, with culture being considered among the most significant challenges.
Other challenges include the absence of:
Strategic direction - where and how digital manufacturing will bring real business value, and the incentives for people to make it happen
technical, managerial, and transformational capability to truly understand and execute the changes
Robust data and IT infrastructure
The five principles for scaling digital manufacturing
Finally in McKinsey’s latest research the organisation outlined five key principles for an organisation to base its scaling approach on:
For more information on all business in Europe, please take a look at the latest edition of Business Chief EMEA.
UK office space slashed as hybrid working looks set to stay
With hybrid predicted to be the working model of the future, and businesses both large and small announcing that WFH will continue for employees into the future, the traditional office space is being re-thought.
Businesses are both questioning how much space they need for a hybrid working future, especially if it means they can potentially save money, and what form that space should take.
UK firms slashing office space
Back as early as February, HSBC – whose real estate footprint currently stretches to around 112 football pitches worldwide – said it would be cutting its post-COVID office space by half globally and by 40% in London over the next few years, as it looks to implementation of a hybrid working model in light of the pandemic.
Lloyds Bank followed suit. Following an internal survey where 77% of employees said they wanted to continue to work for 3+ days a week post-pandemic, the bank announced it was also moving to a hybrid model, and so looking to cut its office space by 20% over the next two years.
In fact, the latest research from consulting firm PwC reveals that a third of organisations surveyed (258 of the UK’s largest companies) believe they will reduce their office footprint by more than 30%.
The findings of PwC’s Occupier Survey indicate there is likely to be a sizeable fall in occupied office space with half of executives surveyed saying that despite taking into account mass vaccinations, employees will continue to work virtually 2-3 days a week.
And companies continue to announce the hybrid working model for their employees. Accountancy firm EY has just announced that its 17,000 employees are moving to a hybrid way of working, WFH for at least two days a week. This follows PwC which in March said workers could stay at home for half the time and KPMG which this month said it would expect employees to only work two days in the office every week.
More collaborative work spaces
However, what’s also clear from PwC’s research is that the role of the office is not going to disappear completely, but instead adapt to a new way of working, with half of all organisations with more than 100 employees saying they have a real estate and workplace strategy that considers the long-term impact of COVID-19.
“We may see an increased demand for flexible space as many businesses operating models may well need that option if holding dead space is to be avoided,” says Angus Johnson, UK Real Estate Leader at PwC UK.
According to the survey, more than three quarters of respondents said they are likely to reconfigure existing office with 43% of financial services firms stating that they are extremely likely to do so as a result of the pandemic.
“It’s also clear that the nature and purpose of office space is going to change. As occupiers seek new, different space to meet their accommodation needs, environmental aspects will be increasingly important. If the real estate sector is to truly succeed as a more dynamic, greener industry it’s imperative that creative thinking comes to the fore.”
And companies are already thinking creatively how they can utilise office space in a hybrid future. So while HSBC is cutting a significant amount of office space, it is not downsizing its prestigious Canary Wharf headquarters, and instead reimagining the space. In April, CEO Noel Quinn announced the firm was embracing an open plan floor, with no designated desks or private offices, and instead using hot-desks in line with the future hybrid working style. “My leadership team and I have moved to a fully open-plan floor of the building in east London with no designated desks,” he said on LinkedIn.
Lloyds also reported it was adapting its office space, so that rather than individual offices, it will have a more collaborative workspace. And just last month, KPMG announced it too was ditching desks and individual offices, and replacing them with meeting rooms and conference halls for a more collaborative workspace.