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Why should manufacturers digitize shop floor operations?

Updated: Jun 2, 2023



Benefits and Business Value Drivers from Digitization of shop floor operations for manufacturers
Benefits and Business Value from Digitization

Manufacturers have to continually look for avenues to improve their operational efficiency as well as adapt to an ever-changing market and customer. Using latest tools and technology enables them to make the most optimal choices and deliver products best suited for their customer. Typically, manufacturers look at digitizing their business processes using ERP systems as the first step. The prevalent thought is ERP implementation is the end of it all when it comes to digitization for manufacturing. However, there is increasing amount of evidence from companies that using ERP alone does not yield all of the possible benefits that are possible from digitization - rather, it’s the start of the digitization journey.


Implementing changes on the shop floor leads to multi-fold gains for manufacturers. Digitization of manual data entry systems enables real-time view of operations and automation of routine data entry tasks. Primarily, it enables data-driven decision making for managers, thus reducing variability and uncertainties that are seen on the factory shop floor to some extent. Digitizing shop floor processes forces managers and teams to formulate and implement processes, which helps standardize work. Due to this, all systems become more robust and are able to withstand changes with better control and visibility. This also makes the operations more scalable and flexible at the same time, provided the processes are formulated keeping agility in mind. The key advantages to the manufacturer can be classified as internal facing vs external facing benefits.


Internal benefits:

  1. Process control: Digitizing shop floor operations requires managers to implement standard processes. Once these are implemented and being adhered to, it becomes easier to track deviations from the process, thus enabling better control over operations. Additionally, any change needed can be implemented easily as only a subset of the processes need to be changed. Having a process based setup helps in modularity, which increases operational agility.

  2. Quality improvement: Documenting data digitally enables data analysis and data-based decision making. Due to this, real-time monitoring can be performed, which helps in early detection of any potential issues. Better decisions can be taken about business processes and uncertainties as well as output variation can be reduced. This leads to improved product quality, reduced rework, and enhanced customer satisfaction.

  3. Resource optimization: Data digitization enables understanding the actual resource utilization. Automation of routine tasks is also enabled. Real-time feedback from processes enables closed loop scheduling where any changes or deviations can be incorporated into the schedule simultaneously. Accurate tracking of inventory and its usage enables better inventory control. Due to this, production planning, sequencing and scheduling can be easily done.


External benefits:

  1. Customer centricity: Being customer centric is no longer an option for companies. Demand quantity variations, increasing customization, etc. have been commonplace in most industries. Adapting a customer centric approach to designing, developing and releasing products can set apart a manufacturer from its competitors. Digitization enables manufacturers to provide an enhanced customer experience as they can provide customization options, faster order fulfillment, improved product quality, and better communication throughout the customer journey. This leads to increased customer satisfaction and loyalty.

  2. Supply chain integration: Modern supply chains are getting increasingly complex, with multiple partners, dependencies and dynamic demand patterns. Digitization enhances visibility across the supply chain, enables real-time data sharing with various partners, and ensures traceability. This helps to develop more integrated and connected supply chains which are resilient and robust to external and internal shocks.

  3. Competitive advantage: Several newer companies are "digitally native" - meaning their business systems and processes are built fully in the digital space without any legacy issues. Such companies are disrupting the way they develop and release products, and are coming up with new, innovative business models. By embracing digitization, manufacturers can adapt to the changing landscape, stay relevant, and compete effectively against these disruptive forces.

  4. Compliance: Manufacturers face stringent regulatory requirements and industry standards that keep changing over time. Implementing digital solutions can help streamline compliance processes for a manufacturer by automating data collection, ensuring traceability, and providing accurate documentation. By digitizing operations, data collection can be automated which helps manufacturers gather data for compliance very easily. It increases transparency as well as reduces the risk of regulatory violations.


Apart from the benefits listed above, digitization helps a manufacturer gain competitive advantage by increasing its protection against several threats, which are described below:

  1. Changing customer needs: Customer requirements are evolving rapidly in the digital age. Customers demand faster product updates, newer products, increased options and customization. Manufacturers need to have flexible processes in order to meet these requirements, else customers may not be satisfied with their products. Due to this, manufacturers need to continually adapt their processes to meet changing product specifications. Digitization helps manufacturers achieve agility to respond to changing requirements from their customers by efficient mapping and execution of processes, incorporating change management and real-time tracking of operations.

  2. Complexity: Products are getting increasingly complex, with newer, advanced materials and production processes being incorporated in their manufacturing chain. This product and process complexity, though difficult to manage, provides competitive advantage to a manufacturer. Old, archaic systems are not capable of handling complexity in several domains. Digitization helps manufacturers mitigate this problem by providing the flexibility to scale complex operations quickly and adapt to changing circumstances. This agility helps manufacturers manage and respond effectively to any external disruptions even for complex processes.

  3. Competition: New business models are coming up lately which are bypassing the conventional value chains. For manufacturers, they need to be prepared to face such competition by ensuring they have systems that are adaptable, agile and flexible. Digitization helps manufacturers be ready to face such threats.


By implementing the appropriate digital solutions and technologies on the factory shop floor, manufacturers can generate business value. This is driven primarily from the following:

  1. Cost reduction: Digitization helps a manufacturer reduce costs due to streamlined processes, reduced defects, increased flexibility in their operations and improved productivity. Real-time data and analytics enable better inventory management, optimized production planning, and reduced waste. Predictive maintenance prevents costly equipment breakdowns and downtime. Energy efficiency practices and resource optimization lower utility costs. Data-driven insights enhance process efficiency and identify cost-saving opportunities. Overall, digitization drives operational efficiency, reduces inefficiencies, and enables cost-effective practices throughout the manufacturing value chain.

  2. Improved product quality: Manufacturers can achieve improved product quality by implementing digitization due to increased consistency and accuracy in their operations. Reduction in defects and rework, better process implementation and control, as well as early detection are all possible due to use of digital tools and technologies. Digital workflows enable standardized processes and reduce human errors. Improved traceability through digitized systems helps identify quality issues and facilitates targeted recalls if necessary. Data-driven insights enable continuous improvement by identifying areas for enhancement and optimizing manufacturing parameters. Overall, digitization enhances quality control, reduces defects, and ensures consistent, high-quality products that meet customer expectations.

  3. Increased agility and efficiency in operations: Digitization of operations helps processes to be flexible. Data-driven decision making enables identification of bottlenecks and higher resource utilization. It also helps increase collaboration between teams and functions within as well as outside the organization. Flexibility in production planning and resource allocation allows for efficient adaptation to varying customer needs. This results in an increase in agility and efficiency of the operations for a manufacturer.

By digitizing shop floor operations, manufacturers can avail themselves of several benefits, protect themselves against threats, and achieve business value. Digitization is no longer just a trend but a necessity for manufacturers to remain competitive, drive innovation, and adapt to the evolving demands of the modern market. This was especially seen in the past few years during the COVID-19 pandemic. Manufacturers who embrace digitization are bound to succeed and overtake their peers in the long run.

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