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The digital overhaul

Rethinking manufacturing for the digital age

Manufacturing’s digital revolution

The digital age has brought with it a new way of thinking about manufacturing and operations. Labor rate changes in emerging economies, coupled with challenges associated with logistics and energy costs, are influencing global production and associated distribution decisions. Significant advances in technology, including big data and analytics, the Internet of Things (IoT), robotics and additive manufacturing, are shifting the capabilities and value proposition of global manufacturing. In response, manufacturing and operations require a digital overhaul: The value chain must be redesigned and retooled and the workforce retrained – quickly.

Many sourcing and manufacturing decisions made since the 1990s have been based on the notion that Asia (specifically China), Eastern Europe and Latin America are lower-cost regions, while the United States, Western Europe and Japan are higher-cost regions. However, this view is increasingly outdated. Changes in wages, transportation and distribution costs, productivity and energy availability are upsetting the traditional equation to determine where to source, where to manufacture and how to go to market. Total delivered cost must be analyzed to determine the best places to locate sources of supply, manufacturing and assembly operations around the world.

Meanwhile, the age of digital manufacturing and operations is here and moving very fast. Technology advances and growth in areas such as big data and analytics, cloud, the Internet of Things (IoT), robotics and additive manufacturing are rapidly changing industry dynamics. These technologies are also generating a dramatic ripple effect as they change the nature of jobs in industries that supply, support and serve manufacturing as it becomes more knowledge intensive.

In the age of digital operations, information previously created by people will increasingly be generated by machines and things – flowing out of sensors, RFID tags, meters, actuators, GPS and more. Inventory will count itself. Containers will detect their contents. Manufacturing assembly will be robotic and analytically automated. The entire value chain will be connected – not just customers, suppliers and information, but also parts, products and other smart objects used to monitor the value chain. Extensive connectivity will enable worldwide networks to plan and make decisions in real time.


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Karen Butner

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, Global Research Leader, AI Automation, Supply Chain, Virtual Enterprise, IBM Institute for Business Value

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    Originally published 13 May 2015