We hear so much about Digital Transformation, but also that some 70% of Digital Transformation projects fail completely or fail to meet the objectives set for them. So, what is DT and what can be done to improve such a depressingly poor record of transformation?
DT means something different to most companies and we can, without doubt, improve and sustain outcomes. It can be, in its simplest form, the replacement of paper with a computer next to a production line for recording quality checks. At the other end of the DT spectrum, it can mean full factory automation, though MIS and MES, all the way to Industry 4.0, Quality 4.0, and beyond.
This is the first important question to be answered. After all, paper recording has served our manufacturing industries for many decades. If the answer is ‘We just want to eliminate the paper or we want to save some forests’ then, desirable as this might be to the middle management team, it is unlikely to be given an adequate budget by the financial controller, largely because the stated reasons are what we call ‘soft benefits’, definitely beneficial but, as they don’t improve profit margins, they are unlikely to be backed by the Finance Director. There has to be something more to justify the investment which, dependent upon the scope, could run into many thousands of pounds.
Even in the most comprehensive offerings, eliminating paper across the whole factory, the justification has to be strong in order to gain FD support. We make clear to prospective clients that, within our comprehensive and sophisticated offering, we are only doing what they are already trying to do with paper, i.e. convert raw materials into a range of consistently high-quality finished products that go out and stay out. Furthermore, manufacturers are striving endlessly to make their products better, faster and cheaper, but these manufacturers are already trying to do so anyway, albeit with paper recording. So, the things we offer (without paper) such as: Materials Control, Legal Compliance, Efficiency (OEE), Consistently High Quality, Label and Date Code Verification, Component Matching (i.e. tubs and lids) are already being done on paper. If this was not the case then there would be little, if any control, batch rejections, legal challenges, etc. In short, Chaos would be the inevitable outcome.
Interestingly, if we look at the track records of many medium to large companies, supplying UK supermarkets over a number of years, we can quickly see that, even where sales volumes are increasing, net profits are falling. Our own research suggests that this is often because the supermarkets demand greater product innovation, smaller batches delivered more frequently, serious financial penalties for failure, plus costly batch rejections, but generally push back against price increases. One large vegetable processor we spoke to in the North told us that, in dealing with all the UK supermarkets and discounters, they had obtained the same market share this year as last, but at even lower prices.
This leaves the manufacturer, at best, with rising raw material costs, shorter batch runs (more downtime through product changeovers), yearly enforced minimum wage increases, and increased pension contributions, plus increased energy costs, with no way to cover these increased costs because of fixed selling prices, and at worst, with a push back to reduce prices or lose the contract. We hear a great deal about sustainability, but this scenario cannot be sustained. Either more manufacturers will go bust, or the supermarkets will have to agree to price increases. Obviously, the supermarkets do not want to accept this, as they have their own battles with their peers and the discounters, plus, coming out of the COVID-19 enforced lockdown, many consumers will be looking for more bargain prices than ever before.
As the current situation is unsustainable and increased consumer prices will be the last resort, what else can be done?
Manufacturers must continue to look internally to see where they can reduce costs and improve efficiencies, whilst not compromising on quality. This requires a far better management information system than can ever be achieved with paper recording. More and more companies are realising that the same paper recording that served them well for decades is now holding them back for the following reasons: Paper recording provides no actionable, real-time information. Such insights might become available a day or two later but, for many, this is too late as the poor quality or incorrectly labelled batch, has already been dispatched and is likely, therefore, to become a batch rejection, or in the event of a potential health hazard, an expensive, though responsible, product recall.
In addition, paper recording affords no real operational control as there is no enforced operational discipline. So frequently, on paper records, we see that the operator carried out important checks at 8:00am, 9:00am, 10:00am, etc. Really? Is that precision timing likely or even possible and, if it is, is the operator simply going through a ‘tick box’ exercise to get through the checklist as quickly as possible, without even checking the quality/compliance?
One of the greatest and increasing concerns is allergen control. Even though our manufacturing base in the UK is undoubtedly second to none worldwide, when it comes to the production of quality, safe, reliable and reproducible products, they still face the threats posed by the 14 key allergen groups. As we, by all accounts, are becoming increasingly allergic, the threat of incorrect packaging or labelling is a key reason to keep responsible manufacturers awake at night. If somebody died, or became seriously disabled, as a consequence of ingesting a product containing nuts, for example, when the packaging gave no indication of this, would in itself be bad enough for most, but the consequential threat to the continuation of the business, or the loss of a valuable contract could mean ‘lights out’ due to the inevitable bad publicity.
Elimination of paper, therefore, provides far greater confidence and safety as it has the potential to ensure ‘Right First Time, Every Time’, No costly Batch Rejections, Improved Efficiency through greater Operational Visibility, and overall protection of the brand and customer confidence.
We’ll talk more about this more next month, when we can discuss ways in which Digital Transformers can help you avoid being amongst that depressing 70%.
In the meantime, if you would like to discuss this before our next article, please do get in touch!