Digital transformation (DX) is in the air. Discussions abound about how businesses are modernizing by replacing analog processes and siloed, legacy, on-premises technology with integrated, digital, cloud-based solutions. These discussions have intensified over the last year as businesses have been forced to adapt to an ever-evolving “new normal”.
If you’re a small- to midsize-enterprise in the consumer packaged good (CPG) space, you may think that the arguments to modernize your IT systems are compelling, but the prospect of doing it is daunting. It can be hard to know where to start, especially if your business (like many others) has multiple priorities that are not always in perfect alignment. To draw on a well-known proverb, DX is akin to standing in front of an elephant you want to eat and not knowing where to start—only in this case it’s where to start digitizing instead of digesting.
The COVID-19 pandemic has accelerated the DX process in CPG as well as other industries. For one thing, there has been a seismic shift toward digital engagement, as a report by McKinsey explains. The partial or total shut-down of traditional channels such as bricks and mortar storefronts and field teams has fostered a rapid acceleration of ecommerce, digitally enabled delivery systems and AI-powered customer service. In 2020 these were all leading use cases for DX.
Similarly, the transformation of front and back offices with cloud-based business apps has sped up as workers have gone remote and IT departments have been tasked with ensuring that communication, collaboration, productivity and security don’t suffer as a result.
While many CPG businesses have made significant inroads in their DX journey, the progress hasn’t been uniform across all areas of the enterprise. A recent study by GE Digital finds that CPG is lagging other industries in DX, and a lack of data management capabilities across their operations is a key factor holding businesses back. Making these capabilities enterprise-wide should be a top business priority.
To realize the benefits of DX, you need to approach it strategically and consider all areas of your business; exactly where and how you invest will depend on your business objectives, such as increasing workforce productivity, driving operational efficiency or improving customer experience.
A digital strategy that leaves in place legacy systems that operate in silos is only a partial strategy, and one that is less likely to succeed—no matter how you’re measuring success. The goal of a comprehensive DX strategy should be expanding across all functional areas, ensuring your operational data is captured and transformed into insights and analytics that provide a 360-degree view of the business.
Returning to our governing metaphor for a moment, your elephant needs more than a digital trunk and tail.
As a CPG manufacturer, you need to ensure you’re digitizing your production lines and the planning, supervisory and management systems that feed them. Why? For one thing, it’s simply the best way to analyze production, find opportunities to optimize it and test the effects of specific changes.
As a general rule, anything that can be digitized can be improved using computer programming and data science techniques to identify underperformance and simulate the effects of change. It’s much less costly and more agile to simulate changes to production processes in a digital environment, where you can effectively test as many variables as you wish and optimize a process before implementing the solution in a real production environment.
Beyond the ability to simulate, test and optimize changes, there are many potential advantages to investing in smart manufacturing, including:
The fundamental promise of investing in DX is compelling, but many businesses are finding it difficult to get started.
So if you’re struggling with moving forward, you’re not alone. If you’re not sure how best to capitalize on the valuable data and insights you’re already capturing or could be capturing, here are some important considerations to get you started on your journey.
One way to capture data from your current operations systems so you can achieve better and faster reporting and analytics is by building a data warehouse. With this approach, you can put your focus on data engineering rather than ripping out and replacing legacy systems with new ones. Data engineering allows you to fix existing operational challenges, including insufficient business data, without having to change your systems wholesale.
Good data engineering acts like digital glue that connects systems and data sets, extending the lifetime of legacy technologies and creating added value for your organization. It can be a good first step for organizations that haven’t budgeted for a wholesale transformation of their production systems and/or don’t have a comprehensive technology roadmap but do need better analytics to inform business decisions.
Building a data warehouse infrastructure that automatically captures and archives data from across your organization opens up exciting new possibilities for reporting, including customizable dashboards that display the leading indicators executives need to manage operations and the real-time reports that plant workers use to respond to issues in real time.
When rethinking your business reporting, one of your goals should be simplification. Chances are you’re already generating too many reports across the organization, and few (possibly none) are providing you with all the information you would ideally like to see. As the methods of collecting data increase (as in more sensors, more databases, more spreadsheets) so does the likelihood of data fragmentation, And if you’re building reports manually (as in cutting and pasting data from multiple sources into report documents), you’re adding another level of complexity as well as increasing the possibility of errors.
With a centralized, automated data infrastructure, the right statistical measurement and a modern business intelligence (BI) platform, you can build the views of your operations that you actually need.
Are you at a point where you need to drive more automation in your production processes? Arguably, smart automation should always be part of your strategy to increase productivity and efficiency, and if you haven’t formulated a plan you’re putting yourself at a competitive disadvantage. When undertaking this analysis, It can help to think about your “automation pyramid”, which consists of five levels:
If your goal is really to digitize the elephant, trunk to tail and everything in between, your DX strategy will comprise all levels and provide a roadmap to automate and integrate them. That’s a tall order, and daunting for many businesses. Based on experience with manufacturers at different stages of their DX journey, we propose you start by analyzing a few key areas.
In the majority of CPG manufacturing facilities today, supervisory control and data acquisition (SCADA) systems control plant equipment, take measurements from that equipment and provide alerts and warnings about machinery or system issues. SCADA systems have been long in use in manufacturing as well as infrastructure sectors; however, not all SCADA systems are created equal, and many don’t take advantage of the 21st century technologies that are driving this fourth industrial revolution.
Modern SCADA systems should be digital first and cloud based. They should support automatic updates, secure back ups, robust analytics. Perhaps most importantly, they should include industrial internet of things (IIoT) capabilities. Why? Because IIoT deployments include features such as wirelessly connected sensors, cloud-based storage, open standards and simple integration. If you’re automating plant operations today, you will likely start with an IoT solution that offers all the benefits of “as-a-service” implementation. Read the 3AG article about the different approaches to building an incremental change path from SCADA to IoT.
If you have already implemented an ERP solution in your business, you’re probably asking why you should even consider revisiting what was a long, painful and expensive process the first time around. Does this sound familiar? On the other hand, if you haven’t implemented ERP you may wonder whether it’s worth all the cost and trouble.
The essential promise of ERP is compelling: a fully integrated view of your core business operations, updated automatically. What CPG executive would decline a comprehensive picture of the business’s financials, supply chain, manufacturing and distribution channels?
This promise is real and it’s achievable, but as with so many things, the devil is in the details.
It’s a core belief at 3AG that your ERP solution needs to be customized and optimized to meet the unique needs of your organization. Out-of-the-box ERP deployments rarely deliver the results that vendors promise and stakeholders expect. Other key features of an optimized ERP include:
The CPG industry as a whole has been (and will continue to be) heavily impacted by the COVID-19 pandemic and the digital acceleration it has brought about. The situation requires urgent action. The recommendations in this article are intended to make the mammoth transformation (pun intended) a little less intimidating. Your approach to DX will be influenced by a host of internal and external factors. Make sure you have strong partners to help you navigate the process, and you should avoid being crushed by the beast.
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