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Operational Excellence through Digital in Manufacturing Industries
2 
Manufacturing companies have historically had an on-off relation with technology. Most have aggressively adopted traditional technologies such as Enterprise Resource Planning (ERP). However, they have been slow in adopting recent digital technologies such as big data analytics, real-time order confirmation, Web-EDI among others. Moreover, most have adopted technologies to varying extent creating a connectivity gap in their operations. We believe digital technologies will help manufacturing companies in eliminating this gap. Our research and project experience indicate that by adopting digital tools, manufacturing companies can cut costs by as much as 30% by enabling savings on capital costs, labor field force among other key cost elements. 
The first area where digital technologies can have significant impact is on manufacturing operations. Most manufacturers still rely on traditional and outdated models of planning. By migrating to advanced planning systems, and using digital technologies, they can gain greater visibility into their manufacturing operations. LG Display integrated seven different planning and execution systems to gain a unified process data view of its global plants. 
Supply chain visibility is a key item on the agenda of Supply Chain Management (SCM) professionals. Over the years, SCM has seen deployment of multiple disparate digital tools, creating a siloed system that distorts end-to-end visibility. Digital tools can help bridge these connectivity gaps. Levi Strauss & Co. reduced manual tracking and tracing of inbound shipments by 98% by implementing a supply chain visibility platform supporting ASN (Advanced Shipping Notification). 
Digital tools aid the service function in overcoming information paucity, enabling effective scheduling, providing multifunctional tools to field technicians and driving the overall productivity of service operations. Kinetico, a manufacturer of water treatment systems, cut its service resolution time into half, after deploying a cloud-based service management solution. 
We believe digital technologies can help manufacturing organizations achieve excellence in manufacturing operations. However, this requires a structured approach involving, among other steps, a maturity assessment, prioritization of digital initiatives and setting up of a digital operating process model. Manufacturers should also consider lessons learnt from the earlier generation of technology deployments and stay away from taking a silo-based approach. 
Executive Summary
3 
Manufacturing companies have 
traditionally been early adopters of 
selected technology such as ERP and 
Production Planning systems. For 
instance, a survey among 170 global 
manufacturers reported that 92% of 
them had implemented an ERP systemi. 
Manufacturers also have systems in place 
that are able to support the management 
and control of internal material flow. Most 
warehouses are managed automatically 
and machines are controlled by CNC1 or 
DNC2 software. However, the challenge 
is that most of these initiatives have been 
implemented in silos. Different processes 
have been made digital at different times 
The manufacturing 
industry is a ‘Beginner’ in 
digital maturity. 
Manufacturing Companies Do Not Fully 
Leverage Digital Technologies 
and to varying extent. Consequently, 
most manufacturing companies have 
not achieved a complete integration of 
information flow along the operations 
process. 
Compared to older technologies such as 
ERP, manufacturing companies have been 
quite slow to adopt more recent digital 
technologies. Our research with the MIT 
Center for Digital Business showed that 
only 12% of manufacturing companies 
are truly leveraging the power of digital 
technologies – we call these companies 
Digiratis3. This compares unfavorably 
to other industries such as banking, 
Figure 1: Digital Maturity by Industry, 2012 
Source: Capgemini Consulting – MIT Center for Digital Business research, 2012 
insurance and telecom where over 30% 
of companies are Digiratis. As an overall 
industry, manufacturing companies 
collectively fall in the “Beginners” category 
(see Figure 1). 
Banking 
Consumer 
Packaged Goods 
Insurance 
Utilities 
Manufacturing 
Pharmaceuticals 
Retail 
High Technology 
Travel and Telecom 
hospitality 
Transformation Management Intensity 
Digital Intensity 
Fashionistas Digirati 
Beginners Conservatives 
Digital intensity measures how advanced digital initiatives are 
within an organization. This includes investments in customer 
experience, operational processes, business model transformation, 
as well as digital capabilities. 
Transformation management intensity measures senior executives’ 
capability to drive change throughout the organization. This 
includes creating and communicating a clear vision, establishing 
governance mechanisms, facilitating cross-silo coordination, and 
building a digital-ready culture. 
1 CNC = Computerized Numerical Control 
2 DNC = Distributed Numerical Control 
3 Digiratis are the category of companies that exhibit the highest amount of digital maturity, a combination of digital initiatives and management practices
4 
Only 38% of manufacturing industry executives indicated that digital initiatives in their company were coordinated across functions or regions. 
Our research indicates that while manufacturing companies have invested in technologies, they have largely done this in silos. Only 38% of manufacturing industry executives indicated that digital initiatives in their company were coordinated across functions or regions. Such an approach results in connectivity gaps where information does not flow freely across departments and business units. This hinders achieving operational excellence. Manufacturing companies have now begun to recognize this gap. For instance, a global survey highlighted that 75% of manufacturers considered improving internal cross-departmental systems, and process collaboration and integration as their top strategic prioritiesii. 
Most manufacturing companies today are still in the early stages of their digital transformation journey. They are not leveraging the significant benefits that digital technologies can bring in driving operational excellence. 
In this paper, we take a look at how digitization will help manufacturing companies in the key three main process domains of manufacturing operations, supply chain and service maintenance. For each of these areas, we assess how manufacturers can minimize the connectivity gap. We conclude the paper with an actionable roadmap on how to achieve operational excellence using digital transformation.
5 
Digital Technologies Enable Operational 
Excellence in Manufacturing Operations 
When it comes to key aspects of 
operations, most manufacturers still rely 
on outdated models of planning, systems 
that offer poor visibility and involve 
excessive human intervention leading to 
suboptimal results. 
LG Display integrated 
7 different systems and 
created a unified process 
data view resulting in 
better decision-making. 
troubleshooting, and manual data entry 
tasks. Consideration of current production 
capacity enables organizations to prevent 
outcomes such as unreasonable delivery 
dates. Finite planning and execution tools 
take existing capacity into account, unlike 
infinite planning that assumes unlimited 
capacity. In combination with real-time 
confirmation and current machine 
status information, resource overload 
situations can be avoided resulting in a 
feasible production order plan that would 
eliminate manual intervention. Reliable 
and real time order confirmation can be 
enabled by machines connected to the 
ERP and integrated with customer order 
management system. This will enable 
companies to give their customers 
realistic order confirmations leading to 
increased customer satisfaction. 
By integrating information flow during all 
steps of operations, the visibility required 
to properly manage these end-to-end 
processes can be achieved. Consider 
the case of LG Display. It is a leading 
global manufacturer of LCD panels. 
The company had been using disparate 
Manufacturing Execution Systems (MES) 
in each of its plants. They were facing 
challenges with data standardization, 
standards of production information 
and hardware profiles. They wanted to 
integrate all of the MES with their existing 
ERP in order to make their business 
systems real-time. They also wanted to 
consolidate decision-making systems 
by processing and displaying real-time 
information through ERP. The company 
integrated multiple areas of its IT systems 
Lack of Integration between 
planning and execution 
impedes operations 
Materials Requirements Planning (MRP) 
is a key part of operations management 
and inventory control in most 
manufacturing operations. MRP systems 
ensure that materials are available for 
production while maintaining the lowest 
possible material and product levels 
in store. They are also responsible for 
purchasing and manufacturing activities 
and for planning delivery schedules. 
However, manufacturers continue to 
rely on traditional methods of operations 
execution. It is estimated that more than 
70% of manufacturers still use ‘Infinite 
Planning’ methods through MRP systems 
to schedule their production programiii. 
Such ‘Infinite Planning’ methods forecast 
potential future capacity without taking 
into consideration the actual capacity 
constraints of each individual work 
stream. Instead, they assume an infinite 
capacity, which results in machine 
overload and unrealistic delivery dates. 
This causes split of production orders, 
inventory carrying and change-over costs. 
As a result, frequent manual adjustments 
on shop floor control level need to be 
done to improve deviations in production. 
The unnecessary manual work impedes 
automation and overall productivity, and 
adds waste to the system. 
Digital Tools Afford Greater 
Visibility 
Digital integrated production planning 
and shop floor control improve visibility 
into production progress and material 
availability. These tools help in avoiding 
activities with limited value-add such 
as searching for material, counting and 
including Enterprise Resource Planning 
(ERP), Master Data Management (MDM), 
Element Management System (EMS), 
Manufacturing Execution System (MES), 
Supply Chain Management (SCM) and 
dataware house (MDW, EDW). Post the 
deployment, the company was able to 
have a unified process data view of 9 
overseas offices of LG Display. Through 
data standardization and process 
re-establishment, systematic data 
connection and integration between 
European, Korean, and foreign offices 
was made possible, resulting in better 
decision-makingiv. 
Digital Technologies 
Cut Down on Delays 
by Eliminating Human 
Intervention 
Connecting an Advanced ERP system 
with a machine control system allows 
for direct transfer of production orders to 
the machine. Alternately, the production 
orders can be transferred to digital 
devices, which display them to the 
shop floor control team. This eliminates 
manual tasks and automatically 
directs information flow to the target 
destination. The connectivity between 
ERP and operations execution system 
also introduces more transparency and 
visibility into material availability (see 
Figure 2).
6 
Figure 2: Integrated Digital Manufacturing Operations 
Source: Capgemini Consulting Analysis 
Sales Operator Machine 
ERP APS APS APS MCS 
Sales Operator Machine Operator Supervisor 
MRP 
Digitized System Manual System 
Order Management 
Order 
Management 
Production 
Planner 
Production 
Scheduler 
Shop Floor 
Controller 
Production Planner Production Scheduler Shop Floor Controller 
ERP 
ERP 
Mobile device
7 
Supply chain visibility is a key item 
on the agenda of Supply Chain 
Management (SCM) professionals. 
Similar to manufacturing operations, 
SCM has seen the implementation of 
multiple disparate digital tools, which 
creates a siloed system and distorts 
end-to-end visibility. Indeed, our global 
survey found that over 40% of supply 
chain executives believed that improving 
supply chain visibility could improve their 
organization’s competitive advantageV. 
There are three major connectivity gaps 
related to supply chain management 
processes. These include the 
ƒƒ point of sales connection and 
immediate customer order reactivity, 
ƒƒ lack of inventory visibility during 
inbound transit, production and 
outbound transfer and 
ƒƒ absence of integrated supply chain 
planning and execution. 
These gaps can collectively lead to 
process and cost inefficiencies. 
Flow of Digital Data Simplifies Supply 
Chain Management 
40% of supply chain 
executives believe 
improving supply chain 
visibility can result in the 
organization gaining a 
competitive advantage. 
Companies can achieve 
savings of over 20% in 
transport costs by using 
end-to-end planning 
systems and processes. 
90% of suppliers incur 
anywhere between 
0-7% of their sales as 
additional costs due to 
forecast deviations. 
Digital Tools Bridge 
Connectivity Gaps 
Multiple sales opportunities are lost due 
to the inability to confirm customer orders 
quickly and consistently. Academic 
research has shown that the magnitude 
of lost sales increases with time delaysVi. 
Similarly, production downtime often 
occurs when there is no information 
regarding delays in the inbound supply 
chain. Lack of visibility into stock levels 
results in overproduction and inventory 
pile-up. Research studies indicate that 
over 90% of suppliers incur anywhere 
between 0-7% of their sales as additional 
costs due to forecast deviationsvii. 
Integrated digital tools perform 
information synchronization, inventory 
management, order fulfillment, delivery 
planning and coordination. These tools 
take the guesswork out of operations 
and reduce complexity during the 
planning process. The coordinated use 
of an Advanced Planning System, Point 
of Sale data and analytics solutions 
ensures reliability of sales projections 
and stability of the supply chain. Fully 
integrated planning systems that take 
into account actual capacity restrictions 
help avoid unnecessary production, 
troubleshooting and premium freights. 
Integrated Business 
Planning Drives 
Transparency 
Manufacturing companies can increase 
the overall level of transparency in 
their supply chains by using advanced 
planning tools and integrating company 
functions during the planning process. 
This leads to greater stability in inputs 
across planning and operational 
processes. It also helps companies to 
be more effective at customer demand-driven 
production and delivery. We have 
observed that reliable planning can 
significantly drive down logistics costs 
for transportation. Order splits caused by 
‘surprises’ in the supply chain typically 
lead to additional transportation and 
handling efforts. These can be avoided 
by using end-to-end planning systems 
and processes that provide full visibility 
into the supply chain. Companies 
that have implemented such systems 
have shown that savings up to 20% of 
transport costs can be achieved – by 
eliminating order split and emergency 
freight (often air freight). In the case of 
a Swiss manufacturing company, we 
found that additional transport required, 
caused by late deliveries due to order 
split, reduced by 13%. Reliable planning 
can also reduce the cost of warehousing 
as inventory levels can be optimized. 
Moreover, such integrated planning also 
ensures that stock levels are optimized 
based on forecasted demand that is 
derived from historical sales and inputs 
from sales teamsviii.
8 
Levi Strauss & Co. reduced manual tracking and tracing of inbound shipments by 98% by implementing a supply chain visibility platform supporting ASN. 
Figure 3: End-to-End Digitally Enabled Supply Chain Model 
Source: Capgemini Consulting Analysis 
Integrated Business Planning 
POS dataSocial media listeningMarket informationDemandProductionDigitized Operations ExecutionSourceMakeDeliverEDIASNEDI / Web-EDI, ASNATPATPBig data analyticsSales forecastWeb-EDISupply / NetworkAPSAuto-confirmation 
Digital Technologies Enable Effective Management of Information Flow 
Digital technologies can also be used to manage the information flow from suppliers to the manufacturing facilities and further down the value chain to the customer. This can be achieved through technologies such as EDI4- enabled Advanced Shipping Notification (ASN)5. Similarly, companies can connect inventory management tools across transport modes using digital technologies such as positioning and navigation systems (see Figure 3). 
Take the case of apparel company Levi Strauss & Co. The company sells its products through a variety of channels including retail chains, department stores and online sites. Managing inbound logistics for the company was a complex task as it required interfacing with hundreds of trading partners through manufacturing and supply bases located across Asia, Middle East, Africa and Latin America. Levi Strauss & Co. deployed a best-of-breed supply chain visibility platform to handle their inbound logistics. A key requirement was the need for the platform to handle shipping notifications that came through EDI. Post the implementation, Levi Strauss & Co. experienced a positive impact on the safety stock, improved its lead times and staff efficiency. They were able to realize the benefits in less than 18 months as against an initial estimate of two years. The deployment also enabled the company to reduce manual tracking and tracing of inbound shipments by a significant 98% and calls/emails by 80% as the system provided self help 
to usersix. 
4 EDI = Electronic Data Interchange 
5 Advanced Shipping Notification is a notification of pending deliveries and is usually sent in an electronic format
9 
58% of organizations in a 
survey treated the service 
function as a profit center 
with clear profit and loss 
objectives in place. 
Research suggests over 
65% of incoming service 
requests require a field 
visit or a dispatch. 
Field Service Becomes More Effective 
using Digital Tools 
The service and maintenance function 
has evolved from being a cost center 
to a significant value generator for 
manufacturers. A recent survey reported 
that 58% of organizations treated 
the service function as a profit center 
with clear profit and loss objectives in 
place. Similarly, 54% of organizations 
see service as a means to rise above 
competitive pressures from other 
manufacturing or service organizationsx. 
However, controlling activities in the 
service and maintenance function 
presents a challenge, particularly with 
increasing number of outsourced service 
partners. Due to this, the end-to-end 
control and visibility across the function 
decreases resulting in suboptimal after-sales 
performance. The service function 
is plagued by several key challenges, 
which can be overcome with effective 
use of digital technologies. 
information is available by integrating an 
ERP/CRM solution where this data is held 
centrally. Since all captured information is 
stored centrally, it minimizes the chances 
that information scarcity and quality will 
impact the overall service function. 
Digital Tools Help Overcome 
Information Paucity 
A common challenge across service 
functions is the lack of information at 
the right place and at the right time. For 
instance, missing information on installed 
base can result in wrong estimation of 
resource calculation for servicing and 
efficient call handling. Similarly, multiple 
instances of capturing information at call 
reception, field service and escalation to 
second- and third-level support result in 
suboptimal information transfer, which 
impacts the service process. In an 
integrated digital environment, relevant 
Diebold, a manufacturer of self-service 
transaction systems such as ATMs, 
had over 2,200 service technicians 
and received over 11,000 service calls 
per day in the US alone. The company 
faced multiple challenges with efficiently 
servicing its customer base, prioritization 
of jobs and visibility into field operations. 
The company rolled out a scheduling 
solution integrating its existing CRM, 
logistics, parts management, reporting 
and mobility components. Post the 
deployment, the company improved the 
number of calls per technician by 33% 
and also gained greater visibility and 
control of the service operationxi. 
Digital Tools Enable 
Effective Scheduling of 
Field Force 
Managing field force and assigning 
schedules represent a significant 
challenge in a manual process. Digital 
tools eliminate the guesswork that is 
inherent in such manual operations. Take 
the case of a fleet operator that maintains 
and repairs a fleet of over 4,000 vehicles 
with 400 employees. A typical process 
involved eight sheets of large paper for 
scheduling these employees. After their 
move to a digital scheduling solution, the 
time a supervisor spent to prepare daily 
schedules came down from half a day 
to 90 minutes. Supervisors can now use 
their smartphones to resolve scheduling 
issues on-the-goxii. 
Digital Technologies 
Provide Multifunctional 
Tools for Field Technicians 
Digital tools help service technicians 
improve customer satisfaction levels. 
Research carried out with over 220 
service and manufacturing organizations 
indicated that over 65% of incoming 
service requests require a field visit or a 
dispatchxiii. For these field technicians, 
the ability to be remotely connected 
to central databases is critical for 
information retrieval. Centrally hosted 
tools allow service technicians to reduce 
problem resolution time and potentially 
increase their billable time by reducing 
unnecessary rework. 
Take the case of McKinley Equipment, 
a company that makes warehouse 
and loading dock equipment. The 
company faced three primary challenges 
– converting paper archives to data 
streams, creating a more efficient 
workflow for its field service technicians 
and delivering an enhanced customer 
experience. In 2011, it adopted tablets 
and a cloud-based CRM and service 
solution for its field technicians. The 
company has seen a significant rise in 
first-call fix rates. With the new solution, 
technicians can now directly update 
the work ticket, show the customer the 
necessary parts on the tablet and get a 
signature on the tablet itself to approve 
the new parts order. This order can then 
be sent from the service solution. The 
company experienced a direct increase 
of 38% in its service business as a result 
of gaining a new account through these 
digital toolsxiv.
10 
Kinetico cut its service resolution time into half, post the deployment of a cloud-based service management solution. 
Digital Tools Drive Overall Productivity of Service Operations 
Manual management of service organizations typically results in 
inefficient operations. Field technicians are challenged with inefficient knowledge management and suboptimal quality of information. They also face challenges in managing work orders and handling escalations through manual processes. Digital tools can significantly impact overall productivity of service operations by eliminating many of these manual challenges. 
For instance, Kinetico, a manufacturer of water treatment systems faced many similar issues with using manual spreadsheets that were shared via email. As the company grew, the existing manual nature of the process caused them to miss deadlines with their customers. Moreover, the process gave the company little insight or metrics around its service performance. It implemented a cloud-based service management solution that had the ability to manage work orders, handle escalations, automate scheduling, and generate reporting and metric tracking to overcome these challenges. As a result, resolution time has been cut in half, technicians have high visibility into work orders and save significantly on time. Post the implementation, technicians are automatically notified of an open case in their area and can easily debrief with a work orderXV. 
Digital technologies can help integrate several service and maintenance tasks such as planning activities, checking availability of required spare parts and consumables, physical transportation and ensuring efficient remote services and scheduling of field technicians. Figure 4 illustrates the integration of data exchange and information flow in a digitalized service model. 
Figure 4: Digital Service Model 
Source: Capgemini Consulting Analysis 
Machines 
Analytic toolsKnowledge databaseERP/CRMPhysical inventory (spare parts) Data ExchangeSeamless information flowPre-processingSatellite systemsSatellite systemsSatellite systemsSatellite systemsSatellite systemsPhone/remote solutionSchedulingField service/ physical solutionPost processing
11 
Digital Tools Can Help Manufacturing Companies Cut Costs by 30% 
Digital tools have a very strong impact across the three key areas of manufacturing operations, supply chain management and service. We believe manufacturing companies can realize significant cost savings while driving delivery reliability, quality and customer satisfaction by deploying digital initiatives. We summarize a selection of tools and their impact on key success factors in the below charts. 
Key Cost and Productivity Benefits from Integrated Digital Manufacturing Processes 
Key Cost and Productivity Benefits from Integrated Digital Service Function 
Key Cost and Productivity Benefits from Integrated Digital Supply Chain 
Area of Impact 
Digital Tool/Initiative 
Influence on Key Success Factors 
Cost of Goods Sold 
Capital Cost 
Delivery Reliability 
Quality of Service 
Customer Satisfaction 
Manufacturing Operations 
Introduction of Finite Planning 
3 
3 
3 
2 
2 
Real-time Order Coordination 
2 
2 
3 
2 
3 
Potential Improvements, based on Capgemini Consulting Project Experience 
-20% 
-30% 
+25% 
+30% 
+30% 
Area of Impact 
Digital Tool/Initiative 
Influence on Key Cost Elements 
Labor call handling 
Labor field force 
Labor Supporting Processes 
Inventory Costs 
Penalties for Missed SLAs 
Service Operations 
POS Data-Big 
Data Analytics 
2 
2 
1 
1 
3 
Integrated end- to-end Business Planning 
2 
2 
3 
3 
3 
Real-time Order Confirmation 
3 
3 
0 
4 
4 
Web-EDI 
3 
3 
0 
3 
2 
Planning-Execution Integration 
4 
3 
4 
2 
1 
Potential Cost Reduction, based on Capgemini Consulting Project Experience 
-5% 
-30% 
+5% 
-20% 
-8~-15% 
Area of Impact 
Digital Tool/Initiative 
Influence on Key Cost Elements 
Labor call handling 
Labor field force 
Labor Supporting Processes 
Inventory Costs 
Penalties for Missed SLAs 
Service Operations 
Integrated ERP/CRM 
3 
2 
4 
1 
3 
Flexible Satellite Systems 
4 
1 
1 
0 
0 
Planning and Scheduling Software 
3 
4 
0 
0 
2 
Knowledge Database 
3 
3 
0 
0 
2 
Technological Integration machine- service 
2 
4 
0 
0 
1 
Big Data Analysis Tools 
3 
3 
0 
3 
1 
Advanced Hardware/ Software for Field Service 
3 
4 
2 
1 
2 
Potential Cost Reduction, based on Capgemini Consulting Project Experience 
-40% 
-30% 
-25% 
-10% 
-15% 
0 1 2 3 4 
Relative Impact 
Maximum 
Minimum
How Can Organizations Achieve Operational 
Excellence through Digital Transformation? 
The starting point of the digital 
transformation journey varies from 
one organization to another, mainly 
due to different digital footprint and 
maturity levels. Across manufacturing, 
SCM, service and maintenance, there 
are a variety of digital initiatives that 
organizations can select. Organizations 
need to have a structured approach 
when implementing these digital 
initiatives (see Figure 5). 
First, manufacturing companies 
should undertake a comprehensive 
maturity assessment of where they 
stand. This should be done across 
the two key dimensions of process 
maturity and digital maturity. A Digital 
Maturity Assessment (DMA) reveals 
the current level of process digitization 
compared to the availability of digital 
process support options. Performance 
maturity assessments add information 
about the positioning of a company’s 
process maturity and the opportunities 
for improvement. This stage helps 
companies identify the right starting point 
for developing an operational excellence 
strategy through process digitization. 
Without a clear understanding of the 
opportunity and the potential value 
for the company the transformation 
journey would lack a clear focus and 
thus would not progress in the right 
direction. A maturity assessment is the 
basis for further progress and enables 
Figure 5: Digital Transformation Roadmap for Manufacturing Companies 
Source: Capgemini Consulting Analysis 
Assess Maturity Define Vision & Mission Prioritize 
Fix Basics and Lay 
Foundation 
Implement 
Define Digital Process 
& Architecture 
12 
organizations to decide on a clear go/ 
no-go based on where they stand. 
The second step is to develop a clear 
organizational vision and mission that 
answers what operational excellence in 
the future means to the organization and 
why it is good for the organization. 
Manufacturing companies should 
bear in mind that it is more complex to 
enhance and adjust existing tools than to 
implement new processes and solutions. 
As such, it becomes important to 
prioritize areas of interest. Consequently, 
the next step is to prioritize integration 
of digital initiatives according to the 
expected operations benefits and level
of implementation efforts. For instance, a company that is facing challenges in sending the right information to its field technicians should focus on creating a Web-based knowledge database before thinking of initiatives such as integrated ERP/CRM (see Figure 6). 
Figure 6: Digital Initiatives’ Impact on Operational Excellence and 
Implementation Effort 
Source: Capgemini Consulting Analysis 
Im 
pact on OPEX Implementation Effort HighLow HighLowManufacturing SCM Service & MaintenancePOS data integrationin planningIntegrated ERP/CRMField Planningscheduling tools Knowledge Webdata baseMachine-Service integrationAnalytics – machinemonitorConectivity for fieldserviceIntegrated E2E Planning (APS&IBP) Real time productionconfirmationWeb EDIPlanning-ExecutionintegrationReal-time order confirmationFlexible satellitesystems 
After prioritizing initiatives, organizations should proceed to create an efficient process architecture that imbibes meaningful digital elements. This architecture should clearly lay out how a digitized value chain for the company would work and the steps involved in getting there. 
The next step is to create a strong foundation for the transformation towards operational excellence by setting up the organizational environment, and defining the digital operating process model and the relevant IT infrastructure. 
And finally, the implementation stage will involve significant process redesign and adjustments, training of employees across levels and deployment of software solutions that will enable the company to run with optimized digitized processes. 
In summary, digital transformation in manufacturing processes will drive operational excellence by enhancing information flow and eliminate waste across manufacturing, supply chain management and service operations. Manufacturing organizations should realize that digital technologies offer them a strong opportunity to efficiently connect processes and people, and use information effectively without connectivity gaps. They should also consider lessons learnt from the earlier generation of technology deployments and stay away from taking a silo-based approach towards digital technologies. Instead, the focus needs to be on leveraging digital technologies to make information flow fluid and drive operational excellence. 
13
14 
i 
Aberdeen Research, “ERP in Manufacturing 2012: The Evolving ERP Strategy”,July 2012 
ii 
Aberdeen Research, “Supply Chain Visibility: Fostering Security, Resiliency, and Efficiency”, October 2012 
iii 
The Association for Operations Management, “Material Requirements Planning in a Demand-Driven World”, October 2011; 
Capgemini Consulting analysis 
iv 
LG CNS and HP Case Studies on LG Display 
v 
Capgemini Consulting, “The 2013 Supply Chain Agenda”, 2012 
vi 
JTAER, “Disruptions in Information Flow: A Revenue Costing Supply Chain Dilemma”, January 2008 
vii 
VDA Study, 2008 
viii 
Capgemini Consulting client 
ix 
Aberdeen Group, “Supply Chain Visibility Excellence”, March 2011 
x 
Aberdeen Group, “State of Service Management: Outlook for 2013”, January 2013 
xi 
Clicksoftware case study 
xii 
Public Works Magazine, “On-the-fly field force scheduling”, February 2013 
xiii 
Aberdeen Group, “Field Service 2012”, February 2012 
xiv 
Search Consumerization, “How iPads and a field service app transformed McKinley Equipment”, April 2013 
xv 
ServiceMAX case study 
References
Rightshore® is a trademark belonging to Capgemini 
Capgemini Consulting is the global strategy and transformation 
consulting organization of the Capgemini Group, specializing 
in advising and supporting enterprises in significant 
transformation, from innovative strategy to execution and with 
an unstinting focus on results. With the new digital economy 
creating significant disruptions and opportunities, our global 
team of over 3,600 talented individuals work with leading 
companies and governments to master Digital Transformation, 
drawing on our understanding of the digital economy and 
our leadership in business transformation and organizational 
change. 
Find out more at: 
http://www.capgemini-consulting.com/ 
With more than 125,000 people in 44 countries, Capgemini 
is one of the world’s foremost providers of consulting, 
technology and outsourcing services. The Group reported 2012 
global revenues of EUR 10.3 billion. Together with its clients, 
Capgemini creates and delivers business and technology 
solutions that fi t their needs and drive the results they want. A 
deeply multicultural organisation, Capgemini has developed its 
own way of working, the Collaborative Business ExperienceTM, 
and draws on Rightshore®, its worldwide delivery model. 
Learn more about us at www.uk.capgemini.com 
About Capgemini and the 
Collaborative Business Experience 
Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group. The information contained in this document is proprietary. 
© 2013 Capgemini. All rights reserved. 
Authors 
For more information contact: 
Digital Transformation 
Research Institute 
dtri.in@capgemini.com 
Gunnar Ebner 
gunnar.ebner@capgemini.com 
Wolfgang Klade 
wolfgang.klade@capgemini.com 
Ralph Schneider-Maul 
ralph.schneider-maul@capgemini.com 
France 
Jean-Francois Laget 
jean-francois.laget@capgemini.com 
India 
Anindya S Datta 
anindya.datta@capgemini.com 
Central Europe 
Dr. Gunnar Ebner 
gunnar.ebner@capgemini.com 
Netherlands 
Martijn Holt 
martijn.holt@capgemini.com 
North America 
Thomas Wrobleski 
thomas.wrobleski@capgemini.com 
Spain 
Carlos Garcia Santos 
carlos.garcia.s@capgemini.com 
Middle East 
Jawad Shaikh 
jawad.shaikh@capgemini.com 
SWEFI 
Ulf Jansson 
ulf.jansson@capgemini.com 
United Kingdom 
Julian Fielden-Page 
julian.fieldenpage@capgemini.com 
China 
Sophia Li 
sophia.li@capgemini.com 
Subrahmanyam KVJ 
subrahmanyam.kvj@capgemini.com 
Jerome Buvat 
jerome.buvat@capgemini.com

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Operational excellence through digital in manufacturing industries capgemini consulting - digital transformation

  • 1. Operational Excellence through Digital in Manufacturing Industries
  • 2. 2 Manufacturing companies have historically had an on-off relation with technology. Most have aggressively adopted traditional technologies such as Enterprise Resource Planning (ERP). However, they have been slow in adopting recent digital technologies such as big data analytics, real-time order confirmation, Web-EDI among others. Moreover, most have adopted technologies to varying extent creating a connectivity gap in their operations. We believe digital technologies will help manufacturing companies in eliminating this gap. Our research and project experience indicate that by adopting digital tools, manufacturing companies can cut costs by as much as 30% by enabling savings on capital costs, labor field force among other key cost elements. The first area where digital technologies can have significant impact is on manufacturing operations. Most manufacturers still rely on traditional and outdated models of planning. By migrating to advanced planning systems, and using digital technologies, they can gain greater visibility into their manufacturing operations. LG Display integrated seven different planning and execution systems to gain a unified process data view of its global plants. Supply chain visibility is a key item on the agenda of Supply Chain Management (SCM) professionals. Over the years, SCM has seen deployment of multiple disparate digital tools, creating a siloed system that distorts end-to-end visibility. Digital tools can help bridge these connectivity gaps. Levi Strauss & Co. reduced manual tracking and tracing of inbound shipments by 98% by implementing a supply chain visibility platform supporting ASN (Advanced Shipping Notification). Digital tools aid the service function in overcoming information paucity, enabling effective scheduling, providing multifunctional tools to field technicians and driving the overall productivity of service operations. Kinetico, a manufacturer of water treatment systems, cut its service resolution time into half, after deploying a cloud-based service management solution. We believe digital technologies can help manufacturing organizations achieve excellence in manufacturing operations. However, this requires a structured approach involving, among other steps, a maturity assessment, prioritization of digital initiatives and setting up of a digital operating process model. Manufacturers should also consider lessons learnt from the earlier generation of technology deployments and stay away from taking a silo-based approach. Executive Summary
  • 3. 3 Manufacturing companies have traditionally been early adopters of selected technology such as ERP and Production Planning systems. For instance, a survey among 170 global manufacturers reported that 92% of them had implemented an ERP systemi. Manufacturers also have systems in place that are able to support the management and control of internal material flow. Most warehouses are managed automatically and machines are controlled by CNC1 or DNC2 software. However, the challenge is that most of these initiatives have been implemented in silos. Different processes have been made digital at different times The manufacturing industry is a ‘Beginner’ in digital maturity. Manufacturing Companies Do Not Fully Leverage Digital Technologies and to varying extent. Consequently, most manufacturing companies have not achieved a complete integration of information flow along the operations process. Compared to older technologies such as ERP, manufacturing companies have been quite slow to adopt more recent digital technologies. Our research with the MIT Center for Digital Business showed that only 12% of manufacturing companies are truly leveraging the power of digital technologies – we call these companies Digiratis3. This compares unfavorably to other industries such as banking, Figure 1: Digital Maturity by Industry, 2012 Source: Capgemini Consulting – MIT Center for Digital Business research, 2012 insurance and telecom where over 30% of companies are Digiratis. As an overall industry, manufacturing companies collectively fall in the “Beginners” category (see Figure 1). Banking Consumer Packaged Goods Insurance Utilities Manufacturing Pharmaceuticals Retail High Technology Travel and Telecom hospitality Transformation Management Intensity Digital Intensity Fashionistas Digirati Beginners Conservatives Digital intensity measures how advanced digital initiatives are within an organization. This includes investments in customer experience, operational processes, business model transformation, as well as digital capabilities. Transformation management intensity measures senior executives’ capability to drive change throughout the organization. This includes creating and communicating a clear vision, establishing governance mechanisms, facilitating cross-silo coordination, and building a digital-ready culture. 1 CNC = Computerized Numerical Control 2 DNC = Distributed Numerical Control 3 Digiratis are the category of companies that exhibit the highest amount of digital maturity, a combination of digital initiatives and management practices
  • 4. 4 Only 38% of manufacturing industry executives indicated that digital initiatives in their company were coordinated across functions or regions. Our research indicates that while manufacturing companies have invested in technologies, they have largely done this in silos. Only 38% of manufacturing industry executives indicated that digital initiatives in their company were coordinated across functions or regions. Such an approach results in connectivity gaps where information does not flow freely across departments and business units. This hinders achieving operational excellence. Manufacturing companies have now begun to recognize this gap. For instance, a global survey highlighted that 75% of manufacturers considered improving internal cross-departmental systems, and process collaboration and integration as their top strategic prioritiesii. Most manufacturing companies today are still in the early stages of their digital transformation journey. They are not leveraging the significant benefits that digital technologies can bring in driving operational excellence. In this paper, we take a look at how digitization will help manufacturing companies in the key three main process domains of manufacturing operations, supply chain and service maintenance. For each of these areas, we assess how manufacturers can minimize the connectivity gap. We conclude the paper with an actionable roadmap on how to achieve operational excellence using digital transformation.
  • 5. 5 Digital Technologies Enable Operational Excellence in Manufacturing Operations When it comes to key aspects of operations, most manufacturers still rely on outdated models of planning, systems that offer poor visibility and involve excessive human intervention leading to suboptimal results. LG Display integrated 7 different systems and created a unified process data view resulting in better decision-making. troubleshooting, and manual data entry tasks. Consideration of current production capacity enables organizations to prevent outcomes such as unreasonable delivery dates. Finite planning and execution tools take existing capacity into account, unlike infinite planning that assumes unlimited capacity. In combination with real-time confirmation and current machine status information, resource overload situations can be avoided resulting in a feasible production order plan that would eliminate manual intervention. Reliable and real time order confirmation can be enabled by machines connected to the ERP and integrated with customer order management system. This will enable companies to give their customers realistic order confirmations leading to increased customer satisfaction. By integrating information flow during all steps of operations, the visibility required to properly manage these end-to-end processes can be achieved. Consider the case of LG Display. It is a leading global manufacturer of LCD panels. The company had been using disparate Manufacturing Execution Systems (MES) in each of its plants. They were facing challenges with data standardization, standards of production information and hardware profiles. They wanted to integrate all of the MES with their existing ERP in order to make their business systems real-time. They also wanted to consolidate decision-making systems by processing and displaying real-time information through ERP. The company integrated multiple areas of its IT systems Lack of Integration between planning and execution impedes operations Materials Requirements Planning (MRP) is a key part of operations management and inventory control in most manufacturing operations. MRP systems ensure that materials are available for production while maintaining the lowest possible material and product levels in store. They are also responsible for purchasing and manufacturing activities and for planning delivery schedules. However, manufacturers continue to rely on traditional methods of operations execution. It is estimated that more than 70% of manufacturers still use ‘Infinite Planning’ methods through MRP systems to schedule their production programiii. Such ‘Infinite Planning’ methods forecast potential future capacity without taking into consideration the actual capacity constraints of each individual work stream. Instead, they assume an infinite capacity, which results in machine overload and unrealistic delivery dates. This causes split of production orders, inventory carrying and change-over costs. As a result, frequent manual adjustments on shop floor control level need to be done to improve deviations in production. The unnecessary manual work impedes automation and overall productivity, and adds waste to the system. Digital Tools Afford Greater Visibility Digital integrated production planning and shop floor control improve visibility into production progress and material availability. These tools help in avoiding activities with limited value-add such as searching for material, counting and including Enterprise Resource Planning (ERP), Master Data Management (MDM), Element Management System (EMS), Manufacturing Execution System (MES), Supply Chain Management (SCM) and dataware house (MDW, EDW). Post the deployment, the company was able to have a unified process data view of 9 overseas offices of LG Display. Through data standardization and process re-establishment, systematic data connection and integration between European, Korean, and foreign offices was made possible, resulting in better decision-makingiv. Digital Technologies Cut Down on Delays by Eliminating Human Intervention Connecting an Advanced ERP system with a machine control system allows for direct transfer of production orders to the machine. Alternately, the production orders can be transferred to digital devices, which display them to the shop floor control team. This eliminates manual tasks and automatically directs information flow to the target destination. The connectivity between ERP and operations execution system also introduces more transparency and visibility into material availability (see Figure 2).
  • 6. 6 Figure 2: Integrated Digital Manufacturing Operations Source: Capgemini Consulting Analysis Sales Operator Machine ERP APS APS APS MCS Sales Operator Machine Operator Supervisor MRP Digitized System Manual System Order Management Order Management Production Planner Production Scheduler Shop Floor Controller Production Planner Production Scheduler Shop Floor Controller ERP ERP Mobile device
  • 7. 7 Supply chain visibility is a key item on the agenda of Supply Chain Management (SCM) professionals. Similar to manufacturing operations, SCM has seen the implementation of multiple disparate digital tools, which creates a siloed system and distorts end-to-end visibility. Indeed, our global survey found that over 40% of supply chain executives believed that improving supply chain visibility could improve their organization’s competitive advantageV. There are three major connectivity gaps related to supply chain management processes. These include the ƒƒ point of sales connection and immediate customer order reactivity, ƒƒ lack of inventory visibility during inbound transit, production and outbound transfer and ƒƒ absence of integrated supply chain planning and execution. These gaps can collectively lead to process and cost inefficiencies. Flow of Digital Data Simplifies Supply Chain Management 40% of supply chain executives believe improving supply chain visibility can result in the organization gaining a competitive advantage. Companies can achieve savings of over 20% in transport costs by using end-to-end planning systems and processes. 90% of suppliers incur anywhere between 0-7% of their sales as additional costs due to forecast deviations. Digital Tools Bridge Connectivity Gaps Multiple sales opportunities are lost due to the inability to confirm customer orders quickly and consistently. Academic research has shown that the magnitude of lost sales increases with time delaysVi. Similarly, production downtime often occurs when there is no information regarding delays in the inbound supply chain. Lack of visibility into stock levels results in overproduction and inventory pile-up. Research studies indicate that over 90% of suppliers incur anywhere between 0-7% of their sales as additional costs due to forecast deviationsvii. Integrated digital tools perform information synchronization, inventory management, order fulfillment, delivery planning and coordination. These tools take the guesswork out of operations and reduce complexity during the planning process. The coordinated use of an Advanced Planning System, Point of Sale data and analytics solutions ensures reliability of sales projections and stability of the supply chain. Fully integrated planning systems that take into account actual capacity restrictions help avoid unnecessary production, troubleshooting and premium freights. Integrated Business Planning Drives Transparency Manufacturing companies can increase the overall level of transparency in their supply chains by using advanced planning tools and integrating company functions during the planning process. This leads to greater stability in inputs across planning and operational processes. It also helps companies to be more effective at customer demand-driven production and delivery. We have observed that reliable planning can significantly drive down logistics costs for transportation. Order splits caused by ‘surprises’ in the supply chain typically lead to additional transportation and handling efforts. These can be avoided by using end-to-end planning systems and processes that provide full visibility into the supply chain. Companies that have implemented such systems have shown that savings up to 20% of transport costs can be achieved – by eliminating order split and emergency freight (often air freight). In the case of a Swiss manufacturing company, we found that additional transport required, caused by late deliveries due to order split, reduced by 13%. Reliable planning can also reduce the cost of warehousing as inventory levels can be optimized. Moreover, such integrated planning also ensures that stock levels are optimized based on forecasted demand that is derived from historical sales and inputs from sales teamsviii.
  • 8. 8 Levi Strauss & Co. reduced manual tracking and tracing of inbound shipments by 98% by implementing a supply chain visibility platform supporting ASN. Figure 3: End-to-End Digitally Enabled Supply Chain Model Source: Capgemini Consulting Analysis Integrated Business Planning POS dataSocial media listeningMarket informationDemandProductionDigitized Operations ExecutionSourceMakeDeliverEDIASNEDI / Web-EDI, ASNATPATPBig data analyticsSales forecastWeb-EDISupply / NetworkAPSAuto-confirmation Digital Technologies Enable Effective Management of Information Flow Digital technologies can also be used to manage the information flow from suppliers to the manufacturing facilities and further down the value chain to the customer. This can be achieved through technologies such as EDI4- enabled Advanced Shipping Notification (ASN)5. Similarly, companies can connect inventory management tools across transport modes using digital technologies such as positioning and navigation systems (see Figure 3). Take the case of apparel company Levi Strauss & Co. The company sells its products through a variety of channels including retail chains, department stores and online sites. Managing inbound logistics for the company was a complex task as it required interfacing with hundreds of trading partners through manufacturing and supply bases located across Asia, Middle East, Africa and Latin America. Levi Strauss & Co. deployed a best-of-breed supply chain visibility platform to handle their inbound logistics. A key requirement was the need for the platform to handle shipping notifications that came through EDI. Post the implementation, Levi Strauss & Co. experienced a positive impact on the safety stock, improved its lead times and staff efficiency. They were able to realize the benefits in less than 18 months as against an initial estimate of two years. The deployment also enabled the company to reduce manual tracking and tracing of inbound shipments by a significant 98% and calls/emails by 80% as the system provided self help to usersix. 4 EDI = Electronic Data Interchange 5 Advanced Shipping Notification is a notification of pending deliveries and is usually sent in an electronic format
  • 9. 9 58% of organizations in a survey treated the service function as a profit center with clear profit and loss objectives in place. Research suggests over 65% of incoming service requests require a field visit or a dispatch. Field Service Becomes More Effective using Digital Tools The service and maintenance function has evolved from being a cost center to a significant value generator for manufacturers. A recent survey reported that 58% of organizations treated the service function as a profit center with clear profit and loss objectives in place. Similarly, 54% of organizations see service as a means to rise above competitive pressures from other manufacturing or service organizationsx. However, controlling activities in the service and maintenance function presents a challenge, particularly with increasing number of outsourced service partners. Due to this, the end-to-end control and visibility across the function decreases resulting in suboptimal after-sales performance. The service function is plagued by several key challenges, which can be overcome with effective use of digital technologies. information is available by integrating an ERP/CRM solution where this data is held centrally. Since all captured information is stored centrally, it minimizes the chances that information scarcity and quality will impact the overall service function. Digital Tools Help Overcome Information Paucity A common challenge across service functions is the lack of information at the right place and at the right time. For instance, missing information on installed base can result in wrong estimation of resource calculation for servicing and efficient call handling. Similarly, multiple instances of capturing information at call reception, field service and escalation to second- and third-level support result in suboptimal information transfer, which impacts the service process. In an integrated digital environment, relevant Diebold, a manufacturer of self-service transaction systems such as ATMs, had over 2,200 service technicians and received over 11,000 service calls per day in the US alone. The company faced multiple challenges with efficiently servicing its customer base, prioritization of jobs and visibility into field operations. The company rolled out a scheduling solution integrating its existing CRM, logistics, parts management, reporting and mobility components. Post the deployment, the company improved the number of calls per technician by 33% and also gained greater visibility and control of the service operationxi. Digital Tools Enable Effective Scheduling of Field Force Managing field force and assigning schedules represent a significant challenge in a manual process. Digital tools eliminate the guesswork that is inherent in such manual operations. Take the case of a fleet operator that maintains and repairs a fleet of over 4,000 vehicles with 400 employees. A typical process involved eight sheets of large paper for scheduling these employees. After their move to a digital scheduling solution, the time a supervisor spent to prepare daily schedules came down from half a day to 90 minutes. Supervisors can now use their smartphones to resolve scheduling issues on-the-goxii. Digital Technologies Provide Multifunctional Tools for Field Technicians Digital tools help service technicians improve customer satisfaction levels. Research carried out with over 220 service and manufacturing organizations indicated that over 65% of incoming service requests require a field visit or a dispatchxiii. For these field technicians, the ability to be remotely connected to central databases is critical for information retrieval. Centrally hosted tools allow service technicians to reduce problem resolution time and potentially increase their billable time by reducing unnecessary rework. Take the case of McKinley Equipment, a company that makes warehouse and loading dock equipment. The company faced three primary challenges – converting paper archives to data streams, creating a more efficient workflow for its field service technicians and delivering an enhanced customer experience. In 2011, it adopted tablets and a cloud-based CRM and service solution for its field technicians. The company has seen a significant rise in first-call fix rates. With the new solution, technicians can now directly update the work ticket, show the customer the necessary parts on the tablet and get a signature on the tablet itself to approve the new parts order. This order can then be sent from the service solution. The company experienced a direct increase of 38% in its service business as a result of gaining a new account through these digital toolsxiv.
  • 10. 10 Kinetico cut its service resolution time into half, post the deployment of a cloud-based service management solution. Digital Tools Drive Overall Productivity of Service Operations Manual management of service organizations typically results in inefficient operations. Field technicians are challenged with inefficient knowledge management and suboptimal quality of information. They also face challenges in managing work orders and handling escalations through manual processes. Digital tools can significantly impact overall productivity of service operations by eliminating many of these manual challenges. For instance, Kinetico, a manufacturer of water treatment systems faced many similar issues with using manual spreadsheets that were shared via email. As the company grew, the existing manual nature of the process caused them to miss deadlines with their customers. Moreover, the process gave the company little insight or metrics around its service performance. It implemented a cloud-based service management solution that had the ability to manage work orders, handle escalations, automate scheduling, and generate reporting and metric tracking to overcome these challenges. As a result, resolution time has been cut in half, technicians have high visibility into work orders and save significantly on time. Post the implementation, technicians are automatically notified of an open case in their area and can easily debrief with a work orderXV. Digital technologies can help integrate several service and maintenance tasks such as planning activities, checking availability of required spare parts and consumables, physical transportation and ensuring efficient remote services and scheduling of field technicians. Figure 4 illustrates the integration of data exchange and information flow in a digitalized service model. Figure 4: Digital Service Model Source: Capgemini Consulting Analysis Machines Analytic toolsKnowledge databaseERP/CRMPhysical inventory (spare parts) Data ExchangeSeamless information flowPre-processingSatellite systemsSatellite systemsSatellite systemsSatellite systemsSatellite systemsPhone/remote solutionSchedulingField service/ physical solutionPost processing
  • 11. 11 Digital Tools Can Help Manufacturing Companies Cut Costs by 30% Digital tools have a very strong impact across the three key areas of manufacturing operations, supply chain management and service. We believe manufacturing companies can realize significant cost savings while driving delivery reliability, quality and customer satisfaction by deploying digital initiatives. We summarize a selection of tools and their impact on key success factors in the below charts. Key Cost and Productivity Benefits from Integrated Digital Manufacturing Processes Key Cost and Productivity Benefits from Integrated Digital Service Function Key Cost and Productivity Benefits from Integrated Digital Supply Chain Area of Impact Digital Tool/Initiative Influence on Key Success Factors Cost of Goods Sold Capital Cost Delivery Reliability Quality of Service Customer Satisfaction Manufacturing Operations Introduction of Finite Planning 3 3 3 2 2 Real-time Order Coordination 2 2 3 2 3 Potential Improvements, based on Capgemini Consulting Project Experience -20% -30% +25% +30% +30% Area of Impact Digital Tool/Initiative Influence on Key Cost Elements Labor call handling Labor field force Labor Supporting Processes Inventory Costs Penalties for Missed SLAs Service Operations POS Data-Big Data Analytics 2 2 1 1 3 Integrated end- to-end Business Planning 2 2 3 3 3 Real-time Order Confirmation 3 3 0 4 4 Web-EDI 3 3 0 3 2 Planning-Execution Integration 4 3 4 2 1 Potential Cost Reduction, based on Capgemini Consulting Project Experience -5% -30% +5% -20% -8~-15% Area of Impact Digital Tool/Initiative Influence on Key Cost Elements Labor call handling Labor field force Labor Supporting Processes Inventory Costs Penalties for Missed SLAs Service Operations Integrated ERP/CRM 3 2 4 1 3 Flexible Satellite Systems 4 1 1 0 0 Planning and Scheduling Software 3 4 0 0 2 Knowledge Database 3 3 0 0 2 Technological Integration machine- service 2 4 0 0 1 Big Data Analysis Tools 3 3 0 3 1 Advanced Hardware/ Software for Field Service 3 4 2 1 2 Potential Cost Reduction, based on Capgemini Consulting Project Experience -40% -30% -25% -10% -15% 0 1 2 3 4 Relative Impact Maximum Minimum
  • 12. How Can Organizations Achieve Operational Excellence through Digital Transformation? The starting point of the digital transformation journey varies from one organization to another, mainly due to different digital footprint and maturity levels. Across manufacturing, SCM, service and maintenance, there are a variety of digital initiatives that organizations can select. Organizations need to have a structured approach when implementing these digital initiatives (see Figure 5). First, manufacturing companies should undertake a comprehensive maturity assessment of where they stand. This should be done across the two key dimensions of process maturity and digital maturity. A Digital Maturity Assessment (DMA) reveals the current level of process digitization compared to the availability of digital process support options. Performance maturity assessments add information about the positioning of a company’s process maturity and the opportunities for improvement. This stage helps companies identify the right starting point for developing an operational excellence strategy through process digitization. Without a clear understanding of the opportunity and the potential value for the company the transformation journey would lack a clear focus and thus would not progress in the right direction. A maturity assessment is the basis for further progress and enables Figure 5: Digital Transformation Roadmap for Manufacturing Companies Source: Capgemini Consulting Analysis Assess Maturity Define Vision & Mission Prioritize Fix Basics and Lay Foundation Implement Define Digital Process & Architecture 12 organizations to decide on a clear go/ no-go based on where they stand. The second step is to develop a clear organizational vision and mission that answers what operational excellence in the future means to the organization and why it is good for the organization. Manufacturing companies should bear in mind that it is more complex to enhance and adjust existing tools than to implement new processes and solutions. As such, it becomes important to prioritize areas of interest. Consequently, the next step is to prioritize integration of digital initiatives according to the expected operations benefits and level
  • 13. of implementation efforts. For instance, a company that is facing challenges in sending the right information to its field technicians should focus on creating a Web-based knowledge database before thinking of initiatives such as integrated ERP/CRM (see Figure 6). Figure 6: Digital Initiatives’ Impact on Operational Excellence and Implementation Effort Source: Capgemini Consulting Analysis Im pact on OPEX Implementation Effort HighLow HighLowManufacturing SCM Service & MaintenancePOS data integrationin planningIntegrated ERP/CRMField Planningscheduling tools Knowledge Webdata baseMachine-Service integrationAnalytics – machinemonitorConectivity for fieldserviceIntegrated E2E Planning (APS&IBP) Real time productionconfirmationWeb EDIPlanning-ExecutionintegrationReal-time order confirmationFlexible satellitesystems After prioritizing initiatives, organizations should proceed to create an efficient process architecture that imbibes meaningful digital elements. This architecture should clearly lay out how a digitized value chain for the company would work and the steps involved in getting there. The next step is to create a strong foundation for the transformation towards operational excellence by setting up the organizational environment, and defining the digital operating process model and the relevant IT infrastructure. And finally, the implementation stage will involve significant process redesign and adjustments, training of employees across levels and deployment of software solutions that will enable the company to run with optimized digitized processes. In summary, digital transformation in manufacturing processes will drive operational excellence by enhancing information flow and eliminate waste across manufacturing, supply chain management and service operations. Manufacturing organizations should realize that digital technologies offer them a strong opportunity to efficiently connect processes and people, and use information effectively without connectivity gaps. They should also consider lessons learnt from the earlier generation of technology deployments and stay away from taking a silo-based approach towards digital technologies. Instead, the focus needs to be on leveraging digital technologies to make information flow fluid and drive operational excellence. 13
  • 14. 14 i Aberdeen Research, “ERP in Manufacturing 2012: The Evolving ERP Strategy”,July 2012 ii Aberdeen Research, “Supply Chain Visibility: Fostering Security, Resiliency, and Efficiency”, October 2012 iii The Association for Operations Management, “Material Requirements Planning in a Demand-Driven World”, October 2011; Capgemini Consulting analysis iv LG CNS and HP Case Studies on LG Display v Capgemini Consulting, “The 2013 Supply Chain Agenda”, 2012 vi JTAER, “Disruptions in Information Flow: A Revenue Costing Supply Chain Dilemma”, January 2008 vii VDA Study, 2008 viii Capgemini Consulting client ix Aberdeen Group, “Supply Chain Visibility Excellence”, March 2011 x Aberdeen Group, “State of Service Management: Outlook for 2013”, January 2013 xi Clicksoftware case study xii Public Works Magazine, “On-the-fly field force scheduling”, February 2013 xiii Aberdeen Group, “Field Service 2012”, February 2012 xiv Search Consumerization, “How iPads and a field service app transformed McKinley Equipment”, April 2013 xv ServiceMAX case study References
  • 15. Rightshore® is a trademark belonging to Capgemini Capgemini Consulting is the global strategy and transformation consulting organization of the Capgemini Group, specializing in advising and supporting enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus on results. With the new digital economy creating significant disruptions and opportunities, our global team of over 3,600 talented individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the digital economy and our leadership in business transformation and organizational change. Find out more at: http://www.capgemini-consulting.com/ With more than 125,000 people in 44 countries, Capgemini is one of the world’s foremost providers of consulting, technology and outsourcing services. The Group reported 2012 global revenues of EUR 10.3 billion. Together with its clients, Capgemini creates and delivers business and technology solutions that fi t their needs and drive the results they want. A deeply multicultural organisation, Capgemini has developed its own way of working, the Collaborative Business ExperienceTM, and draws on Rightshore®, its worldwide delivery model. Learn more about us at www.uk.capgemini.com About Capgemini and the Collaborative Business Experience Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group. The information contained in this document is proprietary. © 2013 Capgemini. All rights reserved. Authors For more information contact: Digital Transformation Research Institute dtri.in@capgemini.com Gunnar Ebner gunnar.ebner@capgemini.com Wolfgang Klade wolfgang.klade@capgemini.com Ralph Schneider-Maul ralph.schneider-maul@capgemini.com France Jean-Francois Laget jean-francois.laget@capgemini.com India Anindya S Datta anindya.datta@capgemini.com Central Europe Dr. Gunnar Ebner gunnar.ebner@capgemini.com Netherlands Martijn Holt martijn.holt@capgemini.com North America Thomas Wrobleski thomas.wrobleski@capgemini.com Spain Carlos Garcia Santos carlos.garcia.s@capgemini.com Middle East Jawad Shaikh jawad.shaikh@capgemini.com SWEFI Ulf Jansson ulf.jansson@capgemini.com United Kingdom Julian Fielden-Page julian.fieldenpage@capgemini.com China Sophia Li sophia.li@capgemini.com Subrahmanyam KVJ subrahmanyam.kvj@capgemini.com Jerome Buvat jerome.buvat@capgemini.com