Smart Manufacturing: CEOs Share Strategies, Tactics and Opportunities

The future of manufacturing has arrived—and what a future it is. The digitization of the end-to-end manufacturing process promises enhanced product quality, streamlined operations, increased productivity, lower costs, reduced waste and shorter time to market.

In today’s high-tech factories, the use of composite materials is already resulting in lighter, stronger, more flexible, more durable and less expensive machine parts. 3-D printers punch out single components that used to require hundreds of parts. Giant robots safely assemble complex modules in collaboration with people. And cloud-based machine learning and data science systems are connecting the end-to-end production process to generate insightful information that improves decision making.

The digital transformation of manufacturing is a historic event altering hardened foreign production and supply chain trends, in which production was pushed overseas to reduce labor costs. Thanks to the extraordinary efficiencies and cost savings of smart manufacturing, in which data-powered machines efficiently and cost-effectively control the process of making goods, expectations are in place for a rebirth of manufacturing on American shores.

The business opportunities presented by the digital transformation of manufacturing drew more than 200 CEOs of midsized and larger manufacturers to Seattle in May to attend the fifth annual Smart Manufacturing Summit, hosted by Chief Executive and cosponsored by The Boeing Company. “Manufacturers have a rare opportunity to leverage digital technology to partake in a renaissance of American manufacturing,” said Wayne Cooper, executive chairman of the Chief Executive Group, which publishes Chief Executive, in his opening remarks.

“Manufacturers have a rare opportunity to leverage digital technology to partake in a renaissance of American manufacturing.”

THE JOURNEY AHEAD
Many large U.S. manufacturers are well along in leveraging these opportunities, among them Boeing, Stanley Black & Decker, Siemens, ThyssenKrupp and Cisco, whose current and former CEOs and other senior executives leaders gave presentations at the Summit. Many leaders of midsize companies in attendance were there to learn more about advanced manufacturing before making an investment. Several expressed concern about competing to win the skillsets needed to operationalize the new technologies, while others brought up the challenge of recruiting workers to run the machinery.

Nevertheless, the overwhelming consensus was that the opportunities of smart manufacturing are significant enough that companies should dive in now rather than risk playing catch-up down the road. Many midsize manufacturers are hungering for technologies to make operations leaner and more agile. Thanks to the resurgent U.S. economy and growing market demand, the timing may be right to allocate capital in smart manufacturing initiatives.

Certainly, the collected responses of the attendees after the Summit indicated that many are eager to follow the lead of larger manufacturers like Stanley Black & Decker. “A dozen years ago, so many manufacturers were offshoring to get their labor and wage rates and materials costs as low as possible, including us,” said John Lundgren, former CEO and current chairman of the maker of industrial tools, household hardware and security products.

While this tactic reaped dividends at the time, it did little to produce continuous improvements in operational flexibility, risk management, data transparency and the elimination of waste. When The Stanley Works and Black & Decker merged in 2010 to form Stanley Black & Decker, Lundgren ushered in an end-to-end digital transformation strategy.

“We became vastly more efficient, more agile and operationally leaner,” he said. “In 2000, we had 4.5 working capital turns. Last year, we had 10.6 working capital turns, versus industrial peers that were in the 5 to 6 range. Our digital transformation strategy was the jump-starter of the combined company.”

NEW WAYS OF MAKING STUFF
Smart manufacturing presents value across the value chain. A case in point is engineered composite materials—that is, materials that contain at least two constituent parts. The range of composites is limited only by the imagination, with different types of metals, resins, polymers, ceramics and natural fibers blended in different ratios to form the material.