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The impact of smart factories on the automotive industry

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From production to the retail environment to the driving experience, the automotive industry is currently in an unprecedented phase of digital transformation.

Car sharing apps, connected cars, the increasing digitization of the car shopping experience, and the increasing goal of personalization are all big DX topics within the industry. Even tire technology is getting an upgrade via AI and IoT

But what about smart factories?

According to a new report from the Capgemini Research Institute, the automotive industry is pushing ahead of its industrial peers with respect to smart factory adoption — increasing investment by more than 60% in the next three years, translating to productivity gains of more than $160 billion.

In tracking smart factory deployment automotive Original Equipment Manufacturers (OEMs) and suppliers in 2019, and comparing results to equivalent research from 2017/18, Capgemini found that “both projected investment levels and productivity gains relating to smart factories are significant, but that only a minority of automotive firms are fully ready to take advantage through deployment at scale.”

Within their analysis, 72% of automotive firms are “novices” and 10% are “frontrunners” — ready to realize the full potential of smart factories at scale. Capgemini’s research shows firms can realize annual productivity gains of 2.8%–4.4% by 2023 from smart factory initiatives.

One of the biggest takeaways is that 30% of factories in the automotive industry have been made smart in the past 18-24 months. As an example, Audi’s greenfield smart factory in Mexico was put into operation 30% faster than usual, with the entire process chain optimized.

Furthermore, 80% of automotive manufacturers believe 5G is key to their digital transformation over the next five years.

The appetite for smart factories in the automotive sector is clearly very strong — a justified move, given the multi-billions in potential benefits. Those OEMs and suppliers that want to achieve scale and smart factory wins need to accelerate the prioritization of Capgemini’s recommendations: strategy, integrated systems solutions, IT-OT convergence, and a talent reboot.

DX Journal Staff
Author: DX Journal Staff

DX Journal covers the impact of digital transformation (DX) initiatives worldwide across multiple industries.

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Where is the financial value in AI? Employing multiple human-machine learning approaches, say experts

According to a new study, only 10% of organizations are achieving significant financial benefits with AI.

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AI is everywhere these days — especially as we work to fight the spread of COVID-19

Even in the “before times,” AI was a hot topic that always found itself in the center of most digital transformation conversations. A new study from MIT Sloan Management Review, BCG GAMMA, and BCG Henderson Institute, however, prompts a crucial question:

Are You Making the Most of Your Relationship with AI?

Finding value

Despite the proliferation of the technology and increased investment, according to the report, just 10% of organizations are achieving significant financial benefits with AI. The secret ingredient in these success stories? “Multiple types of interaction and feedback between humans and AI,” which translated into a six-times better chance of amplifying the organization’s success with AI.

“The single most critical driver of value from AI is not algorithms, nor technology — it is the human in the equation,” affirms report co-author Shervin Khodabandeh.

 

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From a survey of over 3,000 managers from 29 industries based in 112 countries — plus in-depth interviews with experts — the report outlined three investments organizations can make to maximize value:

  • The likelihood of achieving benefits increases by 19% with investment in AI infrastructure, talent, and strategy.
  • Scalability. When organizations think beyond automation as a use case, the likelihood of financial benefit increases by 18%.
  • “Achieving organizational learning with AI (drawing on multiple interaction modes between humans and machines) and building feedback loops between human and AI increases that likelihood by another 34%.”

According to report co-author Sam Ransbotham, at the core of successfully creating value from AI is continuous learning between human and machine:

“Isolated AI applications can be powerful. But we find that organizations leading with AI haven’t changed processes to use AI. Instead, they’ve learned with AI how to change processes. The key isn’t teaching the machines. Or even learning from the machines. The key is learning with the machines — systematically and continuously.” 

Continued growth

While just 1 in 10 organizations finds financial benefits with AI, 70% of respondents understand how it can generate value — up from 57% in 2017.

Additionally, 59% of respondents have an AI strategy, compared to 39% in 2017, the survey found. Finally, 57% of respondents say their organizations are “piloting or deploying” AI — not a huge increase from 2017 (46%). 

One of the biggest takeaways? According to co-author David Kiron, “companies need to calibrate their investments in technology, people, and learning processes.”

“Financial investments in technology and people are important, but investing social capital in learning is critical to creating significant value with AI.”

DX Journal Staff

Author: DX Journal Staff

DX Journal covers the impact of digital transformation (DX) initiatives worldwide across multiple industries.

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Bringing DX to the food supply chain in a pandemic

In a new paper, supply chain stakeholders share how COVID-19 has affected the transformation of the sector.

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There’s little doubt that COVID-19 had a profound effect on the food supply chain.

As one example, just think back to roughly March of this year, when virus transmission was rapidly picking up speed. Remember the reports of food and beverage companies only producing their most popular or essential products? Or how it would take slightly longer than usual to restock certain products? What about the rush to integrate — or quickly improve the efficiency of — digital and e-commerce. 

Panning out a bit, think about food safety and quality professionals. The need to stay safe — and in many cases, stay at home — meant performing the very hands-on job of monitoring, auditing, inspecting at a distance, i.e. digitally. 

When the food supply chain was hit by storages, delays, breakdowns, and lockdowns, the end result was — like in so many sectors — a rapid digital transformation.

As The Food Safety Market — an SME-powered industrial data platform dedicated to boosting the competitiveness of European food certification — elaborates in a new discussion paper, “technology has played an important role in enabling business continuity in the new reality.”

The paper — Digital Transformation of Food Quality & Safety: How COVID-19 accelerates the adoption of digital technologies across the food supply chain — features industry experts from companies like Nestlé, Ferrero, PepsiCo, McCormick & Company, and more discussing the effects of the pandemic on the supply chain.

A few highlights from the paper:

  • John Carter, Area Europe Quality Director for Ferrero put the issue of food access into perspective at the start of his interview:

“The production of food defines our world. The effects of agriculture on our daily lives are so omnipresent that they can be easy to overlook; landscapes and societies are profoundly influenced by the need to feed our growing population. But much has been taken for granted. Only occasionally are we forced to consider: ‘where does our food come from?'”

  • Ellen de Brabander, Senior Vice President of R&D for PepsiCo provided insight on the cost benefits of digital transformation:

“The need for customization is a big driver for accelerating digital transformation and moving away from a ‘one size fits all’ approach. This means that the cost to develop and produce a product must be lower and digital technologies provide a clear opportunity here.” 

  • Clare Menezes, Director of Global Food Integrity for McCormick & Company brought up one area where digital tools need to go:

“There aren’t any areas where digital tools “fail”, but there is a need for tools that ‘prove out’ predictions around where the next integrity event will play out and how it could lead to quality or food safety failure. These tools are an obvious candidate for AI given the number of PESTLE factors that might come into play.” 

Want to read all of the interviews? Check out the paper here.

DX Journal Staff

Author: DX Journal Staff

DX Journal covers the impact of digital transformation (DX) initiatives worldwide across multiple industries.

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Looking ahead at Digital Transformation in 2021

What’s coming next year? More massive growth in DX investment and IT, and a pivotal role for CIOs in economic recovery.

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What’s to come next year? According to IDC’s 2021 predictions, more massive growth in digital transformation investment and IT, and a pivotal role for CIOs in economic recovery.

Every year, the leading DX market research firm releases its series of FutureScape reports, which, according to IDC, “are used to shape IT strategy and planning for the enterprise by providing a basic framework for evaluating IT initiatives in terms of their value to business strategy now and in the foreseeable future.”

Let’s look at the highlights for three of the IDC FutureScape reports for 2021:

Digital Transformation Predictions

As we’ve firmly established, the global COVID-19 pandemic has largely accelerated DX efforts. 

According to IDC’s report, “direct digital transformation (DX) investment is still growing at a compound annual growth rate (CAGR) of 15.5% from 2020 to 2023.” It’s expected that investment will approach $6.8 trillion, as a result of companies quickly modifying their existing strategies in an effort to prioritize digital-first.

“Organizations with new digital business models at their core that are successfully executing their enterprise-wide strategies on digital platforms are well-positioned for continued success in the digital platform economy,” explains Shawn Fitzgerald, research director, Worldwide Digital Transformation Strategies. 

“Our 2021 digital transformation predictions represent areas of notable opportunity to differentiate your own digital transformation strategic efforts.”

IDC has also revealed their top 10 DX predictions. The top three are:

  • Accelerated DX Investments Create Economic Gravity: “The economy remains on course to its digital destiny with 65% of global GDP digitized by 2022.”

  • Digital Organization Structures and Roadmaps Mature: “By 2023, 75% of organizations will have comprehensive digital transformation (DX) implementation roadmaps, up from 27% today, resulting in true transformation across all facets of business and society.”

  • Digital Management Systems Mature: “By 2023, 60% of leaders in G2000 organizations will have shifted their management orientation from processes to outcomes, establishing more agile, innovative, and empathetic operating models.”

Read the full list here.

IT Predictions

When looking at IDC’s IT predictions for 2021, the firm explains that “to succeed in this period of change, CIOs and digitally driven C-suites need to focus on three areas over the next five years.”

First, they need to address gaps within IT that emerged in the immediate response to the pandemic. Up next, is making sure that accelerated IT and DX efforts are “locked in.” 

Finally, and as IDC says, most importantly, “they must seek opportunities to leverage new technologies to take advantage of competitive/industry disruptions and extend capabilities for business acceleration in the Next Normal.”

While COVID has shown that organizations can — and for the most part, did — respond and adapt quickly, to do so is a marker of future success in the digital economy, explained IDC Group Vice President for Worldwide Research, Rick Villars. 

“A large percentage of a future enterprise’s revenue depends upon the responsiveness, scalability, and resiliency of its infrastructure, applications, and data resources.”

IDC again released a top 10 list of predictions for this category. The top three are:

  • The acceleration of the shift to cloud-centric infrastructure
  • The increasing importance of the edge
  • “The Intelligent Digital Workspace”

Read the full list here.

CIO Agenda predictions

The pandemic has caused many business leaders to rethink their entire organizational structure and workflow. 

CIOs have faced many challenges this year — given the speed of digitization for most businesses — and they’ll need to be in the front seat of the upcoming recovery efforts as well, IDC reports.

“In a time of turbulence and uncertainty, CIOs and senior IT leaders must discern how IT will enable the future growth and success of their enterprise while ensuring its resilience,” said Serge Findling, vice president of Research for IDC’s IT Executive Programs.

IDC’s list of predictions starts with these three at the top:

  • “By 2022, 65% of CIOs will digitally empower and enable front-line workers with data, AI, and security to extend their productivity, adaptability, and decision-making in the face of rapid changes.”
  • Cyber attacks, trade wars, and a shaky economy will mean CIO struggle to adapt. IDC predicts that 30% of CIOs will not be able to protect trust.
  • The accumulation of technical debt accumulated during the pandemic will cause “financial stress, inertial drag on IT agility, and “forced march” migrations to the cloud.”

Read the full list here

DX Journal Staff

Author: DX Journal Staff

DX Journal covers the impact of digital transformation (DX) initiatives worldwide across multiple industries.

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