How Digitization Improves Value Creation

Individually manufactured products have always been a Fraba specialty. The SMB used to rely on skilled craftsmanship; its production is now based on digitization. Thanks to digital mass customization, Fraba manufactures one-offs and small production using mass production processes. Using a cloud IT solution developed in-house the company has also automated production processes and scrapped paper as an information carrier. Digital remote control is reflected impressively in the figures: productivity has increased by 500 percent in relation to a one-euro labor cost.  

Fraba is a textbook example of how to improve value creation by means of faster front office processes. According to the Smarter Production trendbook digitization increases value creation in manufacturing operations in three central areas: in customer alignment, within the company, and in supporting processes. “That requires companies to revise and digitize their entire process structure. They must speed up their front office processes, improve their value creation processes and make all of their back office processes more efficient,” the study’s authors say. The front office is where the company has direct customer contact. The back office is where the in-house corporate processes take place that customers do not see, such as Production, Warehouse or Accounts. The trendbook focuses on in-house digitization as a success factor for manufacturing enterprises.

Another SMB, Phoenix Contact, is an example of successful business-oriented value creation. Specialized in electrical engineering and headquartered in Blomberg, North Rhine-Westphalia, it manufactures around 60,000 different products, some highly automated, digitally. Via a Web configurator, customers can design and order up to 1,000 kinds of isolation amplifier. All systems involved in their production use digital data – from order creation to the finished product and the logistics. The World Economic Forum awarded Phoenix Contact a Global Lighthouse for Industry 4.0 for digitization and its use of innovative technology.

According to the techconsult and Deutsche Telekom benchmark study Digitalisierungsindex Mittelstand 2020/2021, more than three out of four industrial enterprises 78 percent) already use data analytics to monitor and optimize processes or develop new products. In addition, one SMB out of five connects these analyses with artificial intelligence (AI). Highly digitized industrial enterprises have also come through the covid crisis well because they had already digitized their business models or processes comprehensively. Eighty-one percent of companies confirmed that, according to the study, which found that industry has further increased the pace of digital transformation due to the covid crisis.

A recent study by management consultants PwC identified five factors that make up a good data strategy. “Many companies have invested heavily in data analytics technologies and infrastructure and are frustrated that their investments have not paid immediate dividends,” said Holger Schmidt, Partner, PwC Strategy & Germany. “Our analysis shows where they must adjust the screws to make full use of the benefits.” According to the study these factors are the cornerstones of every data strategy and determine its success:

• Organizational Structure: The structure maps, according to PwC, how the company handles its resources and activities. It also shows which data projects its employees are currently working on, how collaboration functions and how data governance is structured.
• Handling of Personnel Resources: Handling personnel resources, skills and abilities has a great influence on how companies can develop data expertise and retain specialists.
• Operating Model for Data & Analytics: How companies deal with individual use cases and data initiatives depends on the operating model, PwC says. “The aim is to share knowledge and information and decide on a sound basis which use cases are to be implemented.”
• Platform Landscape: Too many different platforms, the analysts say, cause high costs for operation, interfaces, compliance and personnel. A uniform technology platform is the gold standard.
• Data Access Philosophy: Companies must decide whether all data is to be accessible for employees or access is to be restricted. PwC: “This fundamental decision,” PwC says, “aims to extract as much information as possible from the data while protecting it at the same time.” The trend is toward open data insofar as regulatory requirements permit it.