A Guide to Digital Transformation in Manufacturing

The journey toward digital transformation in manufacturing may present hurdles, but the benefits are well worth the effort.

Navigating new technologies, scaling initiatives effectively, and avoiding analysis paralysis are just a few pitfalls to watch for. However, the advantages of digital transformation go beyond immediate gains like increased profits and cost savings. It also builds a resilient organization ready for ongoing change and future transformations.

To fully realize these benefits, integrating effective change management techniques is essential. This approach facilitates smoother transitions and ensures sustainable growth and adaptability.

In this article, we’ll explore the essence of digital transformation, its advantages for the manufacturing sector, and the role of change management in driving successful transformations.

What Is Digital Transformation in Manufacturing and Why Does it Matter?

Digital transformation in manufacturing involves implementing new digital technologies into manufacturing processes. The goal is to optimize efficiency, increase output and enhance quality control—all while reducing operational costs and lead times.

With the right digital technology, manufacturers can transform operations and gain massive competitive advantages. Technologies that facilitate digital transformation include:

• Artificial intelligence (AI) and machine learning (ML)
• Internet of Things (IoT)
• Cloud computing 
• Robotic process automation
• Big data and analytics
• Digital twin technology
• Augmented reality

These advanced technologies enable innovation, increase productivity and help companies respond to shifting market demands. They can also enable better decision-making through real-time data. Let’s take a closer look at the benefit of digital transformation in manufacturing.

Benefits of Digital Transformation in Manufacturing

Digital transformation has brought considerable value to various industries. The market is projected to reach $10 trillion by 2034. Although manufacturing has lagged behind, now is the time to realize the value of new technologies in this industry.

Here are the benefits of implementing digital transformation and examples of key technologies driving change.

Increases manufacturing efficiency

Maximizing efficiency is always a top priority, no matter what industry you operate in or the goods you produce. More efficient processes mean you can produce more, use fewer resources, or both.

For example, the right technology can reduce the percentage of unusable products. An example is the use of IoT sensors to monitor equipment. Research from Deloitte found that predictive analytics enabled by AI and IoT technologies reduces equipment breakdowns by 70%. Companies can use similar technologies to monitor equipment and keep it in good condition.

Improves quality control

Manufacturing isn’t just about producing more; it’s also about maintaining high-quality standards. 

One technology that can help manufacturers improve product quality is computer vision—a field of AI that enables computers to “see” products. It can detect defects with a high degree of accuracy and flag damaged goods.

Another groundbreaking tool is digital twin technology—a digital model of physical objects or systems. It uses IoT sensors and other devices to simulate real-world conditions. Manufacturers can create a virtual environment to “assemble” products to ensure components will fit before producing them. This helps companies avoid costly rework and improve quality control in their manufacturing processes.

Informs decision-making processes

Big data is shaping the manufacturing industry by helping companies unlock more insights. Analytics tools can gather and analyze data from various sources like machines, sensors and production systems. These digital tools can help manufacturers:

• Identify potential bottlenecks and optimize resource allocation.
• Predict equipment failure and reduce downtime.
• Forecast demand using AI to prevent overproduction.

With advanced analytics and real-time data collection, manufacturers can make more informed decisions. For example, you can anticipate buying behaviors with demand forecasting and ensure you have enough materials on hand to avoid production shortages.

Increases manufacturing sustainability 

The manufacturing industry has been constantly evolving in response to new technological innovations. However, increasing environmental regulations are also pushing manufacturers to adopt more sustainable practices. For example, the Federal Buy Clean Initiative was launched in 2022 to prioritize American-made, low-carbon construction materials for federal contracts. By meeting certain sustainability requirements, manufacturers can bid on these contracts and reduce their carbon footprint in the process.

One way digital transformation supports sustainability is by enabling real-time monitoring of sustainability metrics. Armal, a manufacturer in the portable sanitation industry, implemented a real-time IoT monitoring system in its production processes and reduced its energy consumption by 40%.

Enhances supply chain visibility

Supply chains are more complex than ever, making it harder for manufacturers to achieve end-to-end visibility. This limited visibility can delay decision-making and increase operational risks. Fifty-four percent of manufacturing leaders say improving supply chain visibility is one of their top priorities.

With technologies like blockchain and Radio Frequency Identification (RFID) tags, manufacturers can digitize physical assets and get real-time visibility of goods across the supply chain. They can also demonstrate to customers the source of raw materials to prove they meet ethical standards.

Digital Transformation Challenges in Manufacturing

Business leaders often believe that once the technical side is in place, they’ll start reaping the benefits immediately. But change initiatives can fail to “stick” when organizations overlook the people side of change—the individuals adopting and using the smart manufacturing technology.

Here are some of the challenges associated with the people side of digital transformation and how effective change management can help.

Resistance to change

Change can be uncomfortable. Organizations that implement new initiatives will likely encounter resistance from employees, who experience barriers to adopting the change, and may resist using different workflows or learning new technologies as a result.

Even those in more senior positions may resist change. Based on Prosci research, the groups most resistant to change are mid-level managers, followed by front-line employees.

Most Resistant Groups

The good news is you can prevent resistance to change. An effective change management strategy can prevent resistance by communicating the “why” behind a change and answering the “What’s in it for me?” question that impacted individuals often ask.

High initial costs

Digital transformation isn’t cheap when you implement new technologies like AI and robotics, sometimes across several sites. But it’s not just the upfront costs for hardware, software and infrastructure upgrades; there are also ongoing maintenance and training costs to consider. Then, there’s the potential downtime and productivity loss during system upgrades. 

Given the high upfront costs, it’s not surprising that 58% of digital leaders cite budget as one of the top barriers to accelerating digital transformation. 

Cost considerations can keep manufacturers from investing in digital strategies. When you make a strong case for change and support people through the process, you can get commitment from the impacted individuals and secure the necessary resources to implement digital transformation.

Skills gap in the workforce

Even with the latest technologies, your digital transformation journey will face major roadblocks without skilled workers to operate and maintain them. According to Udacity and Ipsos, 59% of employers report that the lack of qualified employees has a major or moderate impact on their business operations.

Manufacturers can address skills gaps by investing in comprehensive training programs for their employees. They can also develop change management strategies to help workers adapt to new technologies.

Lack of sponsor support 

Company leaders play a key role in initiating and sustaining change. As the primary sponsors of change, they’re responsible for ensuring the success of new initiatives. However, executives have packed schedules. Change practitioners cite a lack of time and resources from their sponsors as one of the top challenges to change management.

Sponsor Challenges

Without a well-defined roadmap and leadership commitment, digital transformation initiatives often lose direction or fail to deliver the expected results. Getting support from primary sponsors is essential for any digital transformation initiative. Our research shows that change practitioners having regular access to a sponsor is correlated with meeting or exceeding objectives from change initiatives.

Why Change Management Is Key to Digital Transformation in the Manufacturing Industry

Successfully implementing digital transformation in the manufacturing sector demands a robust approach that drives effective adoption.

Change management is the key to overcoming the challenges of digital transformation. Let’s explore how it can pave the way for a seamless transition and empower your organization to thrive.

1. Improves change readiness

Companies must continuously adapt to change. However, the effectiveness of change initiatives will depend on your organization’s change readiness—the level to which your company is willing and able to implement changes. This means having the right infrastructure in place and creating a supportive environment for impacted employees.

Here’s how change management can help encourage change readiness:

• Provide comprehensive training – For example, if your company is implementing new software, you can provide workshops to help employees adapt to new technologies. Use The Prosci ADKAR® Model to address adoption gaps.
• Keep communication open – Communication should never be ad hoc. Develop a communications plan to involve and engage employees early on. Hold regular meetings so impacted employees know what to expect.
• Take a proactive approach – Actively listen to and understand objections from employees. Involve impacted individuals in change-related decisions from the start to increase commitment.

Implementing these practices can help your organization become more change-ready and create a more supportive environment for digital transformation initiatives to flourish.

2. Prevents resistance to change

It’s not the implementation of technologies that companies struggle with; it’s addressing the people side of change. The Prosci Best Practices in Change Management - 12th Edition benchmarking study report shows that employee resistance is one of the top obstacles to change success.

Here’s how you can use change management to prevent resistance to change:

• Answer the “why” behind change – When implementing changes, employees will undoubtedly ask: “Why do we have to do this?” Build awareness to help impacted individuals understand the need for change and how it will impact them. 
• Identify potential resistance – Understand which groups are most resistant to change and tailor your approach to address their concerns early. Concerns may include lack of support, misalignment of project goals, and lack of confidence.
• Resolve barriers to change – Get to the root cause of resistance to change and take steps to remove those barriers from the start. For example, you could invest in more comprehensive training to ensure impacted individuals are confident in their ability to adapt to a new technology.

By applying a structured change management process, you can prevent resistance to change and get more employees on board with your digital transformation efforts. You can also minimize disruptions to your production lines and facilitate change at the individual level.

3. Achieves strategic objectives

Applying change management principles increases the likelihood of successful adoption and usage of new technologies. Our research shows initiatives with excellent change management are seven times more likely to meet project objectives.

Correlation Between Change Management and Project Success

Initiatives with effective change management can also help projects:

• Stay on schedule – Without a clear direction, digital transformation projects can face significant delays and implementation challenges that can hinder adoption. Projects with excellent change management are five times more likely to be on or ahead of schedule than poor change management.
• Stay on or under budget – Project leaders often worry that new initiatives will go over budget. However, our data shows that projects with excellent change management are 1.5 times more likely to stay on or under budget. This can help you build a stronger case for digital transformation.
• Achieve higher adoption rates – Change management focuses on the people side of change. By actively supporting individuals as they move to a future state (how things will be done). With structured frameworks, you can increase adoption rates and sustain project outcomes.

In short, change management ensures that digital transformation efforts align with an organization’s strategic objectives. 

3 Real-World Examples of Digital Transformation in Manufacturing

Here are various case studies of manufacturers across different sectors successfully applied change management to facilitate change and reach new objectives.

1. Global manufacturing

A global manufacturing company was experiencing rapid growth and quickly recognized it needed to optimize its operations to keep up. The company started with the HR department before making more sweeping changes across the enterprise.

Challenge:

• Limited experience with building change capability.

Solution:

• Go where the energy is – The company has a strong track record in project management. However, HR leaders recognized that the rest of the company wasn’t ready for a capability build. So, they played to their strengths and started implementing changes in the HR department before preparing for an enterprise-wide capability build.

Results: 

• Gained leadership commitment to deploy changes on a larger scale.
• Accomplished an organization-wide shift in company culture.
• Increased employee engagement on key change initiatives.

2. Home fixtures

A home fixtures manufacturing company was experiencing lingering effects from the recession, such as higher production costs and supply chain delays. They needed to make their operations more lean and efficient to stay competitive.

Challenge:

• Change management was a low priority for the company.

Solution:

• Align with your culture – Change management can fail when you don’t make culture an important consideration. The company implemented change initiatives in a way that aligned with their culture of projects and business processes.

Results:

• Increased change management commitment from impacted employees.
• Cultivated an environment that’s more conducive to change.
• Managed resistance to change by aligning initiatives with company culture.

3. Medical and packaging

Husky Technologies manufactures a wide range of injection molding equipment for the medical and packaging industries. The company demonstrated initial success applying change management, but it wanted to expand its application.

Challenge:

• Applying change management practices to other areas of the organization.

Solution:

• Deploy on a key business initiative – Building momentum for change initiatives is essential. By demonstrating the value of change management early on, you can get commitment and increase support from key stakeholders. Husky used our ADKAR Model to successfully apply change management to other initiatives across the company.

Results:

• Leveraged initial success to gain commitment.
• Brought the value of change management to other initiatives.
• Provided employees with comprehensive role-based training.

These success stories demonstrate how manufacturers have used structured change management approaches to boost their digital transformation efforts and enable change at all organizational levels.

Embrace the Future of Manufacturing With Digital Transformation and Change Management

Digital transformation is revolutionizing the manufacturing industry. To navigate this complex environment, you need more than just technology. Your organization must prioritize change adoption at an enterprise level. This requires a structured change management approach that empowers every individual to embrace new ways of working and grow stronger from change.

At Prosci, we understand that successful change hinges on engaging people at every level. Our expertise will help you implement effective change management practices that facilitate smoother transitions and ensure sustainable growth and adaptability.

Join us on this journey to unlock the full potential of your digital transformation. Together, we can turn challenges into opportunities and lead your organization to thrive. Embrace Change Done Right with Prosci as your trusted partner.