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Digital margin

By Lauren Duensing

Manufacturers can reap up to a tenfold return in efficiency and stronger, more predictable profits, says Lauri Klaus, founder and CEO of KeyedIn Solutions

FFJ 0517 face leadQ: What is driving the trend of manufacturing going digital?

Lauri Klaus: The main drivers are competition, operational performance and business growth. Traditional manufacturing systems and processes simply can’t keep up with the pace of change. For example, I spoke recently with a metal fabricator who told me every part of the business was managed by a different spreadsheet. I’ve run large organizations using very sophisticated spreadsheets and they are powerful tools. But they don’t communicate well across departments or across the entire supply chain. Manufacturers must open up their information to multiple people so that more things happen automatically rather than a one-off phone call or email. Operating on a spreadsheet may have worked in the past when customer expectations around time to market and change orders were much lower. But today customers expect manufacturers to turn on a dime. That flexibility is possible only with digital manufacturing processes—at least if you actually want to make a profit on the job. 

Q: How does going digital enable that flexibility?

Klaus: Digital manufacturing includes all aspects of a manufacturing business, from the main office to the shop floor. We have been talking about digital manufacturing or “paperless ERP” for a couple decades now. Now, with cloud ERP options, the reality of the benefits of a single version of the truth and expanding the digitization of any company to the shop floor and the supply chain, companies have a great opportunity to create a smart and efficient organization. Automate the things that no one wants to do, so your talent can focus on the creative, the craftsmanship that goes into making great things. With that, going digital means real-time information in a single, comprehensive view from production to accounting. This allows manufacturers to eliminate department silos and operational gaps. With 360-degree visibility, employees can quickly adjust to changes in production and work seamlessly together for better communication, collaboration and overall efficiency. One manufacturer put it this way: By going digital, he was able to grow the business faster. His team completed more orders in less time, because they used a visual, digital process to organize and schedule production. You can prioritize those jobs that drive greater profits and satisfy loyal customers.

Q: How does going digital reduce costs?

Klaus: A modest investment in digital processes can reap up to a tenfold return in efficiency and much stronger, more predictable margins. The shop floor is where profits are made or lost, so reducing costs associated with production is important. Estimating too high loses business. Estimating too low loses money.  Having better visibility into actuals versus estimates in real time gives decision makers, estimators and managers more insight into where they should allocate resources. With digital manufacturing, shop floor teams are able to gain greater control over the production process, reduce inventories by purchasing material precisely when it’s needed, prioritize the most urgent and profitable jobs, simplify setups and streamline processes based on part characteristics and machine capacity. Finally, manufacturers can collaborate more effectively in house and with vendors and customers. As they realize cost savings, manufacturers can invest in the long-term success of employees and capital equipment.

Q: What do returns look like from investing in digital manufacturing?

Klaus: Besides the cost savings, going digital creates a more efficient and profitable business model, enabling manufacturers to produce higher quality, high-margin products. By implementing digital processes, manufacturers glean more accurate job costing reports, lower material overhead, optimized machine capacity and greater overall efficiency by streamlining and accurately analyzing data flow that, when managed manually, was time consuming and unreliable. The return on an investment for digital manufacturing can start instantly, but that return will only grow in the weeks, months and years ahead. FFJ

Lauri Klaus is the founder and CEO of KeyedIn Solutions, Minneapolis. She has been in the manufacturing technology space for more than 20 years and has experience working with manufacturing companies of all sizes to implement successful digital business processes.

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