What is digital transformation in manufacturing?

With the beginning of the 4.0 era, digital transformation in manufacturing has become a prevalent trend. In recent years, we have witnessed its drastic effects to facilitate supply chains, operational efficiency, R&D, and communication.

But what is digitalization in the manufacturing sector? One may ask. While discussing a definite answer, we also want to touch on some of its benefits, challenges, and the most popular trends of this transition. 

What Is Digital Transformation in Manufacturing?


First and foremost, digital transformation or digitalization are two terms that can be used interchangeably. This is a business strategy that applies in all industries and sectors, not only in manufacturing. It involves the application of digital technologies to solve traditional and new business problems while paving the way for new opportunities.

Using such a strategy in manufacturing means enhancing productivity and strengthening the workforce. At the same time, it maximizes the bottom line by reducing the cost. 

In short, these are the definitive goals of digitalization in manufacturing:

  • Maximize the profit and reduce production costs.
  • Enhance the goods’ quality and productivity.
  • Facilitate operational activities and decision-making processes.
  • Enable the ability to deal with abrupt challenges and market demands.
  • Improve the competitive edge.

The production of every competitive business is quickly changing to adapt to a more and more flexible market. This process is further boosted by the 4.0 technologies, especially after the pandemic’s hit, which disrupted the whole sector. 

Example Of Digitalization In Manufacturing

To give you a clearer view of how digitalization in manufacturing works in practice, we present a case in point from a giant: Nike.

The world’s largest sports brand has incorporated the strategy for quite some time. The most visible evidence is how this giant develops its digital and mobile platforms to improve engagement with global customers. It’s not a surprise that the hype in the sneakers industry in recent years is a result of Nike’s successful analytics.

Since 2017, Nike has focused on a more on-point marketing strategy that affects its R&D and product distribution. The strategy aimed to cut its distributor force from 30,000+ to 40 and shift to a more elusive market. As such, the company achieved 33% direct-to-customer sales in only three years, two years earlier than planned.

If Nike had not made the risky decision, an ever-growing sportswear market would have probably diluted its products.

Challenges Of Digital Transformation In Manufacturing

Despite the enormous benefits the process may offer, there are obstacles, namely the operational system and some daunting bills. Therefore, businesses should carefully consider their inevitable challenges before making any abrupt change.

Manufacturing is a costly and dynamic sector that requires any penny spent is worth it. The process will likely lead to some initial investment numbers, which, again, requires persuading the investors and shareholders, along with a carefully-planned financial strategy.

Having resource constraints and tight schedules also mean any disruption or ineffectiveness before the strategy proves its result is more intolerable. 

Whether in-house or outsourced, the IT department will face tremendous challenges. Each new process and idea cost a lot of time and dedication to build new systems, APIs, and procedures to facilitate the digital/manufacturing infrastructure.

Last but not least, the workforce will surely take time and effort to change with a new digitized system before it can work in integrity. Workers, employees, and managers alike will face new challenges and demands, which may require higher or different skills.

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Why Digital Transformation Is Important In Manufacturing?

Yet, businesses will reap immense benefits if the digitalization process proves to be successful and delivers results in time.

Innovations-driven productivity: Digital technologies enable better communication methods that enhance employee collaboration. Also, big data and AI facilitate decision-making processes and predictive analytics. Digital platforms also smoothen the learning curve and deliver better management for productivity control.

A new, high-skilled workforce: Advanced processes and activities will require well-trained and more dynamic workers. Each company will have more chances to attract new high-skilled employees to take charge of the innovation in manufacturing.

Improved operational efficiency: Digital innovations remove manual and traditional labor with automation and robotics. The process helps reduce employees’ costs, saves time, and provides new effective management methods. Businesses also focus more on critical tasks, such as planning and dealing with new challenges. 

Maximize revenue and profit: It will also cut down inventory, delivery, and supply chain costs. Furthermore, a better decision-making system will minimize risks and management-related costs and improve sales with better insight into customers’ demands.

Digital Transformation Trends in Manufacturing

Industrial Internet of Things (IIoT)

IoT refers to a network of physical and industrial assets that connect and exchange data via a network of sensors and electronic devices. They operate on software and the internet to handle different tasks with integrity.

Like our household appliances but applied on an industrial level, these assets and machines collect data to perform analytics and predictive processes.

A 2019 survey indicates that 63% of manufacturers believe in IoT’s profitability in the next five years.

A promising and evident effect of IIoT on saving cost is that it helps detect malfunctions earlier and more precisely than manual oversights. Also, it reduces money and energy on inventory and facility management.

Big Data, Analytics, And AI

Being a significant branch of the 4.0 industrial revolution, big data and AI enter the scene as practical tools in businesses’ arsenal in regaining and improving the competitive edge. The massive amount of data that IIoT collects needs to be processed to gain insight and deliver predictive analytics. 

In such processes, AI and machine learning are mighty to translate clear and understandable information for management. Any subtle improvement in manufacturing will likely lead to millions of dollars on the bottom line.

Recently, Repsol collaborated with Microsoft to apply AI in decision-making regarding when and where to drill. The Spanish gas company expects a more efficient deal in oil drilling. 

Cloud Computing

Cloud computing powers big data to present valuable and tactical storage for processing massive data. By incorporating cloud services, companies will save a ton of cost on maintaining and updating computational prowess in dealing with billions of data points for modeling and machine learning. 

Cloud services also lend a hand in navigating, managing, and retrieving data in real-time while easily accessing from any facility’s computer in the field. This on-demand availability speeds up reaction time towards new and changing issues in a dynamic environment.

Next Generation Manufacturing Employees

And no, we are not only talking about high-skilled and competitive employees, though that is an excellent bonus for your workforce from incorporating digitalization. Robotics and automation have been around for some time, and they will be the staple of any competitive manufacturers.

Robot arms and inventory robots have their places where human laborers can be replaced with higher efficiency and reduced costs. They can work more intensely, more reliably, and with better performance from manufacturing and inventory standpoints. 

Back to high-skilled and next-generation employees, advanced technology has made some manual labor jobs outdated yet brought new career chances for competitive workers. High-demand jobs include data analysts, IT, robotic and automation engineers, machine learning engineers, and R&D.

The trend poses new challenges along with benefits. Since it is only the beginning of the 4.0 era, the quality workers supply and talent pool for those high-demand jobs are still very limited, making recruitment difficult.

3D Printing Technology

The technology is in good use to produce better, cheaper, and more efficient prototypes as well as mass-produced commodities. With 3D printing, product designers and R&D specialists can spend more time researching, finding, and fixing errors while saving time building test products.

With growing potential, it is also very effective both in time and costs to produce simple and precise products, which significantly enhances productivity.

Agility And Responsiveness

Technology integration not only saves time dealing with data and decision-making processes. Businesses will also gain better responses and make new manufacturing decisions to adapt to a dynamic market and meet customers’ demands.

With data gathering from users and customers, they will also have a better chance of improving the products or delivery on time. That will effectively boost their competitive advantages.

Augmented Reality

Using AR devices, managers and workers will have a better working experience with data and the performance of machines or inventory. They can eventually access them with a glance, which saves a lot of time than traditional recording and oversight.

AR can also be very potent in training and an intuitive tool to access different components and locations of machinery parts or manufacturing processes.


Today, the question has shifted from “Why should we digitalize manufacturing?” to “How to incorporate digital transformation in manufacturing?” because of solid reasons. Believe it or not, the trend is changing the world of business and production more quickly than you can imagine. So taking the first step to make your business more competitive seems like a wise choice.

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