Advice and Information for Finance Professionals

How Manufacturers Are Moving to the Cloud, One Smart Step at a Time

Guest Author

By Viktor Sahakian, Leader, Oracle Consulting Practice, Hitachi

When it comes to adopting new technologies, manufacturers have always been a cautious bunch. This is still true today, even though new cloud solutions are knocking at the door of every manufacturer out there with promises of greater agility and lower costs. Downtime for big facilities can be costly, so manufacturers can’t be blamed for casting a wary eye on proposals to bring new solutions—cloud or otherwise—onto their shop floors.

However, the truth is that cloud services are proven to provide companies—and manufacturers, in particular—a huge boost in productivity, as outlined in a research report Intelligent Finance: How CFOs Can Lead the Coming Productivity Boom. Authored by Dr. Michael Mandel, senior fellow at the Mack Institute for Innovation Management at the Wharton School, the study projects that cloud services are poised to boost U.S. GDP by $2 trillion over the next decade.

I haven’t done the math, but I wholeheartedly agree with the thrust of the study. There’s no question in my mind that cloud will have a positive impact on the economy—and increasingly we’ll see that impact reach deep into the manufacturing sector.

Getting Nimble

The fundamental value of cloud is that it enables organizations to become increasingly nimble and respond more rapidly to changing market demands. The cloud solves what I call the “problem of time”; you no longer need months and months to launch new capabilities. Now you can stand up capacity on the fly and radically shorten time-to-market cycles. That makes for a big competitive edge in any industry.

In addition, cloud forms the basis for a whole host of advanced technologies like machine learning, 3D printing, blockchain, IoT and more—all of which are in the early stages of transforming manufacturing. 

Finally, the cloud facilitates deep and pervasive connections between people and data via modern dashboards, mobile access, and real-time reporting. If you’re not connected to your data, you’re not leveraging it effectively. Cloud services allows companies to connect the dots faster, driving greater agility.

A Real-World Impact on ROI

I’m seeing the impact of cloud services at many of the manufacturers we work with today. For example, we recently helped a steel-processing company that was experiencing lost output and productivity. Executives recognized that their production planning was sub-optimal, largely because they lacked the data needed to help them improve the production schedule.

Hitachi Consulting created a process to automatically capture critical step-and-cycle time data and generate insights into the causes of production disruptions. This data allowed production planners to introduce standards to refine and optimize the production schedule. Over a five-year period, these changes are expected to deliver a $2.6 million return on investment.

Start Small

It may be true that manufacturers are averse to risk, but risks can be controlled with smart strategies to propel cloud adoption. A good approach is to start with small steps and identify specific use cases around cloud services. To avoid business disruption, we often advise manufacturers to start with “edge” applications (such as reporting or budgeting) before moving core business functions to the cloud.

For example, you could move some of your non-mission-critical workloads to the cloud to demonstrate the benefits of cloud (such as fast implementation times, regular software updates, and ease of use). Alternatively, you might initially target an IoT project on a cloud platform to generate quantifiable results—without interfering with your vital manufacturing systems—and address specific challenges or uses cases that might be impacting your production line or quality. Once you demonstrate business value with these tightly focused, low-risk projects, you can then decide to scale them out. This is the perfect way to drive broader adoption of cloud services.

Smart Manufacturing

Hitachi’s approach to cloud transformation in manufacturing starts with developing quantifiable use cases designed to solve real business problems. Then we leverage Oracle Cloud to enable a Smart Manufacturing for Oracle solution that can help drive gains in operational efficiencies across production, maintenance, quality, scheduling and logistics using IoT, advanced analytics and machine learning.

I see the impact of cloud services in the industry only getting stronger as adoption increases. But not every manufacturer will embrace cloud services at the same speed. This disparity will lead to competitive differentiation between industry leaders and laggards, as Dr. Mandel outlined in his report. The main reason for differing adoption rates will be the mindset of organizational leaders. Those willing to take a more aggressive approach to improving operations with cloud services – and accept a bit more risk – will likely separate themselves with greater levels of productivity and innovation.

How is your manufacturing company leveraging cloud services to become more competitive? I’d love to hear from you.

Viktor Sahakian leads Hitachi Consulting’s Oracle technology practice and has over 25 years of consulting experience with applications development, implementations and systems architecture. He has directed and provided project management and technical leadership on multiple global implementations and transformational projects. His current focus areas are cloud-based SaaS, PaaS and IaaS transformations as well as IoT-based solutions to help companies address business challenges.

CFOs: Are you ready to lead the coming productivity boom? Download the research.


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