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ML Journal June 2022

The Rise of Digital Manufacturing Ecosystems

The formation of value-added digital networks in manufacturing is underway, leading to new ecosystem partnerships that will reshape the industry in the years ahead.   

As digitization becomes ubiquitous in the manufacturing ecosystem, the biggest opportunities and most powerful transformation drivers may well emerge from outside the walls of the enterprise.

The manufacturing paradigm is evolving with highly interdependent industry coalitions and cross-pollination of business interests among industry corporate players, blurring once-clear boundaries. Inter-enterprise relationships are becoming increasingly integrated in the digital world. The result is a highly amalgamated manufacturing ecosystem that requires new rules, gives rise to new business drivers, and exerts new influences on manufacturers’ focus and actions.

Democratization of Manufacturing

As disruptions from the pandemic and a global re-balancing of supply chains continue to settle, digitally integrated manufacturing options, and changing levels of intelligence in products, will drive the democratization of hardware manufacturing, leading to commoditization.

Additive manufacturing, for example, is engendering agile and innovative manufacturing models. As additive manufacturing becomes prevalent and commoditized, direct on-demand manufacturing-from-design will become more frequent. This in turn will create new digitally savvy supply or insource options for manufacturers.

Value-added digital networks will provide new opportunities but also a set of unforeseeable variables with which manufacturers will have to cope.

 

We already see increasing levels of additive manufacturing components in products today. As levels rise further, supply and sourcing options will get redefined. This will cause some manufacturing operations to abandon their current products and methods and pivot into newer possibilities.

With products becoming increasingly connected, and by extension, smarter, software differentiation will become critical. Collaboration between digital resources and traditional manufacturing operations will necessarily increase. This presents opportunities for purpose-built value networks, which we address in the next section.

The shift in differentiation to digital capabilities will drive a degree of commoditization in hardware products, resulting in increased standardization in hardware manufacturing. In combination with additive manufacturing and similar trends, this will drive increased democratization of the manufacturing process.

The Move to Value Networks

As with the advent of the World Wide Web in the early nineties, the formation of value-added digital networks will likely be quite rapid and will foment significant change. In the context of manufacturing digitization and the resultant evolving ecosystem, manufacturing enterprise priorities will need to accommodate emerging cyber-physical systems and digitally enabled supply networks.

As such, collaboration and value will increasingly shift from the physical to the digital. What emerges will pose new opportunities, dependencies, and currently unforeseeable variables on which manufacturers will be able to capitalize—and with which they will need to cope. This would mean a race to define new value propositions within very demanding time- to-market scenarios. To achieve and capture these markets, manufacturers will go through a phase of increased ecosystem partnerships that will continue to shape the industry in the years to come.

With products being increasingly connected and smarter, software differentiation will become critical.

 

Additionally, linear value chains are shifting in favor of more sustainable circular value chains, accelerating the emergence of digitally-enabled, purpose-built ecosystems. This will require manufacturers to set aside the role of a defined player in a relatively static environment and adopt the role of an active participant in an agile and evolving environment. Traditional manufacturing chains that emphasized product-based fit and linkages will give way to a focus on addressing points-of-value convergence with greater speed and agility. In short, manufacturers that wish to succeed will need to move from traditional value chain operations to adapting and existing in an ecosystem-driven value network.

Evolving Business Models

The history of transformation in other industry segments is a harbinger of what to expect in manufacturing. We have already seen service- and data-driven business models create new opportunities and ecosystems in other industries such as transportation, hospitality, and publishing, to name a few.

Digital proliferation to all levels of manufacturing will have manufacturers moving from product-based revenue models to a mix of product-, service-, and data-based business models. Identified by terms such as servitization, as-a-service, utilization-based, or data monetization models, they will become increasingly common. As these models become more prevalent, so will the need for and dependency on an extraordinarily strong ecosystem and partnerships with the right go-to-market strategies.

In summary, while transformation progresses within the walls of the enterprise, the ecosystem incubation and the role it will play is difficult to ignore. As the manufacturing ecosystem evolves, manufacturers must adopt practices that are radically different from those they used in the past.  M


About the author:

Siva Gurupackiam is Vice President of Manufacturing Industry Strategy and Solutions at NTT DATA.

 

 

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