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Morgan Stanley: Here’s What the 21st Century Digital Factory Will Actually Look Like

If factories were caterpillars, they’d be going through the metamorphosis phase, where the resulting butterfly is akin to the digital factory—the beautiful new iteration of what the factory used to be.

In a new report, Morgan Stanley said technological disruption is coming for the manufacturing sector, and part of what’s got the industry poised to take advantage of the times is the wealth of data it sits on.

“Manufacturing is primed for a tech revolution that will give way to the digital factory,” the research arm of the financial services firm said, adding, “Which global industry collects the largest volume of data? It’s not banking, health care or even retail, as many might expect. It’s actually manufacturing. This sleeping giant drives more than $11 trillion in commerce and amasses 2,000 petabytes of data annually—twice as much as government, the next largest data collector.”

The manufacturing industry, apparel and textiles in particular, has been slow to make use of the data it has, with many companies on board with collecting it but few savvy about what to make of all that information and how to employ it to make business-improving changes. Morgan Stanley estimates companies that can’t figure out what to do with their data have discarded as much as 99 percent of the 2,000 petabytes of potentially valuable data they’ve collected since 2010.

In the incoming 21st century digital factory, smart machines and Industrial Internet of Things (IIoT) sensors will all work together to “squeeze waste out of the supply chain,” according to Morgan Stanley. Not only will less waste mean greater efficiency, but it will also pave the way for manufacturers to improve the quality of their products and make customization more widely available.

What’s it going to take?

For many manufactures, the embracing of technology has, at best, meant a “mishmash of disparate software and hardware systems” Morgan Stanley said.

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“The traditional factory is very challenging to navigate,” said Adam Wood, Morgan Stanley Equity Analyst covering European Software & IT Services. “For example, manufacturers often use an array of hardware platforms, each with their own operating systems. They also haven’t had the capabilities to deploy and use technology on a large-scale, though cloud computing and big data applications are changing that.”

Once companies can undertake a unified tech front major market challenges, like competition from low-cost manufacturers in China, product commoditization, shrinking margins and slowing revenue growth, stand to be remedied, according to the report.

“These industry challenges are real—but so is the opportunity, both for manufacturers and vendors that serve them,” Morgan Stanley said.

Software providers and capital goods producers will drive the industrial tech revolution, marrying disruption and innovation, plus industry expertise and manufacturer relationships.

“The vendors best able to combine these attributes should emerge as the winners,” according to Wood. And many are already working on it—capital goods companies have spent $18 billion since 2011 to acquire or collaborate with manufacturing-related software companies.

What the digital factory will look like

If the apparel and footwear industries can get out of their own way and embrace the data and digitization coming down the pike, they’ll ideally end up with factories that look like a “software-integrated production line, able to rapidly respond to changing market dynamics, with minimal disruption,” Wood explained.

For one, the digital factory will use sensors in entirely new ways, like tapping them to monitor production progress, which makes mass customization a greater possibility as machines will be able to identify where products are in the process and enable changes to be made as designated.

Machines on the factory floor will also boast better connectivity, with IoT modules establishing live connections between them, and the gathered operating data will be fed back into the manufacturing process and available for manufacturers to learn from to improve their processes.

In these newfangled digital factories, 3-D printers will be standard since they’re already becoming less expensive and more functional, which means they’ll be able to be scaled for industrial level use.

There’s a flood of manufacturing software acronyms—CRM, ERP, PLM—out there, and these systems will be increasingly better able to integrate seamlessly with each other as well as with machines and factory floor sensors to provide real-time data on the whole manufacturing process, insight that’s expected to make companies both more nimble and more profitable.

“Further down the road, manufacturers will likely have intelligent analytics that identify and then immediately fix issues on the factory floor, without human intervention,” Morgan Stanley said. “These innovations suggest a future factory floor with increased efficiencies while at the same time building new revenue potential from integrating digital services into the manufactured goods.”

What this will mean for manufacturing

The apparel industry has long been needing to take a nod from advancements in auto manufacturing, which has been embracing digital while apparel and footwear companies are still trying to figure out what all this tech even means.

But the companies that can take a page from car manufacturing could find their smart factories will allow them to decrease the time to market for new products.

“Consider the making of a car. Different but integrated software programs can simultaneously complete the vehicle, order the parts, schedule the manufacturing and market the car to potential customers, instead of maintaining a chronological workflow,” the report explained. “Additionally, manufacturers can also more immediately cater products to customer demand, and easily adapt prices to real-time market changes. Connections between the hardware and software can facilitate predictive maintenance, or the ability to flag potential problems before a machine breaks down.”