What does the term “modernization” mean to a manufacturer? To some, it reads as a cost, a series of expensive purchases and tech deployments that add to overhead and squeeze operational budgets that are already tight. To others, it means an investment in the factory’s future capacity to operate more efficiently and weather labor shortages, supply chain shifts, and other 21st-century storms.
For manufacturers in either camp, there’s a rock-solid fact that simply can’t be ignored: Modernization is happening whether you want it to or not.
Automation won’t suddenly cease to be a differentiator, cyber criminals won’t suddenly stop attacking, and connectivity won’t suddenly lose its status as an essential good. The entire manufacturing sector, as well as the rest of the world, is moving towards AI-powered processes and increased digitization. Sitting out on a world-historical trend simply isn’t an option.
That means manufacturers, wherever they find themselves now, need to adopt a modernization-as-investment mindset. Because while modernization does bring costs, we’ve reached the point where failing to modernize is much more costly.
In this blog post, we break down the costs of inaction and describe the returns manufacturers can expect from embracing modernization.
The Costs of Failing to Modernize
The cost of investing in a new IT solution is obvious – you can simply look at the invoice. But the investments you don’t make are often costly. It’s just that the ”invoice” remains hidden.
Bringing those costs into the light can help manufacturers develop a pro-investment mindset.
Organizations face a ‘pay now or pay later’ reality. Invest proactively in secure architecture or risk far greater costs from downtime and business disruption.
Below, we’ve described four of the biggest costs associated with not modernizing a factory.
Downtime
In almost any factory today, a certain portion of the equipment or underlying software relies on the internet to function properly. That means that an internet outage brings the entire operation to a halt.
Given the cost of downtime, these outages are unacceptable.
According to one study, an hour of downtime costs up to $2.3M. And these losses are only increasing, with downtime costs in heavy industry up 319% since 2019.
Internet outages and the downtime they cause are directly tied to the quality and modernization of network infrastructure. Plain Old Telephone Service (POTS) lines, fiber cables, and other older models are already unreliable, and they’ll only get worse as the parts and expertise needed to repair them become increasingly obsolete.
The longer these older systems are left in place, the greater the risk that downtime will put a manufacturer at a serious competitive disadvantage.
Vulnerability to Cyberattack
Cybercrime might seem like an equal opportunity threat. But in reality, some industries are especially vulnerable, and manufacturing is at the top of the list. An incredible 27.7% of all cyberattacks are targeted at the manufacturing sector.
There are several reasons for this. One is that factories tend to rely on a lot of “operational technology” (OT) as well as “information technology” (IT), which widens the surface area for attack.
Another issue is the pure cost of downtime, which criminals see as leverage. The desperation manufacturers feel to get back online likely explains why the median cost of a ransomware attack in the manufacturing industry is so high – $232,694, according to a recent Verizon report.
If a plant resists modernizing, they’re likely to rely on outdated OT and IT systems that weren’t designed with modern security needs in mind. The damage, in reputation and capital, could be devastating.
Supply Chain Chaos
Managing supply chains is a challenge in even the smoothest times and recent years have been anything but smooth. In a recent survey, 82% of manufacturing executives said their supply chains had recently been disrupted.
For manufacturers, maintaining the status quo in the face of this increasing chaos is a recipe for falling behind. Pieces of “smart” equipment and machinery might already be gathering data, but with no “intelligence layer” to convert that data into actionable insights, it won’t be doing the factory any good. Managers will be stuck in constant reactive mode, struggling to source the latest input that’s failed to arrive.
Meanwhile, the competition will be using modern technologies to ride each supply-chain shockwave and get farther ahead.
Read more: What Your Plant Floor Isn’t Telling You Is Costing You Money
Inefficiency
In today’s manufacturing landscape, managers are forced into a “do more with less” mentality. Not only are supply chains increasingly choked, but there’s also a chronic labor shortage that’s only predicted to get worse. By one estimate, the industry will face 2.1M unfilled jobs by 2030.
Manufacturers have no choice but to make do with fewer workers, preferably without losing inefficiency. But OSHA safety requirements limit the extent to which they can cut corners.
Without technology stepping in to play a larger role, there’s simply no way for manufacturers to solve this equation. Diminishing workforces will inevitably lead to decreased production, and profits will wither as a result.
The Returns of Modernization
Modernization may involve initial costs, but when done correctly, it’s generally a sound long-term investment. By partnering with the right trusted advisor and building a cohesive, future-oriented technology infrastructure, manufacturers set themselves up to weather the inevitable challenges of today and tomorrow.
Here’s a breakdown of what modernization delivers for manufacturers:
- Reduced downtime. With the right network infrastructure, plants can stay online and avoid costly non-productive hours.
- Labor optimization. Improved connectivity allows for more automation, and more automation allows for increased efficiency, which is absolutely essential as the labor pool continues to shrink. The conversation has shifted from labor bandwidth and staffing shortages to intelligent connectivity and operational efficiency.
- Safety. By increasing per-worker productivity, automation and digital processes prevent plants from having to compromise on worker well-being.
- Resilience. Connectivity and security solutions work together to keep attackers at bay and production lines humming.
- Quality. With tech solutions maintaining consistent workflows and keeping the factory running smoothly, managers spend less time “putting out fires” and more time improving the quality of outputs.
Growing numbers of manufacturers are realizing that these returns justify the cost of investing in modernization. According to recent studies, 85% of manufacturing stakeholders say modernization is a competitive necessity, while 92% of manufacturing executives see “smart manufacturing” as their main competitive lever.
And executives aren’t just thinking about tinkering around the edges. A reported 26% say that a “complete overhaul” of their manufacturing processes is needed.
The manufacturing industry has reached an inflection point. More and more stakeholders have realized there are only two options: modernize, or wither away.
The Role of a Trusted Partner
While failing to modernize would be a major mistake for manufacturers today, there’s another mistake that could be just as costly: Modernizing in a panicked or haphazard way.
The worst-case scenario for a plant undergoing modernization would be to randomly invest in an assortment of “point solutions” without ensuring they can integrate and work together. It’s easy to imagine how this could happen. A stakeholder hears about the benefits of one solution, so they buy it. Then, they encounter some other impressive piece of technology, so they buy that, too. But when all is said and done, they don’t have a cohesive tech ecosystem that enhances efficiency and improves outputs.
So how can manufacturers ensure they’re building a unified tech infrastructure? By bringing in a trusted partner to guide them from the start.
The ideal tech advisor is someone who understands a wide variety of tech solutions, or can at least rely on a team that provides that sort of expertise. They would also have access to a catalog of solutions from different suppliers. That way, they can identify solutions that fit together, even if they’re not sold by the same company, and help build those solutions into a cohesive system.
For a closer look at how Intelisys sales partners and other trusted partners can help manufacturers modernize their operations, download our ebook: Modern Manufacturing: Resilient. Automated. Intelligent.
Conclusion
Modernization in the manufacturing sector is a force that can’t be stopped. It’s time for manufacturers to take this for what it is: an opportunity. Learn more about technology in manufacturing here.