Those promoting the implementation of smart factories inevitably face the challenge of "how to calculate and explain the effects in advance."
Amid labor shortages and the increasing trend towards small-batch, high-mix production, smart factory initiatives cannot be evaluated solely on short-term financial benefits, as was the case with traditional capital investments.
Based on our experience supporting factory DX and data utilization, this article explains, from a practical perspective, how to organize the effects of smart factory implementation and how to gain internal consensus.
This page is a summary version for those who want to get an overview first.
Please see the full document (24 pages in total), which includes more detailed explanations and examples.
Why is it difficult to calculate the effects of smart factory implementation?
- The higher-level policies are highly abstract and lack past track record.
- When submitting proposals or undergoing approval processes, the "likelihood" of effectiveness is required as a factor in the decision-making process.
- This is not a simple monetary comparison of investment and effect like with conventional capital investment.
table of contents
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The production technology department is responsible for implementing smart factory initiatives.
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Why do we feel the need for decisions to be made in a top-down manner?
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What's needed for internal agreement is a "change in mindset towards investment."
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Five benefits you can expect from smart factory implementation
The production technology department is responsible for implementing smart factory initiatives.
Considering smart factory implementation begins with higher-level policies such as medium-term management plans and DX strategies. This is driven by changes in the business environment, including labor shortages, the shift towards small-batch, high-mix production, and shorter product lifecycles.
Based on these higher-level policies, the factory's production technology department is responsible for formulating specific plans and handling the approval process.
Because this initiative is closely related to production activities, it needs to be promoted in stages by personnel who understand manufacturing. However, this must be done in parallel with daily work, which places a significant burden on the individual.
Why do we feel the need for decisions to be made in a top-down manner?
We often hear from the production technology department that "it would be so much easier if things were handled more top-down." However, structurally speaking, a top-down approach is difficult in reality.
First, there is a business strategy, and to execute that business strategy, there are strategies for each function, such as development, production, and sales. Then, it is up to each department to translate these functional strategies into actionable steps. That's why the production technology department is entrusted with promoting smart factory initiatives, simply because "it is the production technology department that introduces new technologies to the factory."
The production department involves many stakeholders, including those in manufacturing, production technology, equipment maintenance, and production management. Because they are required to explain not only the specifics of a policy but also its validity, the burden on those promoting it increases. Even though the review is supposed to be based on higher-level policies, isn't the honest truth that they wish decisions were made top-down, not just at the policy level, but even at the policy level?
What's needed for internal agreement is a "change in mindset towards investment."
Up until now, investments in the production division have mainly been capital investments aimed at reducing costs, and it was possible to show in monetary terms "how much was invested and how much could be saved."
On the other hand, the current smart factory initiative is
- Continuing manufacturing despite labor shortages
- Flexible response to complex production environments
These are the objectives. Therefore, it is inherently flawed to evaluate the return on investment using the same methods as before.
What's needed to advance smart factory initiatives is a shift in mindset that goes beyond simply focusing on direct economic benefits such as return on investment.
Five benefits you can expect from smart factory implementation
The expected effects of factory digitalization and data utilization can be categorized into the following five points, from a "financial/non-financial" and "short-term/medium-term/long-term" perspective.
① Reduction (short term/financial)
By digitizing simple tasks such as paper record-keeping, transcription, and data compilation and reporting, you can indirectly reduce a significant amount of indirect work.
② Business process improvement (medium-term and financial)
By understanding the actual situation based on data, it becomes possible to improve physical losses such as defects and waste, as well as time lost due to inactivity.
③ Addressing social issues (long-term and financial)
Improving production efficiency itself will create long-term value, ensuring that current levels of output can be maintained even if the workforce declines in the future.
④ Creation of digital talent (non-financial)
In the process of implementing IoT and data utilization, personnel with digital skills will be cultivated within the production department.
⑤ Strengthening organizational and team capabilities (non-financial)
Sharing quantitative data prevents reliance on individual expertise and helps create a system where the organization can recognize and address challenges as a whole.
Examples of initiatives
One manufacturing company implemented a system that uses IoT-based data collection to monitor daily performance on-site.
As a result, awareness among on-site staff changed, leading to improvements such as early detection of defects, reduced waste, and increased operational efficiency.
As the reliability of the data is recognized, efforts to eliminate paper records and utilize data across processes are expanding, evolving factories into those that can flexibly adapt to change.
summary
Smart factory initiatives should not be evaluated solely on their "direct economic effects," as was done in the past.
It is important to grasp the effects of this as a foundation for continuing manufacturing into the future.
By calculating the minimum monetary value while also considering the expected effects from perspectives such as maintaining productivity, developing human resources, and strengthening organizational capabilities, it becomes possible to move forward with smart factory initiatives while gaining internal agreement.
Document download
The full text, including more detailed explanations and examples, can be downloaded from the link below. Please take a look.
The approach to calculating the effectiveness of smart factory implementation
This article explains, with examples and calculation logic, how to calculate and explain the effects of smart factory implementation.
The full document (PDF) is available here.