PwC study: Investments are booming, but implementation is lagging behind
> $1.1 trillion
of digital factory investments each year worldwide
of companies are still at an early stage of their digital transformation
150% on average
has the importance of sustainability as key driver for digital factory transformation risen
in the number of companies saying that resilience and flexibility are key drivers of investment
Dr. Reinhard Geissbauer
Global Digital Operations Partner at PwC Deutschland
Tel.: +49 170 939-1263
Industrial manufacturing companies are going through a time of unprecedented crisis: the global COVID-19 pandemic has disrupted established supply chains, conflict in Eastern Europe has added to the strain, and the resulting shortage of key materials, from microchips to steel, means fewer finished products and significantly higher input costs.
These challenges are pushing manufacturers to rethink their operating models. The PwC Digital Factory Transformation Survey 2022 is based on the input of more than 700 manufacturing companies across the globe, and we found that worldwide, industrial companies are investing $1.1 trillion a year in digital transformation solutions.
The survey results show that the most effective companies – we call them Digital Champions - are implementing a full suite of factory-level digital technologies to drive manufacturing flexibility and resilience, as well as to reduce operational cost via factory automation. They are creating double-digit returns through a combination of cost efficiencies and greater flexibility. Yet the survey also shows that progress is slow: two thirds of companies are still close to the beginning of their digital journey.
64 percent of companies are still at the beginning of their digital transformation
The transformation imperative has shifted from effiency improvements towards flexibility and resilience
Digitally enabled sustainability solutions have been vastly gaining importance
Over $1.1 trillion annual investments in factory transformation – focus is on Asia and Europe
Only high-invests lead to high-returns, a solid foundation drives scalable digitization
A standardized digital backbone is the key buildinmg block for successful factory transformations
Quality analytics, maintenance solutions and automated KPI monitoring are the most implemented use cases
Emerging technologies with relatively short-term payback include drones and 5G applications
An agile target operating model to run the digital transformation is essential
Digital champions evolve from a centralized to an embedded organizational set-up
Most companies (64%) are still at the beginning of their digital transformations and have not managed to scale their digital initiatives – only 10% of the global survey group of manufacturers have completed their digital transformation program or are in the final phase.
Despite slow progress in many cases, digitization is still high on the agenda, and with new imperatives alongside cost and efficiency – due to the scale of external disruption in recent years, resilience and transparency are now the key drivers for digital transformation. Another driver that has been gaining importance, and will continue to do so, is sustainability. Companies have realized that digitization is a key tool in addressing their sustainability challenges.
We estimate that companies are investing more than $1.1 trillion a year in digital factory transformation – yet this may be insufficient. The evidence of our survey is that investment rates of at least 3% of net revenues (around 50% higher than the average corporate investment in transformation) are needed to deliver high returns and rapid payback on digital investments.
The digital backbone is the enabler of transformation, but there are multiple approaches to building or rebuilding this underlying IT architecture. Business use cases may range across quality, maintenance, monitoring or digital twin creation, while applied technologies can include wearable devices, cobots and AI applications.
Every transformation path is different, but a common critical factor is the expected and actual payback period for digital investments: although the survey shows that there is no ‘one size fits all’ strategy for transformation, certain systems, use cases and technologies – including quality analytics, drones and 5G applications - tend to deliver faster payback, within as little as one year for some companies.
Transformations rarely happen quickly or effectively without the right organizational support, and rigid, top-down ways of working are not well adapted to the needs of digital transformation. The survey results show the most effective transformations take place in the context of an agile operating model. Manufacturers are able to evolve into ‘embedded digital organizations’ capable of balancing central management of systems, technologies and standards, but with flexible local implementation based on user needs and preferences in different factories.
The PwC Digital Factory Transformation Survey 2022 was conducted in the second half of 2021 and gathered responses from 700 global corporations from at least 23 different countries to find out about the status of their Smart Factory transformation, their priorities in technologies and use cases, as well as their general transformation approach.
Survey respondents were drawn equally from companies in six sectors: Retail & Consumer Goods, High Technology & Electronics, Chemicals & Process Industries, Pharmaceuticals & Medical Technology, Automotive & Transportation, and Industrial Manufacturing. Respondents were C-Suite executives or operations leaders, with 70% of companies represented having revenues in excess of €3 billion.