It’s no secret that digital transformation is more than just a “trend” for the manufacturing industry. In fact, it’s necessary to stay ahead of the competition and tackle inefficiencies.

First, the talent shortage is a growing concern, with many manufacturers struggling to close the skills gap, or attract and retain the right talent. Companies that adopt a good digital strategy will be able to offer first-rate working conditions and become more attractive employers. Second, supply chain issues are becoming so complex that it’s impossible to solve without mission-critical technology. And third, manufacturers are turning to technology to find ways to generate more revenue, especially when it comes to customer loyalty and satisfaction.

While all of this sounds great, CFOs face more pressure than ever to cut through the noise and find a balance between technology investments and responding to trends such as unpredictable customer demands and an ever-changing manufacturing landscape.

Most importantly, the red thread underlining these challenges is the need to optimise manufacturing costs.

3 Key challenges for manufacturing CFOs

In manufacturing, technology is a costly initial investment. Additionally, all departments have their demands and there is a pressure to make the right decisions - which will have many implications in the future.

Inefficiencies caused by outdated tech

Production disruption - even if they are expected and accounted for - makes it hard to optimise costs. Top inefficiencies include:‍

• downtime caused by poor performance
• Inability to keep pace with new challenges and demands
• security risks causing even more downtime

Financially speaking, energy consumption goes up, there are higher maintenance costs and general unpredictability to deal with.‍

Adapting to business needs

Does the outdated tech have advanced analytics? Does it allow you to break communication siloes? Or monitor the supply chain? Most likely, the answer is no.

In addition, there is scalability to take into account. The software must adapt to the business, but legacy systems are hard to migrate to the cloud. Many manufacturers may prefer to build new solutions that work well in the cloud and allow them to scale up.

‍Overall, software that can’t adapt to business needs affects general output quality.

Long-term planning

With so many technological changes, how do you plan for the future? While this isn’t only a CFO’s job, in the long term, manufacturing companies need to adapt and change at a much faster pace.

As you’ve probably, guessed, this will not be possible without the right solutions. Mostly, manufacturing companies are trapped in a vicious cycle of staying with what’s familiar and incurring much higher costs in the long term due to lower productivity. The alternative is innovation and investing in the right tech to enable you to implement changes.

Overall, these 3 challenges will undermine your efforts to optimise costs. The right technology will help you not only solve them but make the most out of your investments.

How to optimise manufacturing costs through technology?

Manufacturing CFOs are currently navigating turbulent waters, with many pressures to find the correct balance between investing in technology, talent and productivity-boosting measures. The good news is that there is an optimal solution to all of these challenges, which we will discuss at the end:

1. Minimise energy costs

The industrial sector consumes about 54 % of the global total energy. Of course, this varies across industries, countries and even factories. One thing they have in common is the pressure to become more efficient and sustainable. Most of all, reducing energy significantly impacts costs.

Smart manufacturing uses tools such as IIoT devices and analytics to monitor equipment in real time, 24/7 and make energy-saving decisions.

For example, we are working on an AI solution for a client’s warehouse. Based on historical data, we were able to create an intelligent agent that learns from feedback (reinforcement learning).

In an initial phase, we used a deep learning model, LSTM, generally used for forecasting based on time series data. In this way, we simulated warehouse operations, which the agent uses as a training environment, learning optimal policies for energy cost reduction.

In a more advanced stage, the agent starts working in the real warehouse, interpreting data accurately based on outside/inside temperatures, humidity, and other relevant parameters.

In this way, our client benefits from an advanced energy and cost saving system that doesn’t need constant human input.

2. Monitor supply chain

The 2020-2023 global chip shortage has shown us that predicting these events is very difficult. However, what manufacturers (and CFOs) can do is be more prepared for these disruptions by closely monitoring their supply chain. Adopting tools such as supply chain management software, warehouse management systems and AI/Ml can help with:

• tracking assets: for example, the automotive industry benefits from tracking components and ensuring there aren’t any delays with delivery time. For logistics, it’s more about tracking routes and warehouse assets
• identify bottlenecks: where did it all go wrong? Where did it all go right? Identifying bottlenecks helps manufacturers optimise their processes and make better decisions
• Improve collaboration: monitoring enables good collaboration with suppliers, transporters and even customers since they can easily pinpoint issues and offer solutions faster

Technology optimises supply chain monitoring, ensuring that production will go according to schedule, minimal downtime and effective decision-making.

3. Automate tasks

Automation isn’t new, but the recent advancements in AI/ML capabilities can take over some error-prone and hazardous tasks:

• Maintenance - while you can automate and schedule all types of maintenance, preventive maintenance allows you to achieve optimal uptime, prevent equipment failure and ensure that costly repairs/replacements aren’t needed. Powerful AI/ML algorithms monitor equipment all the time and can notify you whenever they detect anomalies
• Collaborative robots - cobots work alongside humans to take over repetitive or dangerous tasks, such as welding or lifting heavy weights. This helps prevent injuries, creating a healthier work environment
• Machine vision - machine vision is not new. However, AI-based neural networks (modelling human thinking) use deep learning to perform very sophisticated tasks such as picking up minor flaws in equipment or products.

Task automation enhances quality management, while reducing waste, which is the perfect formula for cost optimisation.

4. Business intelligence and analytics

BI and analytics are the red thread connecting all of these elements. However, they deserve a special mention since they operate across departments, having the most impact on:

Minimising inventory storage costs - storage fees can add up quickly. Analytics enable you to adopt a demand vs. capacity-utilisation approach through demand forecasting

Quality and innovation: data helps you find areas of improvement, but also opportunities for innovation by identifying patterns and trends

Workforce: optimise workforce planning with data. Benefits include raising productivity, workforce allocation according to needs, and avoiding over/under staffing. It can even help with training and compliance as it identifies core issues and skills gaps.

All of this leads to major savings in the short and long term.

5. Outsourcing IT services

Another important aspect of cost optimisation is making the right decisions regarding software development. The most important one is definitely choosing between in-house and outsourcing IT services.

While both have pros and cons, outsourcing allows you to focus on your core business activities and bypass the talent shortage issue. In this case, a technology partner can help you achieve your goals without compromising quality.

Why work with a technology partner for cost optimisation?

An IT partner can help you optimise and reduce costs. In addition to what we mentioned above, you have:

• Zero recruitment costs - find a pool of experts and assemble a dream team - minus recruitment and onboarding costs
• No ongoing hiring costs - the costs of hiring developers, QA, architects, etc. add up fast
• No training costs - training and certification should be covered by the technology partner
• Lower downtime - find the right experts at the right time and make sure that project bottlenecks are resolved early on
• Reduce hardware and software costs - the IT partner covers hardware costs but also helps you optimise your software investments
• Digital transformation - work with a partner that understands your industry and can offer suggestions for optimising costs

How Qubiz helps manufacturing CFOs optimise costs

Qubiz is a custom software solution company and a reliable technological partner In more than 15 years of experience, we have helped many companies create long-term and sustainable software solutions, integrate the latest technologies, and, most of all, lower inefficiencies.

With us, you can build quality software solutions just in time for the market while optimising IT costs.

Want to learn more about what we can do for you?