May 5, 2022 Why Digitize the Shop Floor?

Three major benefits of digitizing the shop floor for co-packers and their manufacturers.

By Jason Tham, CEO of Nulogy

The one-two punch of labor shortages and supply chain issues have created an unsustainable environment for co-packers and contract manufacturers.

The challenges of today’s labor market are numerous and well documented: the widespread effects of the COVID-19 pandemic brought about the “Great Resignation,” coupled with the “Silver Tsunami” of retirees walking away from businesses with their corporate history/knowledge, have resulted in a dramatic skills shortage and a push for higher wages.

Additionally, global supply chains, already fragile and taxed before the pandemic, have deteriorated even further, and industries from automotive and aerospace to food and beverage are still trying to recover. Supply chain challenges are also numerous, from demand variability and capacity constraints to sustainability requirements and variable customer expectations.

To navigate the myriad of industry challenges and better serve their brand customers, forward looking co-packing and contract manufacturing enterprises understand that shop floor digitization can future-proof their operations by enhancing operational efficiency, cost savings and shop floor control. A digital shop floor solution also builds responsiveness and resilience into these business operations, preparing them for future disruptions and demand spikes.

I believe there are three major benefits of digitizing the shop floor for co-packers and their manufacturers.

Digitizing the Shop Floor Improves Operations

Digitizing the shop floor enables data automation to significantly optimize production operations. Amongst the businesses using the Nulogy Platform, we have seen increased profitability, improved reaction to supply/demand changes, and sharply reduced probability of errors resulting from manual processes.

By evolving beyond paper-based processes, spreadsheets and an overreliance on employees’ tribal knowledge, digitized co-packers and contract manufacturers gain more shop floor control and visibility into both inventory management and production-related workflows.

As well, profitability increases and capital expenditure decreases as co-packers and manufacturers automate materials planning, maximize line utilization, and increase capacity while reducing waste.

Another benefit of a digitized shop floor is improved responsiveness throughout shop floor operations as co-packers and manufacturers gain efficiencies in scheduling and communicating with clients, responding to changes and rush orders, and capturing and collaborating on ERP data.

The ability to connect and collaborate with the entire supply ecosystem in real time is essential for co-packers and their manufacturing partners, especially in terms of collaboration. They require an automated data flow with reliable, time-sensitive and secure intelligence – and ways to save time spent on administrative, non-value-added activities. Customers gain better visibility into orders and their status.

Digitizing the Shop Floor Alleviates Labor Related Constraints

Co-packers and their manufacturing partners are keenly aware of the skills and labor constraints brought on by the pandemic and the wave of Baby Boomer retirements.

We foresaw looming labor shortages and skills gaps in a blog we wrote five years ago, looking at the best ways to apply technology to better empower labor underemployment, and eliminate wasted or non-value-added labor. Process digitization frees up staff from time-consuming manual processes relating to, for example, procurement or external suppliers, while improving their ability to see across the company and the ecosystem to communicate better, respond faster, and facilitate collaboration. Digitization knocks down historical information silos.

When individual workers are the sole possessors of critical knowledge and historical experiences, their retirement or resignation poses an immediate problem. By digitizing the shop floor, all the operational knowledge remains embedded in the system and is retained by the business. Digitization maintains productive operations regardless of the workforce running them. With one centralized platform, companies can maintain and document real-time inventory counts, for example, and monitor production with real-time data, rather than depending on the employees most familiar with a particular production process. Enterprises gain standardized processing, data collaboration and improved efficiency. Digitized solutions deliver visibility, control and agility on the shop floor.

Another growing factor to consider is that younger workers are more attracted to digitized enterprises that incorporate digital tools, IoT processes, AI, virtual reality, mobile applications and more. Paper-based processes won’t cut it with today’s generation of new workers. This new generation of talent will expect organizations to have the modern tools that will enable them to be more productive and value-added.

Digitizing the Shop Floor Improves Collaboration With Customers

By digitizing the shop floor, co-packers gain essential visibility into their processes, gaining greater inventory accuracy, improved collaboration and increased customer satisfaction. They can deliver better outcomes to their brand customers with increased quality and timeliness. 

Real-time or near-real-time data and intelligence further promotes ecosystem collaboration for co-packers with their brand customers. It also saves time, resources and costs while establishing confidence and maintaining their reputation with their customers.

Automated solutions promote an improved level of responsiveness in the entire ecosystem, so co-packers can respond quickly to orders and changes, and deliver real-time status updates. Having a centralized platform and one version of the truth optimizes in-progress order tracking. Order accuracy is increased over error-prone manual processes.

Digitization leverages collaboration with partners and improvements across the entire enterprise, including production scheduling and management, materials planning, warehouse management, quality inspections and more.

Begin the Digitization Journey Today

Shop floor digitization addresses many challenges posed by the skills/labor shortages and supply chain disruptions that have defined the last two years. Hundreds of sites around the world are using software such as Nulogy to build resilience and efficiency into their shop floor operations. It is more critical than ever to prepare for the unforeseen future, and there is no better time than today to start your digitization journey.

About the Author
Jason Tham is a co-founder, CEO and brand ambassador for Nulogy. He is focused on corporate development, executive leadership, and understanding the evolving landscape of Nulogy’s clients. Jason is also an active speaker within the industry as a champion of technology enablement in supply chain.

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