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ASCM Insights

GE’s Big Investment: Digital Factories

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What does the digital factory of the future look like? GE is working to build one version of it today by investing in digital technology to transform its factories, generate new revenue and increase profits, Reuters’ Alwyn Scott reports. GE has spent $4 billion developing digital products, which range from tiny sensors in jet engines to augmented reality and software that can process large volumes of data.

Because GE is a leader in many industries, its experiment will be an important test for the digital factory idea. “[GE] has more than 500 factories around the globe that produce jet engines, power plants, medical CT scanners and other large, sophisticated equipment adaptable to the technology,” Scott writes.

Digitized factories are a big-money bet for GE and other manufacturers. In 2012, companies spent $20 billion on digital manufacturing, and Accenture estimates that number will be more than $500 billion by 2020. GE reports that the market it's in for digital manufacturing will be worth $225 billion by 2020.

Also, while GE is building its own smart factories, it is selling them as well. Called “Brilliant Factory,” GE’s product encompasses digital systems, advanced manufacturing, 3D printing and lean production.

Another digital investment for GE is Predix, its industrial operating system, which cost $1 billion to design. As part of its Predix efforts, GE is investing in companies that build robots, optical scanners and augmented reality.

“Predix systems work, in part, by creating a computerized model, or ‘digital twin,’ of a machine that shows in real time how it is performing, and when parts are wearing out,” Scott writes. “This can eliminate unplanned breakdowns, GE says, saving time and money.”

More technology does mean that fewer workers will be needed in these facilities, but these workers will need more high-level and digital skills. “We’re going to have a smarter worker,” GE CEO Jeff Immelt explained in the Reuters article.

In addition to these workforce shifts and pressure from investors to see payoffs from digital manufacturing investments, there are other challenges. The systems are complex and costly to maintain. Plus, because they rely on a network to operate, they could be hacked.

The bottom line, though, is that digital factories have the potential to improve company operations. To illustrate, the Reuters article describes how GE’s factory in Grove City, Pennsylvania, operates using new digital technology. Flat screens above work stations show how long workers spend on jobs, and a red warning displays when a task is taking too long. Supply chain executives and factory workers can refer to the screens to monitor operations. 

“When a massive railroad engines rolls in for repair, workers check the digital twin to see what parts need to be fixed,” Scott writes. “The system ensures spares are in stock. Older engines are fitted with sensors so they can supply that data next time. The process saves labor by eliminating unnecessary work.”

The next era of lean

Lean production can be a valuable approach for anyone in supply chain. Consider its definition in the APICS Dictionary, 15th edition: “A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with customers …” 

As manufacturing embarks on what experts call the Fourth Industrial Revolution, also known as Industry 4.0, it will be essential for supply chain professionals to remember the basics, such as lean production, as they learn how to operate and succeed in this new era. Prepare yourself and consider earning your APICS Certified in Production and Inventory Management (CPIM) designation, which demonstrates that you have the skills to strategically streamline operations and much more. Learn more at apics.org/cpim

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer at ASCM, the largest nonprofit association for supply chain and the global leader in supply chain organizational transformation and innovation. Prior to this, he was the managing director for the Operations Consulting Group of American Express Tax and Business Services. His leadership roles have included project management, business process redesign, and individual and organizational alignment. Eshkenazi may be contacted through editorial@ascm.org.

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