Digital Transformation – Starting with Cost Profile
Digital Transformation: The cost of ignoring the “Cost Profile” of plant. – The tragedy of Hit & Miss.
While interacting with several customers what we noticed is there is obsession with “Use Cases” but no effort in pinpointing the use cases to the cost profile of the plant.
The cost profile is percentage-wise distribution of plant expenditure in major heads:
Raw Material & Consumables, Maintenance, Waste, Utilities, Labor, R & D and Logistics.
For Digital Transformation, there are two approaches:
– Outside -In : Focus on Technology and letest buzz and chase it to build use case out of it. It seems this is the most prevalent approach.
For Digital Transformation, there are two approaches
Inside-Out: Diligent analysis of plant performance in terms of fixed and variable costs [Raw Material, Maintenance, Waste, Utilities, Labor, Administration, Logistics] and tapping in to technology to bring down the cost and improve the profitability. This is desirable and profitable way.
Inside-Out: Diligent analysis of plant performance in terms of fixed and variable costs [Raw Material, Maintenance, Waste, Utilities, Labor, Administration, Logistics] and tapping in to technology to bring down the cost and improve the profitability. This is desirable and profitable way.
To adopt “Inside-Out” approach, Digital Teams need to closely work with CFO & team and meticulously arrive at areas which are bleeding the plant of revenue and benchmark it with best industry players as closely as possible. Then formulate digital interventions which can bring sustained improvement in these areas to improve the cost factor.
Each plant will have its own strengths and weakness based on Leadership, infrastructure and peculiarities of business but to start with identification of problems with specifics cost factor is assured way of reaping benefits of Digital.
The process has to be carried out in multiple iteration till the point where the cost profile of the plant matches or surpasses that of best in industry – thereby creating a concrete competitive advantage .
