In facing challenges such as inflation, talent shortages, and higher energy costs, machinery and equipment manufacturers could look to digital and cloud solutions for help. According to senior partners Dorothee Herring and Rafael Westinner and coauthors, implementing organization-wide digitalization with cloud applications and a suite of digital tools could improve a machinery manufacturer’s EBIT by as much as five to eight percentage points. Automations, improvements in data analysis, and more can increase efficiencies and free up employees to focus on higher-level improvements that lead to further savings and product innovations.
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A waterfall chart displays the margin improvement of a typical machinery and equipment manufacturer after undergoing a cloud-enhanced digital transformation. The first bar in the chart shows the baseline revenue at 100%, followed by the change in value at each spending level post–digital transformation. The chart indicates that a machinery manufacturer’s digital transformation can realize savings of up to 5% on materials costs, 5–10% on labor and other costs, 10–15% on selling costs, 15–20% on general and administrative expenses, and 10–20% on R&D costs—savings that results in an overall average increase in earnings before interest and taxes of 5–8 percentage points.
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To read the article, see “Boosting machinery sector profitability via cloud-aided digitalization,” August 11, 2023.