Imagine a busy manufacturing company managing the production plan for hundreds of SKUs on tens of lines every week. Imagine doing all this on spreadsheets, including inventory tracking, paper-based procurement orders, and manual production scheduling. Sounds complex, painful, and outdated, right?

Yet many companies still use legacy approaches that consume time, introduce errors and reworks, and affect company agility and profitability.

Manufacturing is no longer a local competency. Other players, like Chinese companies, have mastered the scale and cracked the low-cost model. This largely became possible due to their investments and focus on building manufacturing efficiencies with the help of the latest digital technology. So, manufacturing companies that fail to adopt digital strategies will be left behind and will find it hard to compete with manufacturing powerhouses that extensively leverage technology.

In this article, we will explore why digital transformation is crucial for manufacturing, how it improves procurement and supply chain, and how businesses can remain ahead of the curve by taking their manufacturing digital.

What Is Digital Transformation in the Manufacturing Industry?

Digital transformation in manufacturing involves combining new-age digital technologies like Integrated Planning Solutions (IBP, BY, or o9), Hyper Automation, Smart Manufacturing (PLC, SCADA, etc.), and IIoT Platforms with Artificial Intelligence (AI) Layers on top for production, procurement, and supply chain processes. These digital transformation efforts aim to improve visibility and efficiency, reduce costs, and establish a data-driven approach to decision-making.

All these initiatives aim to improve visibility and efficiency, reduce costs, and establish a data-driven approach to decision-making.

And please don’t mistake the digital transformation for just automation. Unlike automation, where paper-based processes are transformed into digital workflows, digital transformation is a process shift in manufacturing operations. It is about defining the right digital architecture for the plants that connect them to the company’s mainstream systems, such as planning systems or ERP. Digital transformation transforms workflows, strengthens collaboration, delivers predictive insights for efficiency, and eliminates Non-Value-Adding (NVA) activities.

5 Reasons Why Digital Transformation Is Non-Negotiable in 2025

*Why Digital Transformation Is Non-Negotiable in Manufacturing*

Digital transformation is not a one-size-fits-all solution; it is applicable to various types of manufacturing, each with its unique characteristics and challenges. Whether it’s additive manufacturing, job shop manufacturing, or production process manufacturing, digital transformation can address specific challenges and improve overall efficiency and productivity.

Manufacturers worldwide are facing different but significant challenges that are new and rarely seen before. A lot of them are black-swan events as they are so rare and unpredictable. Be it politically inspired tariff changes, geopolitical issues, or outright conflicts, the only way to manage such unexpected problems is to take a more data-driven approach. This makes digital transformation an absolute non-negotiable.

Here are the top five reasons why companies cannot ignore digital transformation in 2025:

1. Rising Competition and Cost Pressures

With increasing globalization, manufacturers compete against companies with scale and automation. Companies such as China-based manufacturers have advanced so much that their landed costs after the logistics and tariffs are still lower than those of many home-grown companies. Without digital transformation initiatives, managing costs and remaining competitive is difficult.

2. Supply Chain Disruptions Events

Wars, pandemics, geopolitical tensions, and raw material shortages have highlighted supply chain weaknesses. Companies that use digital supply chain solutions can better predict disruptions, optimize procurement, and streamline internal operations quickly.

3. Personalization and Shorter Turnaround Times

Product lifecycles have significantly reduced. Customers today demand more customized products and shorter lead times. Digital transformation enables manufacturers to adopt agile manufacturing processes without compromising efficiency and respond quickly to market demands.

4. Regulations on Sustainability and Compliance

Governments and consumers demand greater environmental responsibility from businesses. Digital solutions can monitor carbon footprints up to Scope 3, optimize energy consumption, and monitor international regulations to avoid penalties and maintain brand reputation.

5. Workforce Issues

The manufacturing sector continues to have a skills gap, which has led to increased workforce costs. Digital manufacturing can compensate for labor shortages, increase productivity, and decrease manual labor.

Now that we understand the top reasons why digital transformation is non-negotiable in manufacturing, let's examine its role.

Role of Digital Transformation in Procurement and Supply Chain Management

Manufacturing success depends on procurement and supply chain processes. Digital transformation streamlines the procurement process, from identifying needs and selecting suppliers to managing contracts and mitigating risks. Here’s how digital transformation is changing these functions:

1. Value Unlock with Smart Procurement

Digital transformation enables smart procurement platforms that assess supplier performance, share-of-business (SOB), ground-up costing, and other optimal procurement strategies. This includes direct procurement activities that are critical for acquiring materials and components necessary for manufacturing processes. This provides visibility of procurement plans vs. actuals. Digital transformation unlocks procurement efficiencies that directly impact the COGS.

2. Reduce Risks with Real-time Supply Chain Visibility

Digital transformation provides real-time visibility across the supply chain. This real-time visibility reduces multiple risks, from shipment tracking to real-time production status reports. Companies can react quickly and correct issues by rerouting shipments or moving production to another SKU.

3. Automated inventory management

Conventional inventory management techniques often result in excess stock or shortages. Digital transformation introduces demand-driven inventory management systems that adjust stock levels based on real-time demand data.

4. Improve Supplier Collaboration

Cloud-based procurement platforms enable manufacturers to communicate with suppliers more effectively, reduce lead times, and improve efficiency. Automating contract management and supplier evaluation tools further simplifies procurement management processes.

5. Risk Mitigation with Digital Twin

Digital transformation in manufacturing allows for the creation of digital twin models of supply chains. This helps manufacturers simulate different scenarios and assess their preparation for unexpected supply chain events such as supplier failures or geopolitical disruptions.

7 Steps to Implement a Successful Digital Transformation Strategy

We discussed the need for and role of digital transformation in detail. But how to get it up and running?

Here are seven actionable steps for implementing a successful digital transformation strategy that can help you and your company started on the journey:

1. Set Clear Business Objectives

Digital transformation should align with business goals, and there has to be a reason and business case for it. Don't get tempted by shiny new tech promises. Whether cutting production costs, enhancing procurement efficiency, or enhancing customer experience, having a roadmap to business outcomes makes the best sense.

2. Invest in the Right Technologies

There are too many options out there. Manufacturers should critically evaluate the latest technologies that fit their business needs and existing systems. For example, find an AS/RS that integrates with existing supply chain systems and ERP.

3. Personalize Solutions

Digital transformation in manufacturing is rarely a one-size-fits-all thing. Depending on your business, find the solution closest to meeting your needs and work with the vendor partner to personalize it further. Personalization can be used to integrate with your existing systems, adapt to your business nuances, or do anything else. The most relevant example here is the IIoT platforms. While there are many out-of-the-box solutions out there, successful implementations are always personalized solutions.

4. Train and Upskill Employees

This is the biggest factor that can decide the success or failure of any digital transformation initiative. Insights from digital transformation leaders highlight the importance of investing in employee training to ensure a seamless transition. Technology is only as effective as the people using it. Investing in employee training ensures a seamless transition and maximizes the benefits of new digital tools.

5. Build Cross-Department Collaboration

Digital transformation initiatives should break down silos between procurement, manufacturing, and supply chain teams. Encouraging cross-functional collaboration improves efficiency and enhances decision-making. For example, a digital transformation for the audit and deviation management process should also include the procurement and sourcing team and help build the report of the suppliers’ performance over time based on the number of deviations and CAPAs raised for their supplied goods.

6. Start Small and Scale Gradually

Rather than overhauling the entire system simultaneously, companies should start with pilot projects, analyze results, and gradually expand digital initiatives. Let's say that implementing an end-to-end planning system requires a modular approach. For example, start with Supply and Distribution Planning. Once the system stabilizes, other modules like Material or Demand Planning should be added.

7. Continuously Monitor, Optimize, and Innovate

Digital transformation is an ongoing process. Regularly monitoring performance metrics, gathering feedback from the teams, and staying updated with emerging technologies ensure continuous improvement.

Holocene Helps You Stay Ahead in Your Digital Transformation Journey

Today’s manufacturers need a clear strategy for digital transformation to be in the race. This is where Holocene can be your go-to partner. Whether it’s smart automation, procurement analytics, or end-to-end digital integration, Holocene enables profitable and sustainable digital transformation efforts in manufacturing and procurement operations.

At Holocene, we help implement data-driven digital transformation strategies, like Industry 4.0, to enable next-gen manufacturing operations, eliminate inefficiencies and waste, and improve productivity. Our domain and technology experts help unlock value across manufacturing and procurement operations.

Let’s discuss how Holocene can transform your manufacturing and procurement for continued market leadership. Connect with us for a demo today.