Silos in companies have been a recurring issue for years. Whether we’re talking about traditional or digital organizations, the problem remains the same: lack of collaboration and information exchange between departments. In the digital age, one might think that the silo problem would fade away. Nothing could be further from the truth. Digitalization, if not implemented strategically, can deepen existing divisions. So how do we avoid typical pitfalls and ensure that digitalization not only improves processes but also integrates the company? Let’s take a closer look.
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How Digital Silos Form
In traditional companies, silos emerge from divisions between departments – for example, production and quality often operate in conflict, and although they exchange information, they don’t always do so willingly. The problem plays out on two levels: hard and soft. Let’s start with the latter. The soft level is the conflict between people. While from the entire enterprise’s perspective, both production and quality share a common goal: customer satisfaction, and consequently good relationships, sales, and profit. Should work, right? Well… yes and no. Because when we get down to earth and put a quality engineer and a production manager face to face, their local goals may be in clear conflict. The production manager wants to produce, obviously. A lot and fast. Not necessarily well, unless that ‘well’ doesn’t interfere with ‘lot and fast.’ The quality engineer often slows down or even stops production with their actions. They add additional controls, conduct analyses, run tests and stop the line, add vision systems and sensors which complicate operators’ lives. Add a few communication errors, and you’ve got a conflict ready to go. And digital silos can only deepen it. Different ways of collecting and processing data in both departments mean that one has to reach into the other’s pocket. Quality needs production data, production might not want to collect it because it’s inconvenient, non-ergonomic, or reveals what they want to hide… and the conflict deepens. A similar conflict can occur at the IT systems level. Many companies implement dedicated software in individual departments without thinking about their integration. Information from one system cannot easily reach another. Excel gymnastics becomes necessary, which also absorbs additional people, pulls them away from other duties, generates frustration and conflicts.
For example, the warehouse department might work with a WMS system that manages logistics, but this system isn’t connected to the MES on the production floor, and MES in turn isn’t communicating with CMMS in maintenance. There’s also no integration with APS, the production planning. Each of these systems works great separately, but together they create hermetic environments that don’t share information. The result? Data flows slowly, processes get delayed, and digital silos deepen the problems that digitalization was supposed to solve.
Negative Effects of Digital Silos
Digital silos lead to one main consequence – lack of data synchronization, which impacts company efficiency. Lack of integration between systems means data doesn’t flow smoothly, forcing employees to transfer it manually. In IT, this is called the “protein interface” – where humans become intermediaries between systems. For example? Data from the production system might end up in Excel, which then goes to another department to be imported into another system like WMS – and all this happens manually. Instead of focusing on analysis or decision-making, employees transfer data between systems, which is inefficient, increases the risk of errors, and is simply frustrating and leads to employee burnout.
The lack of automation and consistent data flow means the company loses flexibility, responds more slowly to changing circumstances, and in extreme cases, can’t respond at all because information arrives too late, doesn’t arrive at all, or there’s no way to handle the new situation. Hindered information flow between departments ultimately reduces the organization’s competitiveness.
Strategic Approach to Digitalization: How to Eliminate Silos?
Can digitalization eliminate silos? Of course, but only if implemented strategically. You need to start by viewing digitalization as a holistic process, not as a collection of separate activities in different departments.
The key step is identifying the main process – in manufacturing companies we’re discussing here, this will obviously be production; for service companies it’s the main service, but we’re not dealing with those here. So production should be the initial focus of digitalization, and only then should you think about integrating supporting processes like logistics or maintenance. If you’re unsure whether production is the main process in a manufacturing company, ask yourself this helper question: where does the money come from, or simply what do customers pay for? In a siloed reality, it’s not hard to conclude that each department is the most important because they all interfere with each other. The absence of silos can be recognized by everyone in the organization knowing what the main process is, while all other processes are subordinate to it and work not to interfere with it.
How to subordinate other processes to the main one? Well, you need a drummer, just like on a galley. For all rowers to row in unison, something is needed to help them catch a common rhythm. That something is the pulse, the ECG of the production process. And what is it? For production, the ECG measure is flow. Simple as that. If you’re producing, if units are being created, it means your organism is alive. How fast they’re being produced compared to how fast they could be produced simply determines your production’s condition.
Each unit of produced goods represents one machine cycle, a manual work unit performed by an operator, a semi-finished product placed in a buffer, and a component taken from the supermarket. One unit at the process output is like a signal: record the work, decrease component inventory, increase semi-finished product inventory, calculate operator’s piecework, prepare for supermarket replenishment, prepare for finished goods reception, and so on. See how simple it is? If you don’t have such a drummer, if you’re using only an ERP system, for instance, your production is effectively working in a push system. The ECG tells us when the production line pulls in components and releases products. This organizes reality and implements an actual pull system in production.
The next step is selecting systems that enable automatic data exchange between departments. An example could be implementing a digital kanban that automatically communicates production needs to logistics. This way, the logistics department knows when to replenish materials before they run out on the production line, and the production department doesn’t have to stop work to manually report material shortages.
In this context, it’s crucial that digitalization isn’t just about implementing new tools, but about integrating data and processes across the entire organization. Only then does digitalization start delivering expected results.
Digitalization Pitfalls: How to Avoid Mistakes?
One of the most common mistakes in digitalization is testing solutions on individual machines without considering the entire process. For example, implementing a system that works perfectly on one machine but has no connectivity with the rest of the production line or other departments. As a result, we have a tool that provides lots of interesting data, but this data has no practical application on a broader scale.
Buying “bells and whistles” that look great in sales presentations but don’t add value is a common trap. To avoid this, you need to ask yourself: what effect do we want to achieve? Digitalization should bring real benefits – primarily better synchronization of information flow and improved efficiency across the entire enterprise.
Summary
Digital silos are a serious threat to companies undergoing digitalization without proper strategy. Digitalization should be implemented with the entire enterprise in mind, not just individual departments or machines. The key to success is system integration and automation of data flow between departments. Only then will digitalization bring real benefits such as increased efficiency, better collaboration, and greater competitiveness.
If your company is struggling with digital silos or planning digitalization, contact us to learn how we can help. We’ll integrate your systems and optimize information flow to ensure digitalization brings measurable benefits for your entire organization.
