The fourth industrial revolution has truly arrived. The term ‘Industry 4.0’ emerged in 2011, so it’s been part of the manufacturing vocabulary for almost a decade.
Pioneers from various industry segments representing small, medium and large enterprises have led the way and embraced the benefits this new revolution has to offer, demonstrating to the rest of the world how much there is to gain. The benefits of Industry 4.0 include:
- Creating a cultural shift in the company: the way employees collaborate, work and serve their customers
- Improving production metrics: quality, throughput, reduced scrap, improved machine uptime, traceability
- Unifying data aggregation for a ‘single point of truth’ for manufacturing operations
Companies which approach digital transformation from a strategic standpoint and pursue the step changes required for enabling this new revolution reinvigorate their value chain and have the opportunity to achieve unprecedented results from their operations and extended supply chain.
What Exactly is Industry 4.0?
There is still a lot of apprehension and conjecture from manufacturers across the world about whether or not to pursue Industry 4.0 at all. Some companies contemplate that it may be best to wait and watch to see what others gain out of their digital transformation initiatives. Others believe it is better to pursue a single aspect of the entire Industry 4.0 technology spectrum, rather than trying to incorporate all major use cases, so they want to approach implementation on a piecemeal basis.
Let’s take a step back. Today we will address the entire concept of Industry 4.0 and how it needs to be pursued. We will also explore why digital transformation needs to begin ‘NOW’ in your value chain, rather than waiting, when it may be too late.
First and foremost, let’s address the proverbial elephant in the room: what exactly is Industry 4.0? We provide a good definition in our white paper, Manufacturing Software for Industry 4.0, Embracing Change and Decentralization for Success.
In simplest terms, Industry 4.0 is the fourth iteration of the Industrial Revolution:
This fourth industrial revolution is based on cyber-physical systems—the merging of the real and virtual worlds. These cyber-physical systems rest on enabling technologies, such as embedded electronics, embedded communication, embedded computing, mobile, cloud, advanced analytics, 3D printing, and for collaboration, community platforms.
The promise of Industry 4.0 for manufacturers is not only lowering costs, improving quality, and faster throughput/processing, but addresses a ‘personalization’ factor with smaller lots—theoretically, lots of one. The broadest, future vision calls Industry 4.0 a marketplace, where smart products and smart equipment interact autonomously for dynamic optimization on the fly.
Industry 4.0 then is an amalgamation and integration of new and existing processes, supplemented with current technologies, which through IT applications such as MES and other plant and enterprise applications are connected, enriched with data through the industrial internet of things.
Industry 4.0 allows the entire value chain to become more efficient, more flexible, more resilient and most importantly, more profitable. It brings improved visibility, connectivity, real-time decision making and operational intelligence, created through machine learning, higher employee and asset productivity, higher degree of low cost customization, complete compliance to regulations and cost reductions due to poor quality, labor, downtime or waste.
Diving a little deeper, as we said earlier, Industry 4.0 is driven by technological advancements, such as AI-enabled machine learning, big data analytics, Augmented Reality, cloud computing, automated robots a co-bots, additive manufacturing and IIoT. To truly leverage these technologies from an Industry 4.0 perspective, vertical and horizontal integration of the shop floor with the rest of the value chain is essential, which brings us to IT applications. For manufacturers, MES plays a critical role in enabling this desired integration, being the layer that connects lower level shop floor applications and process equipment with higher level applications like ERP or SCM. It is this very integration and the automation which results from it that holds the key to a successful Industry 4.0 implementation.
Industry 4.0 Use Cases
Most of what we see with Industry 4.0—the drivers and IT applications—are not new. They have been in use for at least a decade. What really changes the game with Industry 4.0 has to do with implementation—how this technology is used.
The orchestration gained by Industry 4.0 with the integration IT applications and advanced technologies allow for end-to-end connectivity and visibility across the value chain, where information generated from and insights gained from the process and beyond is converted to actionable intelligence allowing for smarter, more profitable decisions to be made in the least amount of time, leading to gains across all operational and financial KPIs.
Industry 4.0 is all about this ‘Digital Transformation’ of the value chain. It requires for existing process and operations to evolve in such a way that there is an incorporation of new technologies, while ensuring that IT applications through the MES-enabled data platform orchestrates the transition, so that there is minimal disruption while the whole value chain reboots to the new digital version.
Pioneers in Industry 4.0 implementation are already seeing massive benefits from this step change, which they made very early on. Approaching digital transformation strategically, they understood which use cases needed to be targeted first, and then brought in technology, personnel, industry experts, consultants and IT/MES vendors to create the necessary conditions to achieve the requisite horizontal and vertical integration. Eventually, they incorporated various advanced technologies to gain the maximum possible advantage of the Industry 4.0.
Industry 4.0 Early Adopters
The leaders in Industry 4.0 implementation are referred to as ‘Lighthouses’ (by McKinsey) or ‘Trailblazers’ (by Deloitte). However, irrespective of the terminology used, the benefits these adopters have realized through early implementation of Industry 4.0 is beyond dispute.
Referring to a 2019 study published by McKinsey in association with the World Economic Forum, the front runners in implementation and adoption of AI (which enables machine learning and is a major part of Industry 4.0, manifested through MES) stand a chance to see a 122% positive change in cash flow in 4-5 years upon implementation. This is huge considering the ‘followers’ who lag behind in pursuit of Industry 4.0 experience only a 10% change in cash flow.
The paper also claims that these pioneers experienced an unprecedented boost in KPIs pertaining to Industry 4.0 use cases, such as factory output increase, productivity increases, shortened time to market, inventory reduction, OEE increase, quality cost reductions, production cost reduction, lead time reduction, changeover time shortening and lot size reduction.
The ‘Lighthouse factories’ experienced KPI improvements over a range of 3%-200% across these use cases. By taking a cohesive view and execution of Industry 4.0 components, these companies experienced gains and overall supply chain improvements far beyond what simple continuous improvement initiatives would have provided.
Similarly, the 2019 Deloitte and MAPI Smart Factory Study claims that Industry 4.0 pioneers who have endeavored to create ‘Smart Factories’ through implementation of Industry 4.0 methodologies across 10 or so use cases are the ‘Trailblazers’ setting an example on how much there is to gain by making the transition from status quo to a digital value chain/ operation.
According to the study, smart factory adopters have seen average three-year gains of 10% factory output and expect labor productivity to improve 2 percentage points to 12% by 2022. Similarly, gains in capacity utilization and production outputs have been 11% and 10% respectively, in a period of three years. The key aspect which separates the Trailblazers from the other companies is the fact that on an average they allocate 65% of their factory budget to smart factory initiatives, which implies that they have put being Industry 4.0-enabled as their number one priority.
The Time to Act is NOW
Across every industry segment, the early movers–the so-called pioneers–who have managed to follow the right approach of making Industry 4.0 implementation a value chain-wide strategy are seeing massive improvements. The examples and the numbers presented speak for themselves, and what they say is the time to act is ‘NOW.’
Start with a plan and with a goal in sight. Then, select the team that will assist your transformation—the industry experts, the internal personnel, the use cases and the solutions. This is the core methodology for success.
We believe that having an MES is the foundation for your Industry 4.0 success. Industry 4.0 is designed to change the basic business equation of manufacturing – to improve agility, innovation, efficiency, cost, quality and speed all at once.
These benefits come from a combination of smart products, smart services, smart innovation, smart manufacturing and smart supply chain. The opportunity to be future-ready begins with Industry 4.0. Do not hesitate to take the next steps toward this brave new world.