It was in the latter half of the 18th century that we moved from an agrarian economy and witnessed the introduction of mechanical methods of production. Since then, the manufacturing industry has been witnessing a steady stream of radical transformations- from the use of steam and water power to the adoption of electricity and then computers. Today, we are on the cusp of witnessing what the businesses are calling ‘the fourth industrial revolution’, namely Industry 4.0. This revolution, if we may call it so, is being propelled by increasing adoption of technologies such as Big Data, Artificial Intelligence and the industrial Internet of Things. It is with the help of these technologies that the manufacturing segment is looking to increase productivity and efficiencies, streamline processes and ultimately increase profitability. Essentially, Industry 4.0 signals a shift from the centralized to the decentralized system of production, one where the product intelligently communicates with the production machinery telling it what it should do. This revolution signals the coming together of embedded system production technologies with smart production processes to transform the industry value chains and business models.
Industry 4.0 was a term coined by the German federal government and involves the adoption of new technology such as Internet of Things, Robotics and sophisticated and intelligent automation in order to create ‘smart factories’ and usher in the era of ‘smart manufacturing’. So what are the catalysts that have enabled this revolution? Greater availability of wireless internet connectivity on shop floors, protocol standardization, and cheaper sensor technology are some factors responsible for this movement.
According to a Price Waterhouse Coopers (PwC) report, Industry 4.0: Building The Digital Enterprise, today “35% of companies adopting Industry 4.0 expect revenue gains over 20% over the next five years”.
With Industry 4.0 we will witness the blending of real and virtual worlds of manufacturing through the Internet to create a connected production process where machines, systems, products and people all can manage themselves independently and with each other when the need arises. Though Industry 4.0 is still in its early stage of development, here’s a look at how it is poised to change the manufacturing industry:
Improving The Value Chain
The use of a host of connected technologies, high-quality sensors, powerful networks, artificial intelligence, robotics and technologies such as augmented reality and cloud computing are all geared to make information exchange more streamlined and impact the value chain positively. This enables organizations to improve operational efficiencies, streamline business objectives and improve their predictive capabilities. Since Industry 4.0 creates a ‘physical-to-digital-to-physical’ cycle, manufacturing industries will be able to provide greater focus on the production of physical objects by improving the manufacturing value chain right from design to development, manufacturing, sales and service to improve productivity, reduce risks, increase revenue and identify new avenues for revenue generation.
Build Smarter Products And Services
Given the use of advanced analytics and use of IT sensors, robotics, computer numerical controls in Industry 4.0, manufacturing industries can create better products and services and implement timely product improvements by improving manufacturing intelligence. For example, researchers at Architected Materials in conjunction with the University of California, Los Angeles are using technologies such as 3D scanners to manufacture individualized helmets and using embedded sensors to assess the magnitude of impacts and collect the data through an app to not only offer protection but also create a new data product that can lend itself to continuous improvement.
Better Customer Experience
Companies like Uber are already using data from drivers and customers for price management during times of high demand and adjust their prices accordingly.
A research by PWC called Industry 4.0: Building The Digital Enterprise states that “72% of manufacturing enterprises predict their use of data analytics will substantially improve customer relationships and customer intelligence along the product life cycle”.
Clearly, in the age of Industry 4.0, customer experiences will be driven by the products and services and will be complemented by the intelligence gathered from them in the form of data. This data will enable more transparent customer interactions, make marketing and selling of products and services more targeted, facilitate smoother post-sales experiences with the help of operations and performance analytics and finally make inventory management more streamlined and optimized.
Greater Vertical And Horizontal System Integration
With Industry 4.0 we will see manufacturing functions, right from the shop floor, different departments, functions, and competencies become more cohesive and integrated. This integration will allow the supply chain to convert itself into a flexible value-added network that will allow manufacturers and suppliers to operate in a compliant manner.
The investment in smart manufacturing technologies will help companies improve productivity, weed out redundant processes and legacy systems, improve their product and service line and reduce production time all of which will contribute to improving costs. The ‘New Industrial Revolution’ report by Deutsche Bank Research states that with the smart manufacturing initiatives, companies can expect to see a productivity jump of almost 30%.
The PWC Industry 4.0 research affirms that Manufacturers expect to reduce operational costs by 3.6% while increasing efficiency by 4.1% annually through 2020.
In order to stay relevant in an increasingly complex and competitive market, manufacturing companies will have to adopt Industry 4.0 to survive and thrive in the future. The foundation of this revolution is being laid out now with forward thinking companies making the required infrastructure investments to leverage the benefits of digitization and automation. The time ahead is full of promise, however, before this revolution delivers on its promise, organizations have to mitigate the challenges of interoperability and standardization, ensure data privacy and manage security risks. However, these factors are best left for discussion for another day.