Industry 4.0 – from buzzword to growth vector
How digitalization aligns with the management vision and drive the future growth of business
Factories now have a range of IT technologies and tools at their disposal that make a direct contribution to increasing overall business performance, monitoring equipment utilization and employee productivity. Modern manufacturing is tightly connected to technology adoption, which is not seen only an option for decision makers. As shown in a Gartner report, only 3 percent of the 221 responding managers mentioned that their company manufacturing operations would be “human driven, manual processes only” in 2025. On the opposite side, 17% of them are looking forward to seeing “completely digital, lights out processes” within their company in five-year term, which speaks a lot about the role of digitalization will play in the near future.
“Lights out processes” are fully automated and require no human presence on-site, a desire only turn to life with the large-scale automation and IoT integration, basic elements of the Industry 4.0. Few companies made steps into that direction, but the acceleration of the adoption of technologies at the level of the entire manufacturing sector, corroborated with their wide availability at increasingly affordable cost prices makes the delay in making decisions in this regard deprive the organization of a possible competitive advantage. Thus, modernizing production systems becomes critical as digital technologies are reshaping the manufacturing sector and drive game-changing performance improvements among early adopters.
“Industry 4.0 is the seamless integration of software, equipment, and people that increases the speed, reliability, and flow of information between all systems of a manufacturer. Often, these operations are manual, with work orders and parts delivered from area to area within a factory, often a slow and inconsistent process. Industry 4.0 automates these workflows, improving speed and efficiency in smart factories.” (source)
Visionary manufacturers aim to include next-generation digital instruments in production processes, relying on artificial intelligence (AI) and Internet of Things (IoT) sensors to create innovative products, shorten time to market, and, by default, to increase its market share. They will also focus on optimizing the operation of information technology (IT) and operational technology (OT) to produce value for the business.
However, how big will be the business outcome, the impact of this technology adoption to put Industry 4.0, the Fourth Industrial Revolution, in place?
In April 2019, Deloitte and the Manufacturer’s Alliance for Productivity and Innovation (MAPI) launched a joint study to determine the value of smart factory initiatives to make the business case for investment. The results showed that every manufacturer who invested in smart factory technologies can harvest business value from smart factory initiatives which typically accelerate business value creation. Companies report on average 10–12 percent gains in areas such as manufacturing output, factory utilization, and labor productivity after they invested in smart factory initiatives. The study shows that on average, the year-on-year growth rate of labour productivity will be 2.0% between 2019-2024 and the CAGR figures for 2025-2030 will be higher, around 2.3%.
Even though the data from the Deloitte study were collected in 2019, the situation created by the pandemic in 2020 will not affect the trend. On the contrary, the digitalization decision process was accelerated, and KFactory consultants felt this as potential customers became more receptive.