SAP/MPI Group: the importance of industry 4.0
Examining the extent in which manufacturers are leveraging industry 4.0, the MPI 2020 Industry 4.0 study titled ‘Industry 4.0 drives agility and productivity in manufacturing’ is the latest edition since the study began in 2016.
As the number of manufacturers embedding intelligence and/or smart devices into their operations as well as offering new products that incorporate these technologies increases, the study states that “the changes over time are clear: leaders recognise that their firms must digitise now - or become vulnerable to competition.”
Since starting in 2016, the 2020 study reports that the increased implementation of Industry 4.0 technologies and best practices have resulted in “enhanced productivity, revenues, profits and competitive advantages.”
The importance of Industry 4.0
When asked about the importance of Industry 4.0 for the manufacturing industry, the study concluded that nearly all manufacturing executives believed Industry 4.0 is important to their companies - 45% ‘extremely important and 38% ‘very important’ - with over half stating that it will have a ‘significant impact on industries and businesses in the next five years.
One of the drivers for this is the understanding that in today’s world, Industry 4.0 is a competitive differentiator (50%), due to its capability to improve finances, operations, and brand values across multiple functions and departments. 42% of executives believe that it is the future.
With such expectations for Industry 4.0, 47% of manufacturers have reported that they have strategies implemented to apply Industry 4.0 to their processes. However, only 37% have done this for their products.
Industry 4.0 enabled plants and processes
On average, the study uncovered that manufacturers have incorporated smart devices or embedded intelligence in 41% of their production processes and equipment, with 88% expecting this to increase in the next two years.
In addition to their production processes and equipment, manufacturers - on average - have incorporated smart devices or embedded intelligence into 33% of their non-production processes, with 86% expecting it to increase in the next two years.
It is expected among executives that Industry 4.0 initiatives for plants and processes are likely to be led by IT (31%), operations leadership (19%) or dedicated Industry 4.0 departments or functions (18%).
Focusing in on smart products, 46% of manufacturers state that embedding smart devices and/or intelligence into products is a significant focus of their production innovation plans, with a further 37% having ‘some plans to do so. In addition, two-thirds of manufacturers are embedding smart devices and/or intelligence into products such as goods, materials and software.
As a result, the study indicates that - on average - manufacturers are generating 38% of product sales from goods with embedded smart devices and/or intelligence, with a profit margin of 36% - on average - compared to 33% for other products.
However, executives in the study identified that alongside the benefits, the top challenges when embedding such technologies include:
- Identifying opportunities and benefits (53%)
- Accessing the required technologies (45%)
Building an Industry 4.0 future
In its final chapter, the study highlights that whilst it was conducted prior to the outbreak of COVID-19, it “offers hope for how Industry 4.0 might hasten the recovery of manufacturing in its aftermath.”
However in order to do so, the study explains four things that manufacturers will need to do:
- Establish enterprise-wide strategies for optimisation of Industry 4.0 implementations
- Manage initiatives for Industry 4.0 efficiently vs, strict return on investment criteria
- Creative thinking for how Industry 4.0 can improve agility and productivity for factories and facilities
- Partner with customers to embed into products for higher revenues, margins, and satisfaction
Gartner: Leaders Lack Skilled Smart Manufacturing Workers
With organisations rapidly adopting industry 4.0 capabilities to increase productivity, efficiency, transparency, and quality as well as reduce cost, manufacturers “are under pressure to bring their workforce into the 21st century,” says Gartner.
While more connected factory workers are leveraging digital tools and data management techniques to improve decision accuracy, increase knowledge and lessen variability, 57% of manufacturing leaders feel that their organisations lack the skilled workers needed to support their smart manufacturing digitalisation plans.
“Our survey revealed that manufacturers are currently going through a difficult phase in their digitisation journey toward smart manufacturing,” said Simon Jacobson, Vice President analyst, Gartner Supply Chain practice.
“They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must. However, intuition, efficiency and engagement cannot be sacrificed. New workers might be tech-savvy but lack access to best practices and know-how — and tenured workers might have the knowledge, but not the digital skills. A truly connected factory worker in a smart manufacturing environment needs both.”
Surveying 439 respondents from North America, Western Europe and APAC, Gartner found that “organisational complexity, integration and process reengineering are the most prevalent challenges for executing smart manufacturing initiatives.” Combined they represent “the largest change management obstacle [for manufacturers],” adds Gartner.
“It’s interesting to see that leadership commitment is frequently cited as not being a challenge. Across all respondents, 83% agree that their leadership understands and accepts the need to invest in smart manufacturing. However, it does not reflect whether or not the majority of leaders understand the magnitude of change in front of them – regarding technology, as well as talent,” added Jacobson.
Technology and People
While the value and opportunities smart manufacturing can provide an organisation is being recognised, introducing technology alone isn’t enough. Gartner emphasises the importance of evolving factory workers alongside the technology, ensuring that they are on board in order for the change to be successful.
“The most immediate action is for organisations to realize that this is more than digitisation. It requires synchronising activities for capability building, capability enablement and empowering people. Taking a ‘how to improve a day in the life’ approach will increase engagement, continuous learning and ultimately foster a pull-based approach that will attract tenured workers. They are the best points of contact to identify the best starting points for automation and the required data and digital tools for better decision-making,” said Jacobson.
Long term, “it is important to establish a data-driven culture in manufacturing operations that is rooted in governance and training - without stifling employee creativity and ingenuity,” concluded Gartner.