Companies that make goods need to keep pace with competitors, or risk falling behind in the marketplace. Survival of the fittest means embracing the Industry 4.0 revolution, which is being driven by technology that is reshaping the manufacturing sector, such as artificial intelligence (AI), machine vision and Internet of Things (IoT) connectivity.
McKinsey & Company defines Industry 4.0 as the digitalization of the manufacturing sector, driven by large volumes of data, massive computational power, robust network connectivity, new human-machine interfaces (from voice avatars to augmented reality) and improvements in machine-driven production, such as advanced robotics and 3D printing.
Industry 4.0 for SMEs
Industry 4.0 is transforming the manufacturing sector in key areas, such as digital management tools, digital production tools, advanced analytics and advanced production processes. Large companies are leading the way, but small- and medium-sized enterprises (SMEs) are also embracing new technology.
But one of the major challenges for the future relates to the transfer of Industry 4.0 concepts and technologies to SMEs, according to the authors of "Transfer of Industry 4.0 to Small and Medium Sized Enterprises."
“Industry 4.0 creates the basic prerequisite for the intelligent, self-learning and self-optimizing factory of the future," says Erwin Rauch, a professor of industrial engineering and automation at the Free University of Bolzano, Italy, and a co-author of the Transfer of Industry 4.0 to Small and Medium Sized Enterprises paper. “Combining Industry 4.0 technologies with machine vision, artificial intelligence, machine learning and IoT concepts results in an unprecedented potential for increasing efficiency, and thus achieving an unbeatable competitive advantage in today's highly competitive global environment."
In fact, embracing Industry 4.0 is a competitive imperative for companies of all sizes. SMEs, like larger companies, need to future-proof their operations and processes in order to flourish in a digital-first economy.
“The question will not be whether managers should prepare their company for Industry 4.0 or not, but rather how they can do this as quickly as possible in order not to lose their competitive position," says Christopher Brown, a professor of mechanical engineering at Worcester Polytechnic Institute and another co-author of the Industry 4.0 paper.
A Paradigm Shift
But embracing the new digital manufacturing environment means more than an organizational re-alignment. It requires a fundamental shift in the way manufacturers integrate technology into every facet of their operations. “Compared to the introduction of lean principles in recent decades, the introduction of Industry 4.0 and related concepts of an intelligent factory will be much more difficult for companies," says Brown. “It is not, as in the lean wave, purely an organizational adjustment in the company, but much more of a technological revolution."
McKinsey outlines eight key value drivers that companies need to consider as they align new technology tools with business objectives. These include asset utilization, resource usage, labor, inventories, quality, supply and demand, time-to-market and post-sales service.
“As with all other industrial revolutions, companies will best survive long-term by adopting the innovations as quickly and agile as possible," says Brown. “Once Industry 4.0 has been introduced into the company, it opens a high potential for increasing efficiency in business processes and manufacturing processes."
The evolution of Industry 4.0 over the past decade has included increasing use of sensors integrated into machines and more fully autonomous applications. This has enabled a re-imagination of learning systems that use huge data and real-time information sources into “smart" systems that can learn, evolve and adapt over time," says Mark Skilton, Professor of Practice, Information Systems and Management Group at Warwick Business School at The University of Warwick in the U.K.
Skilton, the author of The 4th Industrial Revolution: Responding to the Impact of Artificial Intelligence on Business, says that next generation assembly, design and manufacturing will be deeply integrated—from idea to use to upgrades and replacement—in a much more optimal and sustainable way.
Industry 4.0, Skilton adds, is facilitating a service-oriented, “always-on," “always connected" business ecosystem. “The future will be connected to the present by this paradigm shift so what we do today will enable new, innovative ways for future-proofing capabilities that grow and adapt with the market," he says.
Choosing the Right Tools
Investing in the right tools at the right time is essential for companies implementing digital transformation strategies. Fundamental tools, such as software for enterprise resource planning and customer relationship management, have to be integrated into a system that is capable of real-time information processing and analysis.
“This will enable forecasts to be created even more accurately, and customer requirements to be interpreted even more individually, which will lead to a new level of quality and effectiveness in sales, logistics and warehouse management," says Rauch.
Another important component of Industry 4.0 is the use of cloud technologies. Rauch says that the cloud can help companies implement more collaborative product development processes that involve end-users in the design. The convergence of virtual and digital planning tools, from 3D renderings to virtual reality, will help facilitate design and testing.
As with all other industrial revolutions, companies will best survive long-term by adopting the innovations as quickly and agile as possible.
—Christopher Brown, professor of mechanical engineering, Worcester Polytechnic Institute
Advanced technology for production, from machine vision to robotics, will also be essential for the digital factory of the future. “New technologies such as additive manufacturing and the introduction of collaborative robots make it possible for the first time to produce even the smallest batch sizes individually and automatically," adds Brown. “The next step in the direction of increasing efficiency and mapping a wide range of variants will be taken if robots are able to predict human movements using machine learning algorithms, thus enabling a product change in the line to be carried out on the robot, without changeover times."
Ultimately, companies will also need automated systems that can analyze massive amounts of data on-the-fly in order to increase production efficiency. Artificial intelligence, predicts Brown, will facilitate detailed data and real-time quality control. “The human being thus receives a completely new level of data quality to make decisions in production," he says.
At the heart of the Industry 4.0 revolution is the ability for manufacturers to make faster and better decisions. “In the future, data will be the new gold of companies, and a driver for success," adds Brown.
While Rauch and Brown agree that Industry 4.0 has the power to transform manufacturing, they also believe that it needs to be harnessed in ways that empower humans to solve big picture problems, such as sustainability and climate change. “The challenge for society," says Brown, “is what to do with the excess intellectual capacity that Industry 4.0 makes available."
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