Industry 4.0 (Part 1) Adapt or Perish

In 1908, it took auto workers 12 hours to build a Model T for Henry Ford. Ford sold it to the general public for $850, roughly $21,000 in today’s dollars. When he revolutionized manufacturing with the assembly line in 1913, a Model T rolled out in just 93 minutes at a price of $260 to the consumer.

Henry Ford would become America’s first self-made billionaire. What would he and his company have become if he hadn’t utilized the technology available to him in the early 20th century?

Today, digital technology puts manufacturers exactly where Ford was in 1913: on the cusp of something astonishing. This technology characterizes The Fourth Industrial Revolution and it permits manufacturers to do what Ford did: produce something quickly, efficiently and cost-effectively. The comparison stops there because today’s “disruptive” technology also allows complete and rapid customization, small-lot production, quick deployment of product innovations, sales and marketing strategies and much more.

This is all well and good but does the promise of Industry 4.0 translate into greater profits? Is it possible for a manufacturer to replicate the cost reduction of Henry Ford’s old Model Ts, for example, or even come close?

Roland Berger is a German-based global consultancy firm that focuses exclusively on digital transformation. According to the firm, the U.S. auto sector is a perfect example of where Industry 4.0 can make a huge impact. The company estimates savings of between 16 and 32 BILLION dollars annually. This is the equivalent of 10 to 20 percent of addressable production costs, says the company, “and is realized by following a trend that is also known as … simply, Industry 4.0.”

There is nothing unique about the auto manufacturing sector. At the end of the day, it’s still manufacturing.

Yet, a study done by Capgemini Consulting in 2012 indicated that only 25% of manufacturing executives surveyed thought digital technology would play a significant role in the next five years. One year later, Capgemini, in cooperation with the MIT Sloan Management Review, conducted another survey that showed adoption of digital technology remained slow.

Many companies struggle to get off the starting line with digital technology. Of the nearly 1600 corporate executives surveyed, 66% rated their firms as “beginners” when it comes to technology. They use email, the Internet and some enterprise software and that’s it.

What’s even more startling is this fact unearthed by the survey: in companies not focused on digital transformation, only 18% believed they would be more competitive in two years, while nearly half of respondents saw a grim and less competitive future over the ensuing 24 months.

Part of the reluctance among manufacturers to move forward is the limiting view that digital technology may automate manufacturing processes but little else. This couldn’t be farther from the truth.

In reality, today’s technology allows an interconnected situation where all facets in a manufacturing plant “speak” to each other all the time through the use and analysis of data. The result can be the elimination of production bottlenecks, the delivery of inventory when it’s needed, quicker product cycles through the rapid design and manufacture of new products plus sales and marketing teams with access to real-time data analytics. The net result is a holistic company where all information is instantly available to everyone for use in decision making. When used properly, digital technology transforms manufacturers into integrated, fast-growing and agile companies. The net effect is a much more profitable bottom line.

Regardless of the many and growing number of benefits of digital technology in manufacturing, according to Capgemini, there is still reluctance among manufacturers to make it a friend, largely due to these factors:

  • Complacency – there’s no burning need to innovate. Everything’s just fine.
  • Lack of vision – if the CEO doesn’t “get it’, how can the rest of the company?
  • No roadmap – it’s one thing to say ‘yes’ to digital technology and another to formulate a plan to roll it out in a company.

A company today that does not see the danger of failing to embrace digital technology is a company doomed to fall by the wayside. Change is happening fast and competition grows stiffer as those factories that do adapt move rapidly ahead of the pack.

The Global Center for Digital Business Transformation puts the power of disruptive digital technology succinctly. “Digital disruption now has the potential to overturn incumbents and reshape markets faster than perhaps any force in history. Digital disruptors innovate rapidly, and then use their innovations to gain market share and scale far faster than challengers still clinging to predominantly physical business models.” Translation: new competitors can emerge at any time, from anywhere, and blow you out of the water.

Gestisoft understands that trying to determine a starting point for a digital roadmap is daunting. But we have worked with manufacturers for more than 20 years to do just that.

Our new eBook, Industry 4.0 – Manufacturing on the Brink in Canada, is now available and will provide more information on why digital technology is not just the future but the present, as well.

We also invite you to order your Industry 4.0 Opportunity Assessment today by reaching out directly to me at spoirier@gestisoft.com . It is based on your company’s unique business DNA and ecosystem, and will be a solid first step towards developing the digital strategy that is ideal for your firm. With our help, Industry 4.0 can become an ally for your company and power your business to new heights.

Read part 2

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