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December 7, 2020 Article 7 min read

Industry 4.0 technologies can help middle-market manufacturers transform existing operating models and manage volatility as they recover from the COVID-19 crisis. Solutions today are simpler and more affordable. Focusing on these three areas can help you get started. 

Businessman in a factory workshop wearing VR goggles and holding hands up.Industry 4.0 has garnered much attention and, while it’s begun to be implemented by large enterprises, it’s had a lesser impact to date on middle-market businesses due to complexity and cost. That said, middle-market manufacturing companies have started investing in Industry 4.0 technologies as these solutions have become simpler and more affordable. Couple that with the need to significantly improve efficiencies of plant operations to accelerate recovery in the wake of the COVID-19 health crisis, and we’re seeing a growing focus on Industry 4.0 in the middle market. For good reason.

Industry 4.0 addresses bottom-line shortfalls

First, let’s demystify the term. At a high level, Industry 4.0 is the intelligent connectivity between people, automation, digitization, and data analytics that drives transformative change in the manufacturing process. It represents an environment where computers are connected and communicate with one another to operate processes and make decisions with minimal human involvement. Technology advances allow for a powerful management transition, giving leaders the ability to guide the organization by looking forward rather than back, streamlining operations, and reducing manual tasks.

Making Industry 4.0 actionable can be overwhelming for many businesses, but transformation isn’t going to happen if you ignore the opportunities it brings. Look for ways to achieve benefits in 90-day increments. With this approach to a practical, achievable plan of action, your organization will be able to make faster decisions, optimize production, improve customer experience, modernize IT infrastructure, and more.

Making Industry 4.0 actionable can be overwhelming for many businesses, but transformation isn’t going to happen if you ignore the opportunities it brings.

Industry 4.0 and middle-market opportunities

As middle-market manufacturers recover from the COVID-19 health crisis, CIOs and CFOs are facing increased pressure to accelerate Industry 4.0 technology adoption to transform existing operating models and manage volatility. This shift in mindset represents a real opportunity. Consider that:

  • Customers, suppliers, and employees may be open, willing, and in some cases, even eager to accept significant changes compared to pre-virus days.
  • All companies are making changes to minimize interactions and keep adequate distances in order to maintain a safe and healthy workplace.
  • Efficiencies lost due to social distancing requirements will need to be recouped. Changing business processes and adopting new technologies can be one of the most effective ways to do this.

Use Industry 4.0 to improve resilience.

In order to operate within new federal, state, and local guidelines, companies are faced with the risks of higher costs and reduced productivity. New PPE (personal protective equipment) and testing requirements add cost while social distancing can potentially impact productivity, as two common examples.

To mitigate these risks, Industry 4.0 technologies can be a valuable tool to make proactive changes to your operating model. As a strong first step, evaluate where people congregate or perform work together such as clocking-in, attending shift meetings, handing off paperwork and materials, work assembly stations, and performing inspections and tool changes — these all are potential areas for trimming expenses and boosting efficiency. With these in mind, focus on three key actions to restart your core operations:

Graphic representation of Industry 4.0 within manufacturing.

1. Introduce business system optimization

Introduce business system optimization to reduce paper-based processes. Such processes tend to require staff to work in close proximity and rely on a handoff in order for information to be keyed into systems. Automating how you capture, share, and analyze information reduces exposure risk and increases productivity. Evaluate optimization opportunities beyond the plant floor, such as accounting, HR processes, and corporate communications.

Innovate interactions with customers and suppliers. Let’s take accounts payable, for instance. If your A/P process relies on manual employee intervention and paper invoices to process payments, consider optimizing your AP process with robotic process automation or RPA. RPA enables not only remote work but streamlines the invoice process from end-to-end with accuracy and speed while significantly driving down cost. Additionally, work with your suppliers to improve labeling to decrease receiving time, congestion at the receiving dock, and improve inventory visibility.

Want to learn more about RPA for manufacturers? Watch our on-demand webinar.

Electronically capture process information. Identify internal processes that are manual, time-intensive, and require multiple systems. For instance, record production using handheld devices rather than paper-based travelers. This eliminates the need for an operator to handle a document and to pass that document to another staff member for further handling (risking virus exposure). If you’re considering introducing COVID-19 contact tracing, implement it with electronic rather than paper-based systems.

2. Add automation

Add automation to reduce manually intensive processes. Start by evaluating your core businesses. Don’t spend time improving or changing noncore or fringe parts of your operating model.

Manual work steps. Identify manual manufacturing processes and determine which steps can be automated. Particularly look at repetitive tasks in assembly areas. Collaborative robots (known as cobots) are becoming a cost-effective solution for many assembly tasks. Cobots can work side-by-side with your staff and allow your team to focus more on decision-making and problem-solving activities. For those remaining manual steps, use automated work directions to guide workers on how to complete tasks efficiently and effectively.

Material flow. Map out material flows and determine how you can automate material handling tasks. Automated vehicles can receive production line signals to transfer materials from the machine to the warehouse. At the same time, inventory transfer transactions are completed in your ERP system so that material visibility remains current. Alternatively, consider introducing RFID chips to reduce the need for scanning and physically tracking materials.

Staff density. Evaluate staff density and look for ways to automate processes and replace staff-to-staff interactions with machines, thereby reducing staff density on your plant floor. Analyze inspection areas, since they often involve a group of people. The use of 3D cameras and laser inspection tools enable inline quality checks at incredible speed and accuracy.

Collaborative robots (known as cobots) are becoming a cost-effective solution for many assembly tasks.

3. Bring insights into your data analytics

Bring insights into your data analytics to make faster, fact-based decisions on optimal production parameters. Determine where to start with the end in mind. Identify your biggest problem or opportunity areas. For instance, are you challenged with having the right product in inventory at the right time? Are your facility leases expiring, or is it time to decide whether to stay in the existing facility or make a move? Have you decided to consolidate production but don’t know where to start? Each of these questions can be answered with the help of a data-driven decision-making process. Examples of how data analytics-based projects improve customer service and reduce operating and carrying costs include:

Inventory optimization. Rather than having your sales team or production planner determine how much inventory to keep on hand based on a gut feeling, use sales history and forecasts, lead times, production capacity, and profit margins to determine optimal inventory levels. Resetting your optimal inventory levels is especially important given the new operating models that companies have had to adopt. For instance, a just-in-time model may no longer be right for your revamped supply chain. Use data analytics to guide your inventory approach and determine your optimal levels in the new environment.

Manufacturing footprint optimization. Which products you produce and at which locations are often a result of history and chance, and these decisions are seldom analyzed. Developing a model that considers sales history, production and facility costs, raw material sources, transportation costs, and profit margins to optimize your manufacturing footprint allows for fact-based rather than emotional decisions.

Production transfer. Moving production from one facility to another can be a risky proposition. You need to ensure you don’t affect customer orders and that you ramp up production quickly. Data-driven decisions about which products and equipment to transfer, when and how to transfer, and how much inventory to build up leads to seamless transitions.

Want to learn how to use intelligent cost and margin data to optimize production and successfully navigate disruption? Read this article.

And finally, as you add technology to streamline operations, reduce manually intensive tasks, and make intelligent management decisions, don’t forget to protect your operations through robust cybersecurity measures.

Get started with your Industry 4.0 strategy

A smart way to get started building out your strategy is with a systematic, focused Industry 4.0 evaluation. This should entail a well-defined approach with discrete activities and outcomes. Any Industry 4.0 evaluation should result in a clear roadmap to achieve meaningful, sustainable results. Start with identifying the core processes of your operating model. Then, assign internal management and external resources with the right skills, determination, and organizational respect to drive the change initiative.

Any Industry 4.0 evaluation should result in a clear roadmap to achieve meaningful, sustainable results.

Finally, and most importantly, start the work — even a few, strategic changes can result in higher profits and a safer, smarter plant.

If you have any questions about Industry 4.0 opportunities for middle-market manufacturers, feel free to give us a call.

COVID-19: Respond. Restart. Be ready.

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