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October 26, 2021 Article 5 min read

Industry 4.0 is no longer a vision of the future. It’s already here and needs to be on the C-suite agenda. We unpack why middle-market manufacturing leaders need to embrace the advantages of reshaping industrial production and how to get started.

Two manufacturing professionals looking at a computer screen.From design and engineering to manufacturing, digital technologies are reshaping industrial production. Known collectively as Industry 4.0 (I4.0), these technologies enable intelligent connectivity among people, automation, digitization, and data analytics to drive transformative change.

At its core, I4.0 is a paradigm shift, and it’s hard to overestimate its significance.

Manufacturers of all sizes benefit from the operational efficiencies and value created by digital operations. To remain competitive, manufacturers need a roadmap for change, and there’s no time to waste.

At its core, I4.0 is a paradigm shift, and it’s hard to overestimate its significance.

Industry 4.0 represents a fundamental change in how manufacturers operate day to day and will — must — transform over time. In other words, manufacturing industry leaders must alter how they’ve historically thought about doing business and explore new ways to deliver their products and services.

No middle-market manufacturer can afford to ignore I4.0. The sheer speed and force of technology and data integration advances, ever-increasing customer demand for speed and customization, and recent and severe supply chain disruptions and labor shortages have created a highly competitive environment. Businesses of all sizes benefit from the operational efficiencies and value generated by I4.0 technologies. Manufacturers that don’t adapt new ways of working and serving customers will fall behind. 

How I4.0 impacts manufacturers

I4.0 technologies enable operational improvements and potentially disruptive advances in how you meet your customer’s needs. Examples of specific I4.0 technologies include artificial intelligence (AI) and machine learning; machine integration; data analytics; robotic process automation (RPA), collaborative robots (cobots); sensors for preventive and predictive maintenance and quality control; and additive manufacturing methods such as 3-D printing.

I4.0 technologies enable operational improvements and potentially disruptive advances in how you meet your customer’s needs.

Applications of these I4.0 technologies enable businesses to:

  • Use data to synchronize your supply and materials across the value chain with predictive algorithms and data performance insights.
  • Seamlessly integrate end-to-end systems and technologies across financial and operational functions and processes.
  • Use sensors and advanced analytics to go from managing unexpected downtime to real-time asset utilization and prescriptive maintenance that connects your plant floor, improves throughput, and prevents unplanned stoppages.
  • Adopt cobots or robots on the shop floor and robotic process automation to take over electronic tasks you’d normally have people do.
  • Digitize end-to-end supply chain data to improve warehouse management capabilities, especially supply chain inventory and transportation logistics.

These advances — and the innovations they bring about — are the essence of I4.0.

The scope and scale of Industry 4.0 changes

Manufacturers need to be ready for I4.0 changes to occur quickly. And those changes impact every aspect of your business: data and IT systems, supply chain intelligence, talent, manufacturing technology and processes, and financial strategy. 

Data and IT systems

I4.0 technologies enable manufacturers to capture, optimize, and deploy large-scale data — far beyond the capabilities of staff and spreadsheets — to improve processes, significantly reduce waste, and strengthen decision-making.

This requires ERP and machine integration that both aligns with your business strategy and connects your entire enterprise to leverage artificial intelligence (AI) to collect data, identify and resolve problems, and keep operations running smoothly.

Supply chain intelligence

Industry 4.0 technologies bring an unprecedented degree of insight into your supply chain and materials flow within your plant to support real-time tracking, forecasting, customization, and optimized operations. This helps you reduce supply chain disruption and better manage risk in an uncertain and increasingly competitive environment.

Talent

I4.0 technologies streamline your processes but won’t replace your talent. A skilled workforce is more important than ever, and manufacturers need to ensure they have a well-trained, upskilled, tech-savvy team to interact with advanced technologies and real-time data. Robots, cobots, machine integration, RPA, and sensor-driven data collection can support talent by making tasks simpler and easier and helping to address labor shortages.

Manufacturing technology and processes

I4.0 technologies have a far-reaching impact on your equipment, tooling, and assets in many ways. Better discover trends by logging downtime and repairs over the lifetime of your equipment. Use analytics to reduce unexpected downtime and improve real-time asset utilization. Extend equipment life by using predictive maintenance.

Manufacturing processes are also improved with I4.0 technologies. Human error is reduced. Streamlined processes improve efficiency and productivity. Product development, processes, and tools align more closely. Your people gain new skills and optimize their time.

Financial strategy

Industry 4.0 technologies and the transformative changes they bring will impact your financial position, and it’s important to understand the implications. For example, digitalization may allow you to restructure your supply chain, which can change your global footprint and the jurisdictions in which profits are taxed. New opportunities for credits and incentives — such as research and development tax credits — will present themselves. Cash flow also will be impacted as better data and analytics improve costing and estimating. Other processes, too, become more efficient and less costly, contributing to improved cash flow. 

While an I4.0 transformation can require significant investment, a careful, holistic financial strategy helps minimize the costs and optimize the positive financial impacts — and if done right, your investments will pay for themselves over time.

Industry 4.0 benefits to manufacturers

Efforts to invest in I4.0 to increase growth lead to numerous benefits for early adopters: greater flexibility in processes and increased productivity (and revenue), higher-quality production, faster time to market, a more agile supply chain, and greater connectivity and transparency. You’ll be able to make better, faster decisions because you have accurate, real-time data.

Additionally, if a sale is on your horizon, optimized data and technology, streamlined processes, well-trained talent, and a comprehensive financial strategy all contribute to making the business an appealing target for investors.

That said, companies that fail to embrace I4.0 technologies soon will find it harder and harder to keep up with competitors. Customer demands will outpace capabilities. Growth goals will stall. The status quo isn’t sustainable — failure to adapt will threaten your market share, margins, and ability to innovate.

Getting started with an I4.0 strategy

Wondering how to start your I4.0 transformation? Start where you are right now. Consider your business strategy: What problems do you need to solve today, and what challenges do you anticipate in the future? Work with an I4.0 consulting firm to develop a focused, business-level use case outlining how change will materialize across your organization, resulting in a systematic roadmap with discrete steps and outcomes to take your I4.0 maturity to the next level.

Next, you’ll want to identify both internal and external resources with the skills and vision to lead your I4.0 efforts. Then, dive in and start the work. A few well-chosen changes can show initial results surprisingly fast. 

The idea of smart manufacturing is fast becoming reality — and an imperative for middle-market manufacturers. With I4.0, industry leaders should prepare to transform not only operations but quality, supply and value chains, customer relationships and, most importantly, your competitive advantage.

Want tips to accelerate your I4.0 digital transformation? Read this next.

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