“Industry 4.0 is poised to bring an estimated US$1.2 trillion to US$3.7 trillion in value creation by 2025.”
Industry 4.0: Redefining Manufacturing For The Digital Age
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Tom Cruise slips into an automated car factory to shake off his pursuers. They give chase. Sparks fly between robotic assembly lines. He wrestles with the bad guys as robotic arms build a car around him – a door here, windshield there, steering wheel barely missing his head as it plugs into the dashboard.
Suddenly the car’s built. He revs the engine. Kicks off the bad guy. And drives off into the western sunset. We dare say that it’s one of the best scenes in the 2002 blockbuster, Minority Report. The precision of this car’s assembly is quite spectacular; the action riveting.
Our factories today are far more advanced than Henry Ford’s assembly line. While robotic arms and automated lines are quite common – what if our factories could be made more precise, smarter, and scales up and down whenever necessary?
They can do it now. Thanks to a little thing called “Industry 4.0”.
What is Industry 4.0 and Why Does it Matter?
Industry 4.0, also commonly called the fourth industrial revolution, is a term broadly used to describe the convergence and application of digital technology to the industrial production environment in factories, plants, and warehouses. Examples of these digital technologies include Internet of Things (IOT) sensors that can gather and analyze big data across machines and business systems, as well as cloud computing innovations such as containers, microservices, and event-driven architecture.
At its core, the fourth industrial revolution is about the intelligent networking of machines and processes to create business value. If implemented successfully, companies will reap improved resource productivity and efficiency, which in turn results in greater agility and responsiveness to customer demands and faster speed to market.
As more cutting-edge technologies such as machine learning and artificial intelligence get added to the digital mix, Industry 4.0 will continue to prove to be a true game changer in the way many businesses and industries operate.
Let’s Take a Look at Sectors Impacted by Industry 4.0
Some sectors are already seeing widespread transformation thanks to Industry 4.0 technologies. Manufacturing is just the tip of the iceberg – nearly every sector of the economy will be impacted, either directly or indirectly, from agriculture to pharmaceuticals, and fashion to banking.
Consider Harley-Davidson’s smart factory, which can construct and ship a customised bike in just 90 seconds. Thanks to its Industry 4.0-enabled factory, the company can build 1,700 different variations of a bike on just one single production line. Overall, the move to smart manufacturing has enabled the company to slash the schedule to build a new bike from 21 days to just 6 hours.
For Harley-Davidson, this translates not only to tangible business benefits such as cost-savings of 7 percent and improved net margins of up to 19 percent. The iconic American brand also enjoys the intangible long-term boost of its brand value by living up to its customer expectations of passionate and authentic individuality. Today, Harley-Davidson partners with SAP to deploy its automotive industry solution to gain real-time visibility into its global operations.
All around the world, manufacturing companies like Harley-Davidson are facing a perfect storm of challenges. They have to increase productivity while producing individualised products of high quality, so as to meet the increasingly demanding needs of the modern customer. And they must do so in a global business environment that’s constantly evolving, which often prompts changes to products and business models faster than manufacturing lines and supply chains can react.
Effective Industry 4.0 implementations directly target these challenges and help manufacturers reap a number of distinct advantages, such as increased competitiveness, higher productivity, increased revenue and profitability, optimisation of internal processes for high cost-savings, more reliable record-keeping and auditing for compliance, and more.
Can companies in Southeast Asia learn from Harley-Davidson? We’ll have an answer down the line.
What Are The Defining Characteristics Of Industry 4.0?
(And More Real World Examples)
There is no one-size-fits-all solution to the fourth industrial revolution. Business goals and challenges vary by industry and even by company, and the technology that works for one might turn out to be unsuitable for another.
Creating value from Industry 4.0 thus requires an industry-specific approach, often with the help of partner technology firms who are specialists in the field. To truly understand what Industry 4.0 looks like in the real world and what it can do for your business, we need to take a step back and understand the characteristics that define an Industry 4.0 implementation, and what we can do to leverage it for our own companies.
According to SAP, a successful Industry 4.0 transformation is driven by four themes providing distinct value to the business.
- Intelligent products are built and configured to meet the exact needs of the customer.
- Intelligent assets are linked to all processes and are dynamically maintained.
- Intelligent factories use data and intelligence to run as autonomously as possible and deliver customised products at scale.
- Empowered people are equipped with all the tools and information they need to do their best work.
These four themes help the company with sensible recommendations tailored to customer-specific capabilities. You will notice that these principles do not mention specific technologies – that is because the focus of fourth industrial revolution is fundamentally about the shift in operating processes and business models, and the technologies that enable this transformation varies depending on each individual company’s needs.
More importantly, SAP solutions are based on open standards, which enables lower integration costs, faster adoption and scale, and ensures seamless interoperability with a company’s existing technology investments. SAP is also a member of the Open Industry 4.0 Alliance, an organization that aims to create a standardized and open system for operating highly automated factories and plants.
Some examples of Industry 4.0 principles in practice include:
- Agile manufacturing and supply chain optimisation. As in the Harley-Davidson example mentioned above, Industry 4.0 solutions can give industrial businesses unprecedented insight into the data that powers their entire supply chain. For example, having visibility into the supply chain of tens of thousands of parts that come together to make a single bike does wonders for resource planning and optimization. Armed with this insight, companies can deliver products and services that better meets their customers’ needs at a faster pace than their competitors.
- Analytics for predictive maintenance. Asset maintenance is a significant cost factor for many companies. With Industry 4.0, particularly tapping on the internet of things paradigm, manufacturers can perform maintenance on their equipment based on actual operational conditions, usage levels, and predictive insights rather than preset time intervals. With predictive maintenance, decisions and investments can be based on real-time asset sensor data reflecting an asset’s current state. This data can also be used to predict failures and proactively head them off – or adjust production schedules to meet customer delivery dates. In either case, companies can maintain planned production levels or adjust to meet customer expectations.
- Capturing the “digital twin” of a factory floor. The concept of a “digital twin” is a common thread that runs through Industry 4.0 implementations. This revolutionary approach captures a digital representation of a specific asset or system – such as the operations of a factory floor – and updates it in real-time across the network, companies can gain tremendous value from eliminating manual effort and errors. Furthermore, a digital twin will enable companies to predict future states based on historical data and simulate possible outcomes of various decisions to determine the best result.
If the fourth industrial revolution is starting to sound like a lot of work, that’s because it is!
Industry 4.0 is a transformational journey, and will force you to rethink the fundamental structure, processes, and business model that your company might currently be reliant on. Great promises also require great investment – a PWC study found that companies worldwide are investing over US$900 billion per year in Industry 4.0 initiatives.
The effort and investment, however, is well worth it. The manufacturing world abounds with examples illustrating how Industry 4.0 is making a difference in shortening cycle times, improving product quality, implementing efficiency across operations, as well as growing the manufacturing of highly customized products on a global scale.
How Would Industry 4.0 Impact My Southeast Asian Operations?
A McKinsey study found that Industry 4.0 is poised to bring an estimated US$1.2 trillion to US$3.7 trillion in value creation by 2025 – a staggering figure that should have global business leaders sitting up with attention. Even within regions like Southeast Asia, home mainly to emerging economies, Industry 4.0 has the potential to help capture productivity gains worth US$216 billion to US$627 billion.
Yet, only about 30 percent of countries in the world are capturing Industry 4.0 solutions at scale today. The numbers for Southeast Asia are even more dismal – only 13 percent surveyed said that their companies had begun an Industry 4.0 transformation.
For manufacturing-driven economies in Southeast Asia (Thailand, Indonesia, Malaysia, and legacy economies like Singapore), it is critical for them to immediately begin their journey to Industry 4.0. Mature economies can also retain pole position through prompt action to upgrade relevant infrastructure and upskilling of their workforce. As McKinsey concluded succinctly in its research paper: “Industry 4.0 cannot be dismissed as the latest buzzword.”
In fact, the earlier Harley Davidson example certainly showed how a determined and dedicated company can use industry 4.0 technologies to evolve in its own industry.
To accelerate the pace of Industry 4.0 adoption in the region, industry leaders will need to work closely with government bodies to set up an economic climate favorable for such a transformation. In addition, they will have to tap into partnerships with academia to cultivate a labor force of professionals and experts proficient in technologies to jumpstart the evolution of industry 4.0.
For example, the governments of Indonesia, Singapore, and Malaysia have already launched initiatives to educate businesses about Industry 4.0. Beyond spreading awareness, Malaysia and Vietnam have started drafting policies to actively encourage businesses to begin adoption of new technologies.
To be sure, these are mammoth tasks easier said than done. But with determination and forward planning, evolution of the industry can be achieved. The tiny city-state of Singapore is an example – from broad policy-level initiatives announced in the country’s national budget to the development of industry-ready tools such as the Economic Development Board’s Smart Industry Readiness Index. Crucially, Singapore is also positioning itself as a nexus for the newest ideas in Industry 4.0 by hosting the first and only Asia Pacific edition of Hanover Messe, the manufacturing industry’s leading trade event.
Finally: How should I Implement Industry 4.0 in My Company?
Today, an increasing number of companies report substantial progress in their Industry 4.0 projects, and many more are hopeful that their bets will pay off soon. According to a World Economic Forum report, most companies believe they will see a return on investment (ROI) within two years or less for their Industry 4.0 projects, and just over a third of companies survey anticipate a longer timeline of three to five years.
However, a degree of cynicism has also crept into the psyche of many other business leaders, fueled by reports of mixed results and uncertainty about how to move past square one.
To get past this hump, you need a trusted technology partner.
SAP, for example, has one of the broadest technology solution portfolios in the world to help companies unlock the full value of Industry 4.0, from data management and analytics to cloud and on-premise applications to intelligent edge components. Together, these solutions combine the power of intelligent manufacturing in factories and plants with end-to-end business process execution across the supply chain.
It is also important to take a long view of Industry 4.0 transformation as it evolves the industry. A recent Deloitte study has found an acceleration in the shift of a business’s journey from being purely profit-driven to one focused on societal impact. These new technologies (internet of things, digital twins etc) can empower us to made decisions that also improve our standing as a responsible global citizen, particularly in the area of environmental stewardship.
In short, Industry 4.0 is more than a yet another buzzword. It changes how production lines work to become faster, better, and cheaper with actual technologies – and not just wishful thinking from a futuristic minority.
We’ve spoken at length on Industry 4.0, its characteristics, and importance to Southeast Asia – wherever you may be from Singapore to Myanmar. To get the inside scope – start with SAP’s vision and strategy for Industry 4.0. This extensive 30-page whitepaper shares everything you need to know about Industry 4.0, its impact on your business, and how it can be leveraged as a strategic priority to turn challenges into opportunities.