Saying yes to Industry 4.0? That’s a nod for 5.0 too

CMR Analyst
New Update

Thomas George


With all the hype and hoo-hah gathering heat with every next day and report, it is easy to get carried away and feel the compulsion of chasing the next-new bandwagon that everyone is jumping on. But being swift cannot come at the cost of being careless. More so- when you are an Industry player still perched atop some other bandwagon that you climbed up with a lot of effort the last time.You cannot simply crawl out.

Not when you are a large creature – with the scale, implications, investments and scope that transpire into a different connotation altogether for the people and assets around you. Yet, it is almost-impossible to stay blinkered to the buzz about Industry 4.0 around, isn’t it?

It’s not a Bee-line. It’s a Bee-Hive


Look around. Most major industrial sectors are all set to inject as much as $907 billion p.a. to Industry 4.0, or around five per cent of revenue p.a.,with thrust on digital technologies, sensors, connectivity devices, software and applications and a lot more. What’s harder to ignore is that 55 per cent of these investments are expected to churn a payback within two years! Yes, a PwC 2016 Global Industry 4.0 Survey combed through some 2000 respondents in 26 countries and these respondents, it turns out, want to‘dramatically’ increase their overall level of digitisation.

And does that matter? Of course, it rings quite loud when we see all this translating into numbers like $493 billion in increased annual revenues for the next five years along with cost reductions of 3.6 per cent p.a. on average. These companies are looking at saving $421 billion in costs each year for the next five years alone.

Well, call it by any name. Digital Factory or IIoT or The Nexus of Forces in Manufacturing or The Fourth Industrial Revolution or the Factory of the Future – this phenomenon is surely catching a lot of steam. And yet, you should chew before you leap.


From 1 to 4 - in the blink of an eye

What started with CAD and CAM machines turned into a landscape strewn with robotic assistance, software-enabled shop-floors, 3D Printing and automation in no time. Soon enough, we found ourselves chatting about new-age AI, M2M tools and IoT at a never-before depth and breadth inside and outside the factories. The timing could not have been better. If we take a hands-on view here, we can gather what Vimal Kapur, President, Honeywell Process Solutions has poignantly contended, in his keynote presentation at HUG EMEA 2017, how industries are constantly being challenged to do more with less CAPEX as well as OPEX. This is uniquely juxtaposed with another trend - accelerated change thanks to a palpable shift from hardware to software as well as faster turnaround of software releases with higher functionality – which has been increasing the pace of obsolescence of legacy assets.

Doing more with less - That's the new thrust: VimalKapur, President, Honeywell Process Solutions


More Software, yeah. That explains the role of data analytics, edge computing-led decisions, shorter operational lead times, higher asset utilization, augmented products, maximum product quality and yes, even digital revenues in giving Industry 4.0 a stronger foothold.Who doesn’t want to earn that extra buck in revenues by making a product more personalized, more proactive and more agile for the customer? Who wouldn’t wish to shave that flab of cost away by making machines and people talk to each other in real time, by being nimble-footed with maintenance or downtime or repair, and by using data all across the value chain for faster and more precise decisions?

That’s 4.0 after all, where not just one function or factory area, but the entire gamut of vertical and horizontal processes across the value chain gets digitized and integrated.

Level 5: The Outcome Economy


What’s the problem then? Nothing. Except that all this digitised pixie-dust cannot be conjured out of a magician’s hat. All this takes time, change and a big shift. Yes, the age of digital economy, the era where products cease to exist and are relegated to a tiny core. The milieu where services and data orbit around this core, augment it constantly, and come together as a constantly-on, tuned-in-to-the-customer, feedback-oriented digital offering. That’s when the digital revenue trickles in.

In an outcome-economy, your customer would be the chief collaborator and much-much close to production than we could dream of a few years back. Here, products will no longer look or function the way they do now and the walls between products and services would come crumbling faster than you would be able to handle. The customer would not be the last mile of a lifecycle but at the centre of it all with value chains, products, data, and services making the rest of the radius. Customisation would become quintessentially individualistic, real-time (thanks to the constant beeping of data from everywhere) and would even precede or interject phases like conceptualisation and production.

Would the erstwhile DNA of manufacturers find it a walk in the park to move into new marketplaces, completely-unfamiliar product lifecycles, and radically-fresh business models without the risks, shifts and sacrifices that the new economy would eke out of them?


The IIoT formula

When you do it right, it’s incredible. Honeywell has already cited proven impact of $5 to 15 M per site every year and $7 to 20 M, thanks to outcomes in production efficiency and reliability, respectively. Not just that, Kapur also illustrated an achievement of $3 to 5 M per site per year gained through enterprise optimisation. Honeywell has solved problems around CAPEX costs (up to 30 per cent chopped) and construction lead times (cut by 6 months) in modular gas plants, for example, using modular and standardised designs. This is possible because new IIoT paradigms help in predicting equipment failure, defining maintenance program and shut-downs, and optimising spare part and inventory.

But what if you can’t do it right? Would flicking the switch to 5.0 be no sweat at all for everyone?


Fettered and Confused

Understandably, there is still a high level of uncertainty among manufacturers regarding implementing Industry 4.0 and many are still struggling to get started. Let’s glance at a McKinsey survey on the progress in implementing Industry 4.0 and the challenges faced by many players.It looks like that only 30 percent of technology suppliers and 16 percent of manufacturers manifested an overall Industry 4.0 strategy in place.

There are still difficulties experienced in areas from what McKinsey unearthed here - coordinating actions across different organizational units, upholding cyber-security standards and determining data ownership when working with third-party providers, sustaining courage and support for a radical transformation, and recruiting the necessary talent.

It is vital to filter the actual problem from all the features that IIoT offers. Remember – you need to pick the signal from all this noise. So ask yourself:

1. Can you internalise the digitisation being enabled by new-fangled technologies and let it compenetrate your entire supply chain and product lifecycle? Do you have the ego-graveyard and the wallets yet?

2. Do your people, their skills and partners across the chain have the inclination and the guidance to make this huge leap?

3. Are you trying to eat more than you can chew in the rush to appear a ‘first-mover’? Would it not be better to move incrementally and master a certain number of areas and applications first before fork-lifting a massive overhaul?

4. Is your footprint and blueprint amenable to the level of interoperability and connectivity that an IIoT model is underpinned upon?

5. Can you handle the complexity and the repercussions of parallel forces like cyber-security and third-party services that the new digital economy would lead to?

6. Above everything else, can you get out of your comfort zones already? Ex: If you are an auto-maker, would you park your car in a museum and join hands with software-makers and data-fountains for offering transport/driving as a service or an experience instead?

As tough as it is to digest, Industry 4.0 is also about unlearning all that you knew so far and then leveraging all the new-found agility to dole out better products, a tighter grip on customer preferences and truly-bespoke way of manufacturing.

Yes, interest in Industry 4.0 is reaching a feverish pace. As to companies in APAC, PwC has reckoned that companies in this region are making the strongest running and have already moved further forward in terms of current digitisation and integration. If 32 per cent companies in Americas and 30 per cent in EMEA felt they are at an advanced level, then for APAC the number stands at a confident 36 per cent.

That’s a good sign and if we can match that confidence with reasonable caution and preparation, then we would surely make ourselves ready for all the new wagons standing just around the corner. Let us make hay and not haste.

ai internet-of-things-iot industry-4-0 iiot factory connected-plant digital-factory