The term Industry 4.0 continues to mystify many business owners, but it’s less complicated than it sounds.
“People think it’s a large, complex and expensive transformation that only big companies can do. That’s not the case at all,” says Eskander Yavar, national leader of Management & Technology Advisory Services at BDO USA, LLP.
While U.S. companies are behind Europe and Asia on this, the wave is starting to break as everything becomes more digitized.
“There could be a point, in the next five to 10 years, where if you’re not doing it, you’re slowly dying,” he says.
Smart Business spoke with Yavar about what Industry 4.0 is, examples of how it has helped companies and how to get started.
What exactly is Industry 4.0?
It refers to the fourth industrial revolution. The first revolution was the advent of steam and water power to drive machinery in factories, which enabled less manual effort in the 18th century. The second revolution was how electricity changed the factory floor, which brought globalization and mass production in the 19th century. The third revolution was the introduction of computers, the internet and automation. This next revolution combines artificial intelligence (AI), data, the cloud — which is just off-site computers — 3D printing, etc.
It’s not a total transformation that’s cost intensive. It’s not reinventing every company. It’s about understanding the technology and the availability of data and connectivity through internet-enabled devices, so new technologies can solve a business problem. For example, you can improve on-time delivery by managing the end-to-end supply chain process through data, an analytics platform, radio-frequency identification tags and sensors.
Industry 4.0, and its ability to deliver data about demand-curves, buying behaviors and other critical patterns and predictions, applies to all manufacturers, from process-oriented and repetitive, to build-to-order. It enables them to gather greater business intelligence and develop customizable products on a mass scale. It accelerates the decision-making process and improves speed to market.
What are some examples of how Industry 4.0 can drive business results?
One manufacturer makes traffic signal preemption hardware so public safety and emergency vehicles can change red lights. It historically wouldn’t come back to customers unless it was time to service or upgrade that hardware. This manufacturer noticed its network threw off data about traffic conditions, how many times a vehicle caught a green light and other metrics. The company took that data and built an analytics platform in the cloud. Then, it sold the data in its desired state for compliance reporting to generate monthly revenue.
In another example, a transportation company had cargo ships going off course during their auto-pilot controlled routes. Because of the anomalies, ships were late and fuel costs rose. The amount of data that needed to be crunched to identify the issue was on such a large scale that the company used an AI algorithm to analyze the data to discover where anomalies were occurring. Then, the company implemented sensors on those ships, so it could autocorrect the errors as they were happening.
How should businesses get started on this?
Do a quick assessment of your technology, processes and connectivity, from a maturity perspective, to ensure the environment is right to introduce something different. Then, look for a use-case — a small proof of concept project — so you can get a quick win with better operational and financial results. Perhaps, it’s tackling a through-put at a certain point on the shop floor by adding sensors and analyzing that data. Then, over time, as you prove out every use case, you end up with larger upside.
Some businesses are already doing this, but don’t call it Industry 4.0. There are a lot of options, too: everything from a fully integrated digitized environment throughout the organization, to systems you don’t have to pay for. However, remember that while it involves technology, data and cloud, it’s not an IT project. It involves change for people and technology. The CIO shouldn’t be driving the transformation; it’s the operations or plant manager who understands inefficiencies in your environment, with executive team support.
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