Industry 4.0 – The Journey to the Future of Productivity

by Bob Merlo, VP of Marketing, Digital Supply Chain, SAP

Manufacturing companies are allured by digital transformation with Industry 4.0 technologies, but many do not know where to begin their journey. Certainly, no one can swallow every technology and process change all at once.

Digital transformation should build incrementally on end-to-end processes, such as the design-to-operate process. Enterprises should assess their process bottlenecks, excessive costs, inefficiencies, and critical failure points. Then, they should look to connect processes from design to manufacturing and operations with an eye toward productivity in processes. At the same time, they should ensure closed loop feedback mechanisms from operating results to drive continual process improvement and influence future product design.

Focus on the Design-to-Operate Process

When it comes to building an Industry 4.0 strategy, organizations should start with design thinking, which seeks to understand users, challenge assumptions, redefine problems, and create innovative solutions. What are the problems our employees, our customers, and our operations face? How can we improve and integrate all our core processes or key areas of pain quickly?

Unique customer demands affect product design and manufacturing most heavily. Therefore, manufacturers need to make processes across both areas seamless. To achieve this, they can utilize 3D designs in digital twins for design, manufacturing, and maintenance and repair, and connect it all to the back end. This digital thread throughout the product life cycle will make it much easier to respond to customer desires, deliver individualized products, and ensure those products work the way in which the customer needs.

To make all these processes seamless, professionals from many different functional areas must come together and collaborate. This includes more areas than you might originally consider, such as sales, marketing, procurement, engineering, manufacturing, IT, logistics, maintenance and repair, and customer service.

Those who do this well, in some cases, have been able to redefine their business models, generate new revenue streams, and improve profitability. For instance, Kaeser Compressors traditionally sold and serviced compressors to their customers. Now, they sell the consumption level of air and value-added services to install and maintain the compressors.

Connecting Factories

To manage and deliver on market demand for intelligent, sustainable products, large manufacturing enterprises must look beyond a single plant to the entire business globally. Can all factories run at peak capacities with zero downtime?

Manufacturing organizations need visibility into every factory’s output and capacity to meet demand in a demanding market. Demand for almost every type of product varies constantly around the globe. Manufacturers must have visibility into both that demand and their own factories to deliver without producing excess inventory.

Unfortunately, most manufacturers have dozens of machines from dozens of original equipment manufacturers (OEMs) that all communicate in proprietary protocols and struggle to communicate with each other, let alone with core IT systems. OEMs have started working with each other to develop standards — such as Open Platform Communications Unified Architecture (OPC UA) — to connect to each other and a platform. Technology vendors and Industrial Internet of Things (IIoT) specialists have developed additional solutions. SAP itself was one of the original founders of the Open Industry 4.0 Alliance formed to partner with production equipment OEMs to define interoperability protocols, enable rapid integration, and champion industrial digitalization.

Gaining visibility into shop-floor operations around the globe starts by connecting a single machine or production line, but by doing so in a way that enables every plant around the world to replicate and integrate with the core business systems. As that small-scale pilot generates value, organizations should scale the solution throughout the plant and then to other plants around the globe.

From Factory Automation to Customization

The Industry 4.0 movement started as an initiative in Germany to instill intelligence and automation into factories, making them open and integrated factories. The movement focused on using automation and IIoT connections to monitor machines and operations and continuously improve them.

Today, the movement has evolved. Manufacturers now need to design and manufacture intelligent, sustainable products. They need to take IIoT data during operations and apply predictive and prescriptive technologies to make more informed and automated decisions. As they improve visibility into customer demands, they will need to create more customizable and individualized products; however, to do this, they require flexibility in design, ordering, and manufacturing.

A few years ago, I met with an SAP customer’s marketing, design, and manufacturing organizations. The marketing team members wanted to enable their company’s customers to design a unique, personalized shoe. The rest of the group nearly dropped to the floor wondering how they could possibly deliver an individualized product for every customer profitably. At the time, they did not know how to do it, but today, the process is in place and working effectively. In fact, when my son ordered his baseball cleats, he had them personalized with his number and team colors. They were delivered in two weeks, and they only cost 15% more than the same model without the customizations.

Manufacturers can use the IIoT sensor data to incrementally improve processes, but stepwise change requires a change in attitude that refocuses on customer demand for individualized products. To differentiate in today’s market, manufacturers must pick apart business pain points and increase agility to better respond to customer needs. Driving costs down with improved processes contributes to that, but Industry 4.0 has grown beyond that.

Other Industry 4.0 Technologies

As manufacturers get more information about product requirements, customer desires, and operational performance, they can gauge what their customers really want. Additionally, with IoT-connected products, they can monitor and manage what customers do with their products in the field and feed that information back into product design.

Manufacturing companies should invest in the technologies that align with their larger strategy and accelerate what they already do best. They should use Industry 4.0 technologies to make better decisions with better, near-real-time information. Automation will only benefit and accelerate how people do their jobs today. It’s meant to make organizations more productive and help them make better decisions. Manufacturers at least need to stay at parity with the competition, or they will surely fall behind.

In an era of increasing business volatility, adaptability isn’t an option, it’s an urgent imperative. As customers get more demanding, they are deciding who is nimble and responsive enough to deserve their loyalty. That’s why winning companies are committing to both process and progress. They are moving from just capturing data to using data — embracing the adaptability promises of Industry 4.0 and digitalization by going beyond digital manufacturing to connect every part of their business.

This is about opportunity, not just urgency. It’s about committing your organization to a new way of working that positions you to lead.

Radically Change Efficiency, Productivity, and Customer Satisfaction

As the level of available information rises from various sources — such as customer surveys to shop-floor operational data to IoT-connected products in the field — manufacturers must remember that information for information’s sake has no true value. However, with the right tools and people managing that information, companies can radically change efficiency, productivity, and customer satisfaction.