Digitization could take manufacturing beyond Industry 4.0

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By Sef Tuma, global lead for Engineering & Manufacturing at Accenture Industry X

The fourth industrial revolution surpasses Industry 4.0. What seems like a paradox is actually not, because the two things are not the same. The term “Industry 4.0” usually means digital technologies, such as the Internet of Things, artificial intelligence and big data analytics, which are applied in factories and factories to make the business more efficient and effective. The Fourth Industrial Revolution goes further than that. It implies significant shifts driven by these technologies and their use – new ways of working, communicating and doing business. Think about how profoundly smartphones, social media, video conferencing and ride-sharing platforms have changed our work and private lives.

Digital in production is still a mixed bag

Has the manufacturing industry gone through these kinds of fundamental changes in the past decade? Many companies are definitely experimenting with the disruptive potential of Industry 4.0 technologies.

Take industrial equipment manufacturer Biesse, which now sells production machines that send data to a digital platform, predict machine failures and deploy maintenance crews. Or Volkswagen, which used an AI-powered generative design to reconceptualize its iconic 1962 Microbus to be lighter and greener, ultimately creating parts that were lighter, stronger and took the time to go from development to production, shortened from a 1.5 year cycle to a few months.

The flip side of the coin: there is a lot of digital white space in production. Compared to other parts of the business, such as marketing, sales and administrative processes, manufacturing is nowhere near as digital as it could be. A survey found that by 2020, only 38% of companies had deployed at least one project to digitize their manufacturing processes. According to another survey from the same year, most companies were still between testing digital capabilities in one factory or factory and deploying these pilots in other locations.

This hardly paints the picture of a revolution. However, change is underway.

Three developments push manufacturers to a tipping point

Companies around the world are seeing and responding to the need for compressed transformation to stay relevant while becoming more resilient and accountable. This includes the transformation of a core part of their business – manufacturing. Three burning platforms push them to the next digital frontier:

1. The ongoing pandemic is accelerating change.

The pandemic has accelerated the adoption and implementation of digital technologies in manufacturing as it sheds an unflattering light on the gaps in digitization. Many companies had to shut down production because they couldn’t run their factories remotely or adapt their production lines to match supply and demand that changed overnight.

To maintain social distancing in the workplace, companies have introduced intelligent solutions for digital workers to ensure their employees can keep production lines running, while uniting around the critical goal of protecting workers. According to an Accenture survey, during this shift, 48% of organizations invested in cloud-enabled tools and technologies and 47% in digital collaboration tools to support their remote workforce.

The pandemic also created a need for more flexible manufacturing than ever before. Many companies united with the shared goal of helping the front lines. Switching factory production from alcohol to hand sanitizer or from fashion to personal protective equipment is no easy task. Yet these companies transformed almost overnight with the right data, connectivity and intelligent machines.

2. Software redefines physical products.

Whether it’s cars, medical devices or even elevators – physical products that used to be relatively dumb are getting even smarter. Some even become intelligent.

What now defines many tools, devices and machines are not nuts and bolts, but bits and bytes. Software activates and controls their functionality and functions. As early as 2018, 98% of manufacturers had started integrating AI into their products. In 2020, 49% of companies reported that more than half of their products and services require later software updates. And by 2025, there could be more than 27 billion connected devices generating, transmitting and processing information around the planet.

As a result, making a successful product has mainly become a digital task, but that does not mean that the mechanical and physical requirements have become obsolete. In many areas, the look and feel of things is likely to remain the deciding factor for customers and consumers. And while a few people see benefits in eating with intelligent forks and wearing smart socks, those will likely remain a minority.

However, a significant and growing number of ‘things’ in manufacturing are already being designed and developed based on their digital functions. It means a huge change in the technical process and the skills required. It also means: manufacturers have to become software-oriented. Relying on their traditional competitive advantages is not enough. They need to retain and strengthen it and add software expertise to the mix.

3. The need for sustainability depends on digital.

Stakeholders are increasingly demanding that companies make things more sustainable, in a more sustainable way. Investor interest in so-called impact investing – which aims to generate positive impact for society along with strong financial returns – is growing and could total as much as $26 trillion. Regulators are also demanding greater sustainability obligations, for example the European Commission whose Sustainable Products Initiative will ban the destruction of unsold durable goods and curb single-use products. And consumers are willing to pay for sustainable products, with products marked as ‘sustainable’ growing 5.6x faster than conventionally marketed products.

This push to become more sustainable will be a crucial driver for digitization in the manufacturing industry. For example, 71% of CEOs say real-time track-and-trace of materials or goods will have a significant impact on sustainability in their industry over the next five years, according to the United Nations Global Compact 2021 study.

Digital twins will also play a vital role in supporting sustainability efforts. These data-driven simulations of real-world things and processes could reduce the equivalent of 7.5Gt of carbon dioxide emissions by 2030, research shows. Johnson Controls, a global leader in smart and sustainable building technologies, is partnering with Dubai Electricity and Water Authority and Microsoft to implement Al Shera’a, the world’s smartest zero-energy government building. Through digital twins, AI and smart building management solutions, the total annual energy consumption of the building is expected to be equal to or less than the energy produced on site.

Two critical steps will help manufacturers reach their next digital frontier

All three developments are milestones of the next digital frontier for most manufacturers. They pose a significant challenge to how manufacturers will remain relevant to customers and employees, how resilient they will be and how responsibly they can act.

They need to address these challenges by focusing their efforts on two things:

1. Don’t stop at implementing technology – plug it in intelligently.

As described at the beginning, Industry 4.0 and the fourth industrial revolution are not the same. To drive meaningful change, companies need to connect Industry 4.0 technologies in such a way that they can see much more clearly and further ahead – allowing them to act and react much faster based on what they see. For example, cloud platforms to share and process data; machine learning algorithms to analyze this data and build different scenarios and digital twins to experiment with these data-driven scenarios.

When intelligently connected to work together, the technologies form a digital thread, allowing information to flow between people, products, processes and factories, from a company’s research and product development to factory floors, supply chains, consumers and back again. This thread makes product development, the production process, market demand and customer behavior more visible and transparent. Think of it as a virtuous loop of digital copies of every aspect of the product development, engineering and manufacturing process, enabling companies to predict, monitor and address the consequences of almost any action.

2. Don’t expect change. Manage it wisely.

People’s agendas are just as important as technology’s agendas, if not more so. Digital means new ways of working, just like the steam engine and assembly line. As more and newer technologies enter the workplace, traditional roles will shift from performing manual tasks to monitoring, interpreting and guiding intelligent machines and data. This means that jobs require more innovation, creativity, collaboration and leadership.

Companies that fail to recognize this and act on it are in for a disappointment. For example, in a 2020 survey, 63% of companies admitted they had fallen short of the expected value of their cloud investments. The main obstacles in their journey to the cloud turned out to be the dimensions of people and change. Similarly, only 38% of supply chain managers believed their workforce was largely or completely ready to leverage the technology tools made available to them.

The manufacturing industry is lagging behind when it comes to digitization – as a sector and within the company. But more and more companies have come to realize that manufacturing is their next digital frontier and are focusing their efforts on this core part of the business.

The technologies are available and proven, and both the need and benefits of digital manufacturing are clear. Companies that intelligently connect technology and deal wisely with the changes it brings can go far beyond the efficiency and effectiveness scenarios offered by Industry 4.0.

Sef Tuma is a global leader for Engineering & Manufacturing at Accenture Industry X.

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