Industry 4.0 – Building Digital Ecosystem

Why am I writing this (reading this) ?

i4-0

I was involved in the most ambitious if not the biggest Industry 4.0 (Internet of Things) research during my time at PwC. This global report conducted by PwC’s surveyed of over 2,000 global companies across nine industry sectors.

The highlight of the report for AU and Singapore region:

Six out of Ten companies in Australia and Singapore invested in Industry 4.0 anticipate up to  two years until amortisation

55% of PwC survey participants are expecting ROI on Industry 4.0 technologies  within  two years

Around 58% of AU and Singapore firms expect to drive high levels of digitisation and integration by 2021, according to PwC’s research. Building the Digital Enterprise outlines how that companies are enhancing their product portfolio with digital functionalities and introducing innovative, data-based services. According to the survey, companies worldwide are set to invest approximately 5% of their digital revenues annually on digitisation – and based on the industry sectors surveyed, this would equate to a total global investment of $US 907 billion per year. AU firms expect to invest approximately 4.9% of their turnover.

A major focus of these investments will be on digital technologies like sensors or connectivity devices, on software and applications like manufacturing execution systems and machine learning. In addition, industrial companies are investing in training employees, in-house technologies and driving required organisational change.

In the course of this anticipated transition, managers surveyed around the world expect to achieve cost reductions of on average 3.6% per year and an additional revenue of around 2.9% annually. In absolute terms, this corresponds to $US 421 billion in year-on- year cost and a simultaneous yearly increase in turnover of staggering $US 493 billion.

The Industry 4.0 is already here and it is one of the focus if not major for many C – level agenda.

What is Industry 4.0 ?

“Industry 4.0“ – also called the fourth industrial revolution – focuses on the end-to-end digitisation of all physical assets and processes as well as integration into digital ecosystems with value chain partners. Data & Analytics is a core capability for Industry 4.0, where applications are fuelled by key enabling technologies.

It is clear that our industrial leaders are already shifting gears as they look to digitise essential functions within their internal vertical value chain.  84% of AU and Singapore firms also challenging their organisations to identify and make use of new technologies and data analytics to optimise and drive the potential for growth.

How to move forward with Industry 4.0 ?

To move forward with Industry 4.0, digital capabilities are all-important. These take time and focus; a step-by-step approach is important. But move with deliberate speed, so that we don’t lose the first mover advantage to competitors. The step-by-step approach as the blueprint moving forward:

blueprint

  1. Companies should start by evaluating their maturity level, prioritising some aspects of digitisation which will bring the most value to their business, and define clear goals. Testing out strategies and building in IT and data security will help make sure that investments bring real value.
  2. Secure funding – even in an unclear business environment; build the case for change; get experience in cross-functional working; establish proof of concept to demonstrate business value. Get the buy-in from the organisation and secure funding for a large roll-out. Compensate for missing standards by pragmatic approaches.
  3. Make smart IT and technology decisions and build strong technology partnerships. Adjust core processes to the digital reality and build digital qualifications.
  4. A clear definition of strategy is important here, as are some basics around making sure you are gathering the right data and using in the right ways. Technical tools and organisational structures are equally important. And here too, we recommend thinking big – but starting small with ‘proof of concept’ projects
  5. With the race to implement Industry 4.0 intensifying, clear leadership and vision from the C-suite and important stakeholders will be critical. But many companies are worried that they lack a clear digital operations vision and are not getting that C-suite support. Capturing the full potential of Industry 4.0  entails requires company-wide transformation with technology, people, culture, process at the top of the agenda.
  6. Develop complete product and services solutions for your customers’ ecosystem. Either build a complete offering internally or utilise partnerships

There will be challenges from defining the clear strategy, securing the funding, establishing strong partnerships, starting the proof of concept and developing the solutions and building the ecosystem. Working together not only with business and technology partnerships but also cross – industry will accelerate the Industry 4.0 journey.

Horizontal Integration along the entire value chain transforms functional silos into an end to end  supply chain network (ecosystem)

The traditional supply chain model typically will look like a daisy chain model with limited view of supply chain from the supplier to customer.

supply-chain

The traditional supply chain model with traditional capability silos has limitations:

View Limited view of supply chain
Information flow Information delayed as it moves through each organization
Collaboration Limited visibility to the entire chain hinders meaningful collaboration
Customer demand End customer demand distorted as information flows along the material path
Responsiveness Different planning cycles resulting in delays and unsynchronized responses across multiple tiers

Industry 4.0 integrated supply chain – supply chain ecosystem:

ecosystem

The integrated supply chain ecosystem model will provide end to end supply chain network:

View Complete view of supply chain
Information flow All supply chain members see information simultaneously
Collaboration Collaboration depth develops naturally to capture intrinsic supply chain value
Customer demand End customer demand changes are rapidly assessed (dynamic)
Responsiveness Real time response on planning and execution level

What are the elements at the heart of the Industry 4.0 integrated supply chain ecosystem ?

ecosystem-elements

The platform(s) connect(s) all parts of the value chain to create a single version of truth on many different levels:

  • Operational: Automated replenishment, order progress, tracking, invoicing, problem identification and alerts, joint resolution
  • Planning: Planning and forecast information, collaborative process, check across entire value chain
  • Strategic: Joint strategic market planning, joint improvements

I will elaborate further on the next post, how IoT platform such as GE and cloud IoT suite (Azure) as the technology partners ready to support your Industry 4.0 transformation journey.

PwC Industry 4.0 Global Research can be downloaded here.

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