The rapidly changing face of the Manufacturing Industry (4.0)

A Technology Tale

Manufacturing and Distribution has evolved significantly since the days of steam power, electricity, and the introduction of computers as an integral part of production.  Today, organizations are leveraging disruptive technologies powered by data analytics, automation, and monitoring and communication at massive scale to drive performance improvement and cost savings.  These digital solutions are shaping the world of manufacturing today creating an ‘Industry 4.0’ revolution.

This transformational momentum has been compounded with the global pandemic.  It is the prevailing thought that 2020 accelerated digital technology trends by as much as five years1.  Businesses are leveraging technology to manage new and compounded challenges with an insecure supply chain, remote workers, and shifting customer demands, while also building market differentiation through these emerging solutions.

Industry 4.0 technology projects, previously reserved for the Fortune 500 of the world, are rapidly taking shape for Small and Medium-Sized Businesses (SMBs) as well with 46% of SMBs “currently implementing digital transformation initiatives” while 81% strongly agreed “technological changes are reshaping our industry”2.

Revisiting the role of IT

Most organizations often only think about IT when the network is slow, email is down, or computer equipment is broken.  However, there is an opportunity many organizations are seizing to build a partnership between IT and business operations to align objectives and maximize value of technology investments.  Rather than try and quantify the value of a new server, the goal is to always start with your three-to-five-year objectives and metrics, and align every investment in technology to achieving that goal.  For example, if the goal is to bring more products to market, greater customer insights facilitated by enhanced data analytics would potentially be a strategic enabler.

Examples of aligning business goals with IT projects3

    • 30 – 50% Reduction in Machine Downtime  –>  Data analytics aggregates historical and current machine performance data to statistically predict when preventative maintenance
    • 15-30% Improvement in Labor Productivity  –>  Geo-tracking ID on assets throughout processing to minimize search time, loss, and identify opportunities for operational efficiencies
    • 10-20% Decrease in Cost of Quality  –>  Internet of Things (“IoT”) devices can provide product diagnostics from the field to a customer rep during a repair request call

Establishing and building on a strong IT foundation

To successfully build these IT initiatives, your organization needs to have the existing processes, people, and technology to support your organization and scale to your strategy.  This process begins with an in-depth assessment of your current state capabilities, which incorporates technology areas, as well as how these areas are managed, budgeted, and delivered by the IT department (referred to as run-as-a-business (RAB).  We’ve illustrated in this diagram.

Considerations to evaluate your IT foundation

After establishing a baseline and understanding of your gaps, you can begin working with your leadership team to align strategic projects with foundational IT requirements.  Using our prior example of customer insights through data analytics, an organization would need to have strong data management controls and information protection buttoned up before working to design, implement, and roll-out this kind of solution or they may face significant operational and security challenges.

Understanding your cyber risk

Major cyber breaches have captured headlines for years now, but today’s rapidly changing IT environment has opened the door to an increased risk of cyberattack. Most often these cyberattacks are not specifically targeted but simply part of a program built to cast a wide net and extract as much money as possible from businesses.  Complex attacks that were previously reserved for the largest organizations are now repackaged and sold on public marketplaces as commodities arming would-be attackers with advanced weaponry.

Developments in IT automation are making cyberattacks increasingly cheaper and easier to carry out on a larger audience. These advances create a rapidly expanding ‘ripple effect’ where initial attacks are quickly commercialized and repurposed to actively roam the internet checking your IT ‘door locks’ in order to gain a footing in any IT environment.  Ransomware is a great example of how organizations are impacted at increasingly alarming rates but, with no law requiring organizations to disclose these types of attacks, businesses are often lulled into thinking that they won’t be impacted.  In fact, the latest statistics show that a ransomware attack occurs every 11 seconds and results in an average of 16.2 days of downtime and an average requested ransom of over $110,0004.

With the increasing likelihood of attack, an organization should weigh desired business objectives and associated IT projects against risk.  For example, as a retail organization, it would be very powerful to perform a facial scan of each person coming into the store to identify returning customers and their preferences. However, what impact would this have on your organization, your brand, and customer trust by doing so especially in the event of a data breach?

Every journey begins with a step

Manufacturing and Distribution technology evolution took time, and so will having IT as a differentiator for your business.  However, we see more organizations looking to start this journey by taking the following steps:

    • Define your vision. This includes establishing both qualified and quantifiable objectives and metrics beyond just ‘increase profits’.
    • Determine how IT can support these objectives. In emerging ‘Industry 4.0’ IT projects, this increasingly consists of projects that leverage IT trends of automation, data analytics, deploying ‘ERP’ solutions, and implementing cloud technology.
    • Evaluate your existing IT department both in terms of technology and operations.
    • Consider your information protection risks and requirements. More technology and more data often mean more investments are needed to secure the data and comply with state, federal, and international laws.
    • Establish a steering committee of business and technology leaders to evaluate gaps and progress of this effort.

Ultimately, it is important to start small, build specific metrics to evaluate success, and adjust as needed.  In the words of the business management author, Tom Peters, “Test fast, fail fast, adjust fast.” and incrementally build IT to enable your business.

We can help

Our Digital Consulting Services Team is ready to assist organizations with their Industry 4.0 journey. Our consultants help organizations make good technology decisions to effectively manage risk, secure data and optimize business operations.  For more information contact Jimmy Buddenberg, Digital Practice Director.

Co-Authors: Robert Snodgrass and Dan Bailey

 

External References

1  https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-covid-19-recovery-will-be-digital-a-plan-for-the-first-90-days

https://lauriemccabe.com/2019/08/07/smb-understanding-of-digital-transformation-grows-but-challenges-to-taking-action-remain/

3   https://www.mckinsey.com/business-functions/operations/our-insights/industry-40-reimagining-manufacturing-operations-after-covid-19

https://www.nationwide.com/cps/cic/blog/cost-of-ransomware-attacks.html#:~:text=One%20common%20and%20damaging%20way,enterprise%20ransom%20payment%20was%20%24111%2C605

 

The information provided in this communication is of a general nature and should not be considered professional advice.  You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.