Digitization could drive 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 is outpacing Industry 4.0. What looks like a paradox actually isn’t, as the two things aren’t the same. The term “Industry 4.0” typically means digital technologies, like the internet of things, artificial intelligence and big data analytics, applied in factories and plants to make the business more efficient and effective. The Fourth Industrial Revolution goes beyond that. It implies significant shifts driven by these technologies and their usage – new ways of working, communicating and doing business. Just consider how significantly smartphones, social media, video conferencing and ride-sharing platforms have changed our work and private lives. 

Digital in manufacturing is still a mixed bag

Has manufacturing witnessed this kind of fundamental change over the past decade? Many companies are definitely experimenting with the disruptive potential of Industry 4.0 technologies.

Take industrial equipment maker Biesse, which now sells production machines that send data to a digital platform, predicting machine failure and deploying maintenance crews. Or Volkswagen, which used AI-powered generative design to reconceptualize its iconic 1962 Microbus to be lighter and greener, ultimately creating parts that were lighter and stronger and reducing the time spent getting from development to manufacturing from a 1.5-year cycle to a few months.

The other side of the coin: There’s a lot of digital white space in manufacturing. Compared to other parts of the enterprise, like marketing, sales and administrative processes, manufacturing is far from being as digital as it could be. A survey revealed that, in 2020, only 38% of companies had deployed at least one project to digitize their production processes. According to another study from the same year, most companies were still somewhere between piloting digital capabilities in one factory or plant and deploying these pilots to other sites.

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

Three developments are driving manufacturers toward a tipping point

Companies across the globe see and act upon the need for compressed transformation to remain relevant while becoming more resilient and responsible. This includes the transformation of a core piece of their business – manufacturing. Three burning platforms are driving them toward 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 shed an unflattering light on the digitization gaps. Many companies had to shut down production because they couldn’t run their factories remotely or couldn’t adjust their production lines to supply and demand that changed overnight. 

To maintain social distancing in the workplace, companies introduced intelligent digital workers solutions to ensure their workers could maintain production lines, whilst rallying around the critical purpose of protecting employees. During this shift, forty-eight % of organizations invested in cloud-enabled tools and technologies and 47 % in digital collaboration tools to support their remote workforce, according to an Accenture survey

The pandemic also created a need for more agile manufacturing than ever before. Many companies united on the shared purpose of aiding the front line. Pivoting factory production from alcohol to hand sanitizer or fashion to PPE is no simple task. Still, these businesses transformed almost overnight with the right data, connectivityand 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 becoming even smarter. Some are even becoming intelligent. 

What now defines many tools, devices and machines aren’t nuts and bolts but bits and bytes. Software enables and controls their functionality and features. Already in 2018, 98 % of manufacturers had started integrating AI in their products. In 2020, 49 % of companies reported that more than half of their products and services require subsequent software updates. And by 2025, there could be more than 27 billion connected devices generating, sending and computing information all over the planet.

Consequently, making a successful product has become a primarily digital job, but that doesn’t mean the mechanical and physical requirements have become obsolete. In many areas, the look and feel of things are likely to remain the decisive factor for customers and consumers. And while a few people may see advantages in eating with intelligent forks and wearing smart socks, in all likelihood, those will remain a minority. 

A significant and growing number of ‘things’ in manufacturing, however, are already being designed and engineered from their digital features. It means a massive change in the engineering process and skills required. It also means: Manufacturers need to become software-savvy. Relying on their traditional competitive advantages isn’t enough. They need to keep and strengthen those and add software expertise to the mix.

3. The sustainability imperative depends on digital. 

Stakeholders are increasingly demanding companies to make more sustainable things, in a more sustainable manner. Investors’ appetite for so-called impact investing—seeking to generate a positive impact for society along with strong financial returns—is growing and could total as much as US$26 trillion. Regulators are demanding greater sustainability commitments as well, for example, the European Commission whose Sustainable Products Initiative will ban the destruction of unsold durable goods and restrict 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 pressure to become more sustainable will be a crucial digitization driver in manufacturing. For example, 71% of CEOs say that real-time track-and-trace of materials or goods will significantly impact sustainability in their industry over the next five years, according to the United Nations Global Compact 2021 study.

Digital twins will also play a pivotal role supporting sustainability efforts. These data-driven simulations of real-world things and processes can 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, has partnered with Dubai Electricity and Water Authority and Microsoft on the implementation of Al Shera’a, the smartest net zero-energy government building in the world. Through digital twins, AI and smart building management solutions, the building’s total annual energy use is expected to be equal to or less than the energy produced on-site.

Two crucial steps will help manufacturers achieve their next digital frontier 

All three developments are landmarks of the next digital frontier ahead for most manufacturers. They pose significant challenges to how customer and employee-relevant manufacturers will remain, how resilient they will be and how responsibly they can act. 

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

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

As described at the outset, Industry 4.0 and the fourth industrial revolution aren’t the same. To foster meaningful change, companies need to connect Industry 4.0 technologies in a way that allows them to see much clearer and farther ahead – allowing them to act and react much quicker according to what they see. For example, cloud platforms to share and process data; machine learning algorithms to analyze this data and build various scenarios and digital twins to experiment with these data-driven scenarios. 

If connected intelligently to act in concert, the technologies form a digital thread, enabling information to flow between people, products, processes and plants, running all the way from a company’s research and product development to factory floors, supply chains, consumers and back again. This thread makes the product development, production process, market demands and customer behavior more visible and transparent. One can picture it as a virtuous loop of digital copies of every aspect of the product development, engineering and production process – allowing companies to predict, monitor and address the consequences of almost every action. 

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

The people agenda is as important as the technology agenda, perhaps even more so. Digital means new ways of working, just like the steam engine and conveyor belt did. As more and newer technologies enter the workplace, traditional roles will move from executing manual tasks to monitoring, interpreting and guiding intelligent machines and data. This means jobs will require more innovation, creativity, collaboration and leadership. 

Companies that don’t recognize this and act on it are in for a disappointment. For example, in a 2020 survey, 63% of companies admitted that they had failed to capture the expected value from their cloud investments. The major roadblocks of their cloud journey proved to be the people and change dimensions. Similarly, only 38% of supply chain executives felt that their workforce was mostly ready or completely ready to leverage the technology tools provided to them. 

Manufacturing is lagging when it comes to digitization — as a sector and within the enterprise. 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 enterprise. 

The technologies are available and have proven their worth and both the need and the benefits of digital manufacturing are obvious. Companies that connect technology intelligently and manage the change it brings wisely can go well beyond the efficiency and effectiveness scenarios that Industry 4.0 provides.

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

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