- 99% of mid-market manufacturing executives are familiar with Industry 4.0, yet only 5% are currently implementing or have implemented an Industry 4.0 strategy.
- Investing in upgrading existing machinery, replacing fully depreciated machines with next-generation smart, connected production equipment, and adopting real-time monitoring including Manufacturing Execution Systems (MES) are manufacturers’ top three priorities based on interviews with them.
- Mid-market manufacturers getting the most value out of Industry 4.0 excel at orchestrating a variety of technologies to find new ways to excel at product quality, improve shop floor productivity, meet delivery dates, and control costs.
- Real-time monitoring is gaining momentum to improve order cycle times, troubleshoot quality problems, improve schedule accuracy, and support track-and-trace.
Demystifying Industry 4.0 is an excellent objective for any research effort. Delving into the specifics of Industry 4.0 delivers fascinating insights into adoption trends and future direction of the market. Those factors are what makes the latest BDO study, Industry 4.0: Defining How Mid-Market Manufacturers Derive and Deliver Value. BDO is a leading provider of assurance, tax, and financial advisory services and is providing the report available for download here (PDF, 36 pp., no opt-in).
The survey was conducted by Market Measurement, Inc., an independent market research consulting firm. The survey included 230 executives at U.S. manufacturing companies with annual revenues between $200M and $3B and was conducted in November and December of 2018. Please see page 2 of the study for additional details regarding the methodology. One of the most valuable findings of the study is that mid-market manufacturers need more evidence of Industry 4.0, delivering improved supply chain performance, quality, and shop floor productivity.
Early Indicators of Industry 4.0 Adoption: Machine Upgrades, Smart Machines, Real-Time Monitoring & MES Lead Investment Plans
In the many conversations I’ve had with mid-tier manufacturers located in North America this year, I’ve learned the following:
- 61% of manufacturers are making large-scale operational improvements to their shop floors, including manufacturing process automation systems in 2019 to continue the strong growth they achieved in 2018.
- Improving shop floor productivity is 1.4 times more important to manufacturers than making marketing improvements to drive more sales leads.
- Manufacturers are turning to robotics as over half of them (58%) are unable to meet production demand due to a lack of skilled labor availability.
- Investing in improving product and service quality fuels growth, keeps customers for life, and leads all technology spending by manufacturers in 2019.
These and many other insights are from the recent Decision Analyst study completed in conjunction with IQMS/Dassault Systemes, Shop Floor Productivity Investments That Drive Manufacturing Growth (PDF, 7 pp., opt-in). Based on interviews with 150 manufacturers distributed across ten industries, the survey provides invaluable insights into their current and future manufacturing process automation roadmaps and plans.
Key Takeaways from BDO’s Industry 4.0 Study
- Manufacturers are most motivated to evaluate Industry 4.0 technologies based on the potential for growth and business model diversification they offer. Building a business case for any new system or technology that delivers revenue, even during a pilot, is getting the highest priority by manufacturers today. Based on my interviews with manufacturers, I found they were 1.7 times more likely to invest in machine upgrades and smart machines versus spending more on marketing. Manufacturers are very interested in any new technology that enables them to accept short-notice production runs from customers, excel at higher quality standards, improve time-to-market, all the while having better cost visibility and control. All those factors are inherent in the top three goals of business model diversification, improved operational efficiencies, and increased market penetration.
- For Industry 4.0 technologies to gain more adoption, more use cases are needed to explain how traditional product sales, aftermarket sales, and product-as-a-service benefit from these new technologies. Manufacturers know the ROI of investing in a machinery upgrade, buying a smart, connected machine, or integrating real-time monitoring across their shop floors. What they’re struggling with is how Industry 4.0 makes traditional product sales improve. 84% of upper mid-market manufacturers are generating revenue using Information-as-a-Service today compared to 67% of middle market manufacturers overall.
- Manufacturers who get the most value out of their Industry 4.0 investments begin with a customer-centric blueprint first, integrating diverse technologies to deliver excellent customer experiences. Manufacturers growing 10% a year or more are relying on roadmaps to guide their technology buying decisions. These roadmaps are focused on how to reduce scrap, improve order cycle times, streamline supplier integration while improving inbound quality levels, and provide real-time order updates to customers. BDOs’ survey results reflect what I’m hearing from manufacturers. They’re more focused than ever before on having an integrated engagement strategy combined with greater flexibility in responding to unique and often urgent production runs.
- Industry 4.0’s potential to improve supply chains needs greater focus if mid-tier manufacturers are going to adopt the framework fully. Manufacturing executives most often equate Industry 4.0 with shop floor productivity improvements while the greatest gains are waiting in their supply chains. The BDO study found that manufacturers are divided on the metrics they rely on to evaluate their supply chains. Upper middle market manufacturers are aiming to speed up customer order cycle times and are less focused on getting their total delivered costs down. Lower mid-market manufacturers say reducing inventory turnover is their biggest priority. Overall, strengthening customer service increases in importance with the size of the organization.
By enabling integration between engineering, supply chain management, Manufacturing Execution Systems (MES) and CRM systems, more manufacturers are achieving product configuration strategies at scale. A key growth strategy for many manufacturers is to scale beyond the limitations of their longstanding Make-to-Stock production strategies. By integrating engineering, supply chains, MES, and CRM, manufacturers can offer more flexibility to their customers while expanding their product strategies to include Configure-to-Order, Make-to-Order, and for highly customized products, Engineer-to-Order. The more Industry 4.0 can be shown to enable design-to-manufacturing at scale, the more it will resonate with senior executives in mid-tier manufacturing.
- Manufacturers are more likely than ever before to accept cloud-based platforms and systems that help them achieve their business strategies faster and more completely, with analytics being in the early stages of adoption. Manufacturing CEOs and their teams are most concerned about how quickly new applications and platforms can position their businesses for more growth. Whether a given application or platform is cloud-based often becomes secondary to the speed and time-to-market constraints every manufacturing business faces. The fastest-growing mid-tier manufacturers are putting greater effort and intensity into mastering analytics across every area of their business too. BDO found that Artificial Intelligence (AI) leads all other technologies in planned use.