Industry 4.0

The traditional manufacturing industry is in the throes of a digital transformation that is accelerated by exponentially growing technologies (e.g. intelligent robots, autonomous drones, sensors, 3D printing).

Enterprises at organizational and operational levels, need to adapt to this rapid change if they are not to be left behind by developments in their sector and by their competitors.
Industry accounts for 80% of Europe’s exports. Some 65% of private sector R&D investment comes from manufacturing. Therefore, a strong manufacturing sector can create jobs, boost a country’s GDP and lead the way towards economic prosperity through trade. In advanced economies, manufacturing can lift agriculture exports, thereby boosting income and living standards, whereas, in developing economies it can promote innovation through R&D, exports and productivity growth.

Moving towards "Industry 4.0"

By embracing technological change, converting research investments into innovative business ideas, and continuing to pioneer the low-carbon and circular economy we will pave the way for a smart, innovative and sustainable industry in Europe.

Currently, manufacturing processes are becoming increasingly digital, and along with the information technology, data and analytics, lead the way to another industrial revolution that urge businesses to move towards a new era, capitalising on smart machines, factories, products and services, utilizing new interaction models and going beyond the automation of production. This new era is known as the "Industry 4.0", commonly referred to as the Fourth Industrial Revolution.

The Fourth Industrial Revolution, otherwise referred to as Industry 4.0, incorporates technologies from digital, physical and biological spheres.

In general, Industry 4.0 relates to the concept of smart factories, where machines are connected through the web to a system, which is able to conceptualize the whole production line and engage into decision-making processes on its own.

Based on the McKinsey Global Institute data, the current automation technology can automate more than 60% of all manufacturing activities.[1][2] Deloitte’s 2016 Global Manufacturing Competitiveness Index report[3] points out that traditional powerhouse manufacturing countries, such as the United States, Germany, Japan, and the United Kingdom, are making a shift towards higher-value manufacturing[4] in order to maintain their competitiveness.

Formulating an Industry 4.0 strategy

A number of market forces are driving the need to become digital. The digital transformation of the industry and the roll-out of additive manufacturing technologies in the manufacturing sector, along with the use of other exponential technologies, require companies to clearly set out strategies that will allow them to respond to many of these trends and challenges.

Understanding thus the strengths and weaknesses of a company in the digital field will be of vital importance, as it will help in setting future targets, improving current systems, and transitioning to digital technology.
After evaluating digital maturity levels, companies will need to create both short and longer-term goals and plans in all of the five core business dimensions (Customers, Strategy, Technology, Operations and Organisation Culture). To identify possible investment priorities and develop an Industry 4.0 strategy, companies will need to consider the below:
· Customer – Providing an experience where customers view the organization as their digital partner using their preferred channels of interaction to control their connected future on and offline.
· Strategy – Focuses on how the business transforms or operates to increase its competitive advantage through digital initiatives; it is embedded within the overall business strategy.
· Technology – Underpins the success of digital strategy by helping to create, process, store, secure and exchange data to meet the needs of customers at low cost and low overheads.
· Operations – Executing and evolving processes and tasks by utilizing digital technologies to drive strategic management and enhance business efficiency and effectiveness.
· Culture, People, and Organization – Defining and developing an organizational culture with governance and talent processes to support progress along the digital maturity curve and the flexibility to achieve its growth and innovation objectives.


References
[1] McKinsey, McKinsey Global Institute (2017) “A future that works: Automation, employment and productivity”. Available at: https://www.mckinsey.com/featured-insights/digital-disruption/harnessing-automation-for-a-future-that-works
[2] McKinsey (2016) “Where machines could replace humans—and where they can’t (yet)”. Available at: https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/where-machines-could-replace-humans-and-where-they-cant-yet
[3] Deloitte (2016) Global Manufacturing Competitiveness Index. Available at: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Manufacturing/gx-global-mfg-competitiveness-index-2016.pdf(Note: This is the most recent study prepared by Deloitte, previous studies were published in 2010 and 2013)
[4] The University of Cambridge’s Institute of Manufacturing defines high value manufacturing as “the full cycle of activities from research and development, through design, production, logistics and services, to end of life management”.s.

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