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Updated 24 Sep 2020

What is Industry 4.0?

Industry 4.0 is a game-changer that can help grow your business – allowing you to create renewed eco-systems within existing supply chains – and optimise your uptime and performance. 

Nicole Crampton, 30 October 2017  Share  0 comments  Print

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Digital transformation is becoming a priority for many CEO’s survey in South Africa. 27% of industrial companies have rated their level of digitalisation as high, and this value is expected to rise to 64% within the next five years, according to PwC. This means that unless you’re already digitising your system you may begin to fall behind competitors who are.

South Africa’s industrial leaders have already begun to digitise all their essential functions within their internal vertical operations processes. 9 out of 10 businesses expect to expand their product portfolio with digital offerings, according to PwC. They are focusing on driving both revenue growth and operational efficiency, by implementing Industry 4.0 strategies.

What is Industry 4.0? 

The term Industry 4.0 refers to the combination of several major innovations in digital technology, which are all maturing and poised to transform multiple industries.  This phenomenon includes everything from advanced robotics and artificial intelligence, to sophisticated sensors, cloud computing, the Internet-of-Things, data capture and analysis, and digital fabrication. From ride-sharing apps, to software-as-a-service, these advances all you to connect with the global value chain, which is already shared by more and more businesses from across the globe. 

Industry 4.0, otherwise known as the fourth industrial revolution is essentially the convergence of Information Technology (IT) and Operational Technology (OT), with the hyper-connected digital industry. This is the bridging of digital and physical, cyber-physical production systems and the Industrial Internet-of-Things, all together creating the fourth industrial revolution.

Related: This is how Industry 4.0 will affect businesses like yours

These innovative new systems are so creating “smart factories,” in which cyber-physical systems monitor the physical processes within the business and make decentralised decisions. The physical systems use the Internet-of-Things to communicate and cooperate with each other and with your team, in real time, via a wireless network.    

Why Industry 4.0 is important 

The essential goal of Industry 4.0 is to make industries faster, more efficient and customer-centric, while simultaneously performing over and above automation and optimisation, and identifying new business opportunities and models. 

Many of the benefits of implementing Industry 4.0 are similar to the benefits of undergoing a digital transformation, here are a few examples of benefits your business can expect when implementing Industry 4.0 as a growth strategy:

1: Optimisation and automation enhance your productivity

Optimisation -and -automation -enhance -your -productivity

By implementing the systems and processes associated with Industry 4.0, you’ll can achieve an increase in your business’ productivity, which in itself will improve profitability and competitiveness. Industry 4.0 effectively:

  • Saves costs
  • Increases profitability
  • Reduces wastage
  • Automates to prevent errors and delays. 

These strategies will also help you to increase the efficiency of your production to work more in real-time and in sync with the overall value chain. To increase speed where needed, a technology upgrade can help you to digitise paper-based processes, and also offers you the ability to intervene faster should there be an error in the production process, avoiding large wastage. 

“Industry 4.0 offers various solutions to optimise, from optimised asset utilisation and smoother production processes to better logistics and inventory management,” according to i-Scoop

2: Real-time data collection 

Being able to collect data in real-time, can help you optimise your supply chain to real-time, to suit this developing real-time economy. With this ability, you’ll be able to enhance your business’ customer experience and become more customer-centric. 

Industry 4.0 is not just about hyper-connectivity, it’s also about the connecting the entire life cycle of your products to its ecosystem. To optimise your value chain, you need to be connected to your suppliers, and customers all the way to the end consumer. Even you initial customers, the businesses you’re selling to, they’re still customers and they want enhanced productivity. 

Your end user will expect high quality products fast, along with an amazing customer experience, and products delivered exactly on time. This high expectation, impacts the entire supply chain. Being able to optimise your productivity doesn’t only give you a competitive advantage and help you reach customer expectation, it also helps you and your value chain to improve alignment, reduce costs and improve value creation.

3: The game changing role of data

Having all your systems and processes interconnected and recording data can help you, not only to optimise your entire system but also incorporate multiple revenue streams and improve your businesses profitability. 

The more data you can gather the faster you can implement changes to improve your operation. By implementing these insights in a timely way you can improve value down your supply chain. 

How your business can adapt to the changing landscape 

Around the world, businesses plan to invest USD907 billion annually in Industry 4.0 over the next five years, according to Moneyweb. They’re doing this because they’re aware of the impact technology will have on business, and that they stand little chance against their competition without it. 

In South Africa, from 61 businesses that took part in a worldwide PwC report, business leaders are planning to spend R6 billion every year until 2020. They are focusing on digital technology such as sensors and connectivity devices, along with software and applications. Local businesses are also focusing investment in upskilling and training for their staff to drive the organisational change that’s needed to successfully digitally-transform. 

Related: 4 Trends that will impact manufacturing in the future

Here are a few step-by-step approaches from PwC to implementing Industry 4.0’s digital capabilities into your business: 

Step 1: Have clear 4.0 objectives in place 

Manufacturing -plant -objectives

A challenge for numerous companies is that they have no clear internal digital operations vision or support structures in place. When organisations implement digitisation, they use a trial and error technique, without having a clear objective of what their digital strategy is supposed to accomplish. 

If you want your business to be prosperous and successfully implement a digital transformation strategy, you need to know what the end goal is. “In a mining company, the major driver is low-cost improved efficiency. But, perhaps a consumer product company would like to increase sales. Once you have established what your business objectives are, then you can focus your 4.0 transformation efforts along those lines,” explains Theron.

Evaluate your business’ current digital maturity and set clear five-year targets. “Prioritise the measures that will bring the most value to your business and make sure these are aligned with your overall strategy,” explains PwC. You’ll need to get leadership and your directors on board to ensure that they are ready and willing to champion your strategy.

Step 2: Test it out with pilot projects

Pilot projects will help you to establish proof of concept and showcase the strategies business value. Focus on a niche area to highlight the end-to-end applications of Industry 4.0. You will have some success and some losses, but every project will help you to think in a cross-functional, agile way that will help you to focus on customers and technology partners. 

PWC says: “With evidence from early successes, you can also gain buy-in from the organisation, and secure funding for a larger rollout. Design pragmatically to compensate for standards or infrastructure that doesn’t exist yet.” 

Case Study: The Royal Mail in the UK has launched a pilot programme, where it places sensors in mailboxes, and these sensors alert customers when there is something in the box. This means that consumers only need to drive to their post-box when there’s actually something in there. 

“It’s a great application particularly in rural country areas where one can be a long distance away from the mailbox,” explains Christoph Hagmann, technology consulting division partner, PwC Germany. This also shows how diverse this technology is, if the UK postal service can find applications for it, so can your business.

Implement ready-to-go technology

Collaborate with digital leaders outside your company, by partnering with start-ups, universities, or industry organisations to accelerate your digital transformation. 

Businesses don’t need to develop this technology themselves, but rather innovate and collaborate with the right partners to improve their business’ offering or productivity, says Hagmann. This is a more cost effective option compared to spending months on millions on a research and development team to come up with something that isn’t half as innovative. 

“Look at Discovery using Uber to deliver flu vaccines. Those kinds of investments are not necessarily significant. If you look for a partner within your eco-system that already has a tool that can be used, you can reduce your costs significantly, and reduce your investment,” he explains. 

Related: Disruptors. Hackers. Breaches. Effective risk management in the digital age

Step 3: Determine what capabilities your business needs

Business -capabilities

Build on the lessons and experience you gained during the piolet programmes. From this you can map out what your business is capable of and what the gap is between that and what you would like to achieve. Include in your diagnosis, how Industry 4.0 technology can fundamentally improve your businesses systems, for example how small does the gap become if you implement an agile IT infrastructure?

Mix business and IT 

Remember that you need to attract knowledgeable, talented employees that can handle the innovative changes in technology. This means you’ll need to develop strategies to entice these individuals to your business. 

A barrier South African business are experiencing is the inadequate digital culture and training, along with not enough natural talent in the digital field. Hagmann on the other hand believes that, besides data analytics, majority of business will have employees who want to and can drive digital initiatives, even if they are currently in various departments across the business. 

PwC explains, that your business’ success in implementing Industry 4.0, could ultimately depend on the skill and knowledge of the people you manage to attract to your enterprise. The largest barrier to smoothly undergoing a digital transformation is your ability to recruit the people you need to put the digitisation in place. 

Step 4: Optimise your data analytics

Implement cross-functional expert teams to get the best out of your data analytics. Once you’ve determine all the strategies for how to optimise your data analytics you can then fully embed these into your functional organisation. 

Directly connect the data you’re collecting to decisions-making and intelligent system designs, to get the most value out of it. You can then use this data to improve products, how they’re used in the field, as well as how your company can offer and build new, and innovative revenue streams. “Think big, but start small with proof of concept, piolet projects,” advises PwC 

Step 5: Undergo a digital transformation

To fully capture the value of the Industry 4.0 technology, you need an organisation-wide transformation. It’s no good if your head office is innovative and making strides into the future of your industry, when every other branch is doing the same thing they were 5-10 years ago. To really make the transformation impactful and lasting, you need to start from the top. 

Your venture needs clear leadership support and commitment from the C-suite to the financial stakeholders. “The key to this step is for the board of directors to understand is that implementing Industry 4.0 is a combination of business and IT. I actually don’t like the separation of business and IT because, in most areas digitisation plays a role, it’s not about IT,” explains Hagmann. “Its business that needs to come up with the idea and IT must only provide the support to bring it to life.” 

Create a digital culture to transform your business from within. All your staff need to think and act like digital natives, who are willing to experiment with new technology and learn fresh strategies of working. Keep in mind, the change doesn’t stop now that you’ve implemented Industry 4.0 technology into your business.

This isn’t a once off strategy that you can integrate into your venture and leave. You need to continuously re-invent your businesses capabilities at faster rates than previously to stay ahead of all your competitors who have implemented similar, if not the same technological advances. 

Related: 4 Reasons why you should have already shifted your transport business to 4.0

Step 6: Create an ecosystem approach

Industry 4.0 is a solution for complete end-to-end optimisation, which means you’ll need to include your entire supply chain. 

Here are some strategies that you can implement to create an ecosystem within your value chain: 

Cultivate complete product and service solutions for your clients, use partnerships or align with platforms if you can’t build a complete offering internally, if you find it difficult to share knowledge with other business, you may want to consider acquiring your supply chain. 

However, PwC advises that you look for ways to bridge this gap, perhaps, for example with technical standards, so that you can profit from being part of platforms that you don’t fully control.

Real breakthroughs will come to your business when you fully understand your consumers’ behaviour and can coordinate your ventures role within the future ecosystem of partners, suppliers and customers. 

Industry 4.0 will be game-changing for those businesses that full understand it, and how it’s going to impact their operations.

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Nicole Crampton

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