End-to-end digitalization, cutting-edge technology, interconnectivity and the growing role of customers in shaping products and services are revolutionizing the way manufacturers operate.
The first industrial revolution was marked by mechanization and the second by the advent of the assembly line and mass production. The third industrial revolution took us into the computer age in the middle of the last century, with the automation of single machines and processes. And now manufacturing frontrunners are building on that, giving way to a fourth industrial revolution commonly known as Industry 4.0.
«Industry 4.0 encompasses end-to-end digitalization and data integration of the value chain: offering digital products and services, operating connected physical and virtual assets, transforming and integrating all operations and industrial activities, building partnerships and optimizing customer-facing activities», consultancy PwC explains in its fourth annual Global Digital Operations survey published earlier this year. Or as Klaus Schwab, the founder and executive chairman of the World Economic Forum (WEF), puts it: the fourth industrial revolution «is characterized by a fusion of technologies that is blurring the lines between the physical, digital and biological spheres».
Digital, or smart, factories and production systems are ones in which state-of-the-art technology – including but not limited to artificial intelligence, augmented and virtual reality, 3D printing, robotics, and the Internet of Things – are increasingly at home. Future technological breakthroughs are only expected to add to the tools of the trade used in Industry 4.0. Consumers are already playing an important role in Industry 4.0, as direct and indirect feedback helps to shape existing product characteristics and new offerings. Their role is also expected to become more important in the future.
According to data from PwC, however, the sweeping changes at the heart of Industry 4.0 are only in their infancy, as almost two-thirds of global manufacturing firms have not even started or only just begun their digital transformations. Frontrunners lie mainly in the automotive and electronic industries, with 20% of the former and 14% of the latter implementing innovative solutions across marketplace and facilities.
Geographically speaking, digital advances have been led by the Asia-Pacific region, where tech-savvy managers and soaring compensation and production costs have made progress on the digital front a priority for maintaining competitiveness. In Asia, 19% of manufacturers surveyed by PwC were identified as Digital Champions – those that can gain a real competitive advantage from a revolution in operations and view their digital transformation in a way that is “far-reaching and aggressively innovative”. This compares with 11% in the Americas and 5% in Europe, the Middle East and Africa.
With respect to their peers, frontrunners are more likely to have adopted technologies like artificial intelligence. «We found that Digital Champions don’t implement technology just for the sake of technology alone, or to keep up with trends», the consultancy noted. «Rather, they understand clearly how specific technologies drive the components of competitive advantage – speed flexibility, customization, and efficiency».
While there are benefits from being at the forefront of Industry 4.0 development, laggards would also be well advised to close the gap if they are to simply survive in the new industrial world. «Many industries are seeing the introduction of new technologies that create entirely new ways of serving existing needs and significantly disrupt existing value chains – writes Schwab –. Disruption is also flowing from agile, innovative competitors who, thanks to access to global digital platforms for research, development, marketing, sales, and distribution, can oust well-established incumbents faster than ever by improving the quality, speed, or price at which value is delivered». Ready or not, Industry 4.0 has arrived.