Est. reading time: 4 minutes
Author: Will Harris
Mckinsey’s report on manufacturing operations after Covid-19 takes an interesting look into the potential adoption pathways companies will take on the way to Industry 4.0 and some of the ways technology is changing the sector. It also identifies what ‘lighthouses’, organisations successfully transforming at scale, are doing to make them succeed.
Industry 4.0: Reimagining manufacturing operations after COVID-19 provides an interesting look at a world beyond Covid-19 and the role of technology in improving manufacturing. One of the report’s most interesting recommendations is to follow a holistic triple transformation approach taken by ‘lighthouses’. An industry 4.0 ‘lighthouse’ is a site that has successfully implemented industry 4.0 transformations at scale.
Below, I summarise the report’s key findings and detail how manufacturing is transforming and what we could expect to see in the future.
The road to Industry 4.0
As many companies struggle to balance the need to build resilience in their operations with the need to preserve their bank balance this may lead to asymmetric adoption. We have recently looked at how the adoption of AI varies between organisations in a previous blog post. A key point made in the report is how there are likely to be three common adoption pathways on the way to industry 4.0.
1. Accelerated adoption
Accelerated adoption covers quick-win projects that help companies adapt to new norms. These can include things like tracking employee health, enforcing safe distancing on the shop floor, and supporting remote collaboration. Technologies like augmented reality (AR) also have the potential for widespread adoption regardless of companies’ existing infrastructure.
2. Differential adoption
These are more likely for solutions such as digital twins and logistics automation. In these areas, large companies are likely to have a significant advantage over their smaller counterparts. Many SMEs may delay investment until they have the required infrastructure or are in a more financially secure position.
3. Deferred adoption
Deferred adoption This is most likely for solutions with unclear or long term pay back periods or the highest capital expenditure. This would involve technologies such as blockchain or nanotechnology.
“Industry 4.0 technologies were already transforming manufacturers’ operations before the pandemic. Now adoption is diverging between technology haves and have-nots.”
The report notes some of the most promising ways manufacturers will be able to improve their operations both in and beyond the four walls of the factory.
Autonomous planning is the future
Industry 4.0 tech improves planning and forecasting. Autonomous planning is the future of this key element of operations. It goes a step further than inventory and supply chain management by not only using AI but using external datasets such as from suppliers, customers, weather forecasters, and broader economic indicators. These help organisations to become more accurate and resilient in their planning.
The factory floor
During the Covid-19 pandemic, digital technologies have enabled workers to work from home, this has mitigated some of the worst effects of the pandemic for many businesses. Wearable technologies and computer vision can also improve health and safety on the factory floor by ensuring correct social distancing procedures are followed.
Productivity and performance management
Manufacturers can now automate data collection, saving staff time and making operations more efficient. This is generally done through sensors and computer vision. Digital technology also allows supervisors to virtually monitor the factory floor in real time.
Digital technologies can improve quality control through automatic inspection and predictive algorithms. Potential industry 4.0 technologies that can be used to further improve quality range from simple barcode scanning to RFID tracking and blockchain.
The supply chain
A digital logistics control tower and digital fleet management can massively improve operational resilience. Combined with technology like route optimisation, these technologies allow you to monitor and optimise your supply chain at every stage in the process.
Warehousing is an area that automation can have a direct and positive impact in many ways. These include shuttle systems, smart shelves, smart picking robots and automated-material storage. Digital twins are another great area that we’ve previously written about on our blog.
The recipe for success
The report points out that despite the optimism surrounding industry 4.0 before the pandemic hit, most businesses have been unable to successfully transform at scale. Around 70% of industry 4.0 initiatives fail to achieve their objectives. This is obviously problematic, but the report goes on to give reason for hope. They identify 44 sites across the world labelled industry 4.0 ‘lighthouses’. Mckinsey defines lighthouses as manufacturing sites where digital technologies were implemented at scale, and with significant operational impact. They have overseen successful industry 4.0 transformations, and all took a holistic approach in implementing them. This can be split into three sections, the triple transformation recipe:
This consists of creating a clear business case, with full understanding long-term business goals.
Most companies will have to upgrade their IT and OT systems to fit the needs of industry 4.0 technologies. They may also want to leverage external technology providers, creating ecosystems of providers to contribute to a successful transformation.
Successful digital transformation is unlikely without putting people at the center. There are four factors here:
- Top-management commitment
- Digital capability acquisition
- New ways of working
Check out the full report.