How Manufacturers Supercharge Massive Supply Chain Advantage with Industry 4.0

Buffeted by all manner of disruptions – the pandemic, geopolitical conflicts, and trade wars to name a few – manufacturers have elevated Industry 4.0 from shop floor tactic to business-led strategy. While automation may have begun in the factory, in an ultra-dynamic market where anything can and does happen, intelligence has kick-started the next digitalized revolution across industrial manufacturing.

“Organizations have embraced Industry 4.0 to build resiliency against constant supply chain disruptions,” said Mike Lackey, global vice president of Solution Management for Digital Manufacturing at SAP. “Extracting insights from operators, systems, and equipment in near real-time instantly brings business context to shop floor data. This helps everyone, from plant management and operations to the entire C-suite, turbocharge new as-a-service business models and customer personalization, as well as more agile, sustainable production for greater employee productivity and sustainable growth.”

Connected Data Sparks Business Results

IDC analysts predicted that by 2023, 50% of all supply chain forecasts will be automated through the use of artificial intelligence (AI), improving accuracy by five percentage points. Two years after that, IDC saw 40% of G2000 organizations using AI, data governance, and a transformed organization to develop a resilient and distributed operational decision-making framework, driving 25% faster change execution.

Lackey said that leading-edge industrial manufacturers in many sectors have achieved impressive real-world results with connected data intelligence from SAP Digital Manufacturing Cloud. Challenged by 24/7 production imperatives to meet high demand, a car battery manufacturer increased average production volume by 25% while boosting product quality and reducing “idea to production” cycle time by integrating data from production design with manufacturing processes. After digitizing design and manufacturing, a medical device manufacturer reduced design change times from months to days, achieving 99% uptime for machines in the field and decreasing time to market and costs ─ a life and death issue with oncology equipment. An electronics manufacturer in the mobile phone industry increased factory productivity by 32%, decreased costs by 33%, and shortened the cycle from R&D to production by 41%.

Intelligent, sustainable factories don’t operate in a vacuum,” he said. “If the process temperature drops below a certain degree, what’s the impact on quality, costs, and promised delivery dates for customers? How fast can we replenish materials from suppliers? When brought together with information from all critical business processes, one single data point on the shop floor can trigger decisions and actions that will help organizations meet and exceed customer expectations – despite unexpected challenges.”

Intelligence Deciphers Production and Demand Signals Fast

Machine intelligence drives innovation with far-reaching business consequences. For example, the typical factory has hundreds of machines from different vendors. With Internet of Things (IoT)-based sensor data from various machines that’s integrated with manufacturing software applications and supply chain management, procurement, and finance, companies can automatically increase operational efficiency while reducing waste and unplanned downtime. According to IDC, 30% of G2000 manufacturers will embed connected technologies to increase product reliability using operational insights that ensure uptime and support an optimized maintenance supply chain by 2025. IDC analysts predicted 60% of G2000 OEMs will use AI and real-time asset data to service equipment pre-failure, avoiding 50% of unplanned downtime hours by 2026.

Equally important, intelligence helps manufacturers read and act on customer demand signals much faster. Driven by increased competition for wallet share, IDC analysts expected 65% of G2000 OEMs will integrate customer insights with service work orders to better personalize engagements, increasing satisfaction by 15% by 2025. Gartner analysts predicted that by 2027, 70% of the top 20 global consumer goods companies will design digital twins of their consumers as part of their customer experience (CX) strategy.

“Companies need both the capacity and agility to respond whether demand fluctuates due to market forces like pandemic lockdowns and natural disasters, or downstream social media promotions,” said Lackey. “Manufacturers are much closer to customers, expected to deliver the same quality products at accelerated innovation cycles. They may need to shift production quickly, retrofit existing operations, or ramp up new facilities so they don’t miss out on opportunities. Insight from connected data is the only way to design, produce, and deliver the products customers want on time.”

Intelligence Meets Sustainable Business Commitments

For manufacturers, intelligence has revolutionized their responsibilities for building a sustainable business. IDC analysts said that by 2024, to improve long-term supply chain profitability, 70% of manufacturers in global supply chains will invest in software tools to support sustainability and circular economy business models. By the following year, Gartner researchers predicted 40% of all manufacturing IT will own the responsibility of data modeling for sustainability and net-zero carbon targets. Clearly, the digitalized supply chain advantage goes to manufacturers that make the most of Industry 4.0.


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This also appeared on SAP BrandVoice on Forbes.