Why is Industry 4.0 an Opportunity for Small Manufacturing?

The goals on the floor of the plant remain unchanged. A successful manufacturer needs to deliver a quality product at a competitive price and still make hard deadlines. The challenge for many small and medium-sized manufacturers is remaining a viable option against larger companies. As companies seek to position themselves for growth in the face of Industry 4.0, they are asking whether new technology is a threat or an opportunity.

One problem facing smaller businesses is the high cost of investing in technology. Larger businesses can more easily invest in new software, equipment and training to increase efficiency. The result can crowd out smaller competition and cause businesses to fail. However, smaller businesses who allocate resources to remain competitive should look to changes in technology as an opportunity.

What is Industry 4.0?

The term Industry 4.0 first entered the vocabulary in the last decade. In simple terms, it stands for the fourth industrial revolution. Over time, industry moved from a manual process to machinery and steam power. This transition was the first industrial revolution. The second big change was the result of electric processes and assembly lines. The third revolution was the result of computerization and automation. Industry 4.0 marks a major transition to artificial intelligence, big data, and cyber management systems.

Sometimes referred to as Digital Engineering, or the Second Machine Age, Industry 4.0 is introducing profound changes into manufacturing processes. According to Capgemini Research Institute “Digital technologies are reshaping the manufacturing landscape. Product-based business models are being disrupted by service-based business models, new skills are needed in a world of smart products, and innovation success depends on the effectiveness of a company’s open ecosystem.”

In their book, “The Second Machine Age,” professors Erik Brynjolfsson and Andrew McAfee estimate that through new digital technologies there will be a jump in productivity as transformational as those brought about in the first Industrial Revolution.

Industry 4.0 and Economic Growth

The investment firm Morgan Stanley estimates that the growth rate of the “The Second Machine Age” is about 17% in a Compounded Annual Growth Rate (CAGR) basis for the next few years. They further estimate that companies in the manufacturing field will invest more than $600 billion dollars a year in IT in the next ten years.

These are pretty big numbers to ignore. But where is all this money going? There are a number of areas, but Morgan Stanley’s classification is interesting. The main areas according to them are Artificial Intelligence Software, Autonomous Vehicles, Internet of Things (IoT) Hardware, Industrial Software, Robotics and Semiconductors.

There is a lot happening in this space. Aside from the IT themes that will certainly drive technology advancements, we find the concept of Project Life Cycle (PLC) which will enable companies to improve productivity significantly using cloud-based collaboration. Industry 4.0 allows manufacturers to move from discovery and innovation phases to product launch faster—increasing efficiencies across all phases of manufacturing.

Terms such as model-based engineering, data continuity, and virtual simulation are becoming familiar, although at a slow rate.  According to CapGemini, only 16% of the organizations that they surveyed are fully implementing Digital Twins—a digital simulation process that facilitates better testing and evaluation of products before physical production begins.

Why is Industry 4.0 Important?

Simply stated, the process improvements of this industrial revolution will create a substantial amount of wealth. Although larger companies can afford to invest in the necessary engineering technology, startups are also moving into the manufacturing industry with a more nimble and collaborative approach to manufacturing. This makes it imperative for small to medium size companies to move fast and look for alternatives to compete effectively if they want to remain in the market.

To be competitive in Industry 4.0, businesses should seek to shift from legacy products to highly engineered products and to products as a service. The change is not easy because it requires caution along with speed to remain competitive. 

Another approach is to move to customized products. Technologies and customer’s demands are forcing many companies to specialize in single, customized product offerings. This transition requires the integration of design with machine learning and other digital technologies. Larger companies will integrate their suppliers into their Programmable Logic Controller (PLC) systems. This will allow for better collaboration throughout the process, but it will also force OEM suppliers to increase digital capability.

Big Data is the Heart of the New Revolution

At the heart of these industrial advancements is data—accurate, readily available data—that can be easily managed. Data previously stored in 2D CAD files must be workable in new 3D technologies as industry moves to a digital model approach. Technology will allow engineers to collaborate from anywhere on the globe, test products in 3D digital simulations, and store data using cloud servers for easy access and revisions.

Productivity is the driving principle of Industry 4.0 and advances are focused on increased efficiencies and time saving processes. For example, SIEMENS has been working on switching from file-based data storage to object-based storage. The idea is to reduce labeling errors and to classify products based on their physical attributes. As such, locating the right 3D model will be easier and less prone to error. In addition, there are design software companies that are moving towards Model Based Definitions (MBD) whereby all the information required for manufacturing is included in the 3D model.

To compete in this second industrial revolution, small and medium size companies need to start by digitizing product portfolios. These digital libraries will become the normal process as the latest industrial revolution continues to gain momentum. The added benefit of digital testing will pay off for companies who wish to compete in the changing industrial landscape.