In the simplest terms, Industry 4.0 is the intersection of machines, devices, sensors, data and people all communicating in real time via the cloud, intranet or network (ERP/MRP) system. “Smart factories” will begin to propel manufacturing into a new era where production, information technology and communication (internet) are all connected together to improve processes and supply chain optimization. The ultimate manufacturing goal is to make more informed decisions that will move products faster through the supply chain. These premises are the foundation of the Industrial Internet of Things (IIoT).
The second driver of Industry 4.0 is the interconnection of products and services also known as the internet of things (IoT) through the web and connected devices. All the rage right now is how to wirelessly connect products to customers through physical devices. A simple example of how a physical product has changed how we digitally interact through the web is the Nest thermostat. We can now control the temperature in our house from practically anywhere in the world. Our cars, phones, homes, appliances and entertainment systems are all becoming connected wirelessly through apps and dramatically changing how we buy and sell goods and services.
Looking back 10 years, what has changed in the industry in how we use technology?
Without a doubt the biggest change has been the widespread availability of stable, low cost, high speed connectivity via the web. Today when we tour middle market manufacturing plants we see increased use of automation, electronic digital KPI data trackers, collaborative robots and cloud based software solutions which allow for real time decision making. This level of integration simply was not possible 10 years ago.
How will Industry 4.0 be a disruptor or game changer?
Industry 4.0 already is a disruptor and game changer in many sectors. Remember not too long ago we actually went out and rented movies from Blockbuster and now we stream them from Netflix whenever and wherever we want. We hailed a cab and now use a ridesharing service. We purchased goods at retail stores that we now order on our phone and have it on our doorstep within hours. These are just a few examples of how the fabric of our daily lives are being meaningfully changed by this level of connectivity. Disruptive businesses embrace the challenges of continuous connectivity and capitalize on innovation and speed to market to effectively capture market share. Manufacturing is no different as the market now favors those with less capital asset intensive processes driven by technology. This bodes well for smaller manufacturers as Industry 4.0 tends to lead to more customizable products and more localized production as speed to market is critical.
What opportunities does Industry 4.0 bring?
With great change comes tremendous opportunity. Industry 4.0 creates more high paying jobs, expands our educated workforce and ultimately increases our standard of living. Industry 4.0 will be a time of significant change that must be embraced by all manufacturers large and small. With the enactment of the new tax law, manufacturers have the opportunity to use the tax savings from reduced tax rates, 100% deduction for capital acquisitions, and other tax changes to really invest in their future. What is the biggest opportunity for your company? Every company is different as to where they are on the Industry 4.0 continuum. Ask yourself where you can get the biggest return on investment given where your organization is in its lifecycle: Is it a cloud based software solution, capital equipment with embedded data analysis, collaborative robots, 3D simulation software, 3D printing, or augmented reality? Whatever direction you take there is no time like now to drive your business forward! Create a plan, engage all stakeholders and go for it, because doing nothing is not an option.
How will Industry 4.0 impact small to medium manufacturers with fewer than 200 employees?
As Professor Klaus Schaub chairman of the World Economic Forum has stated “There has never been a time of greater promise, or greater peril.” We have been advising middle market manufacturing clients for more than 20 years and agree that the professor’s comment is spot on. Having walked the shop floor of hundreds of small, medium and large manufacturing companies, each one has its own culture and vision of the future and where they fit in. But, the greatest impact will not be in machine capabilities as much as how you can digitally connect your organization internally and through the supply chain. The speed of change in the coming years will be the biggest surprise to those companies that have not invested in their IT structure. Will your company be able to react quickly enough to customer demands, have the capital resources to invest in software solutions to connect to customers, have the capital resources to protect your company and customer information from cyber-attacks, or have resources to train the next generation of workforce to run a more IT focused production process? These are all questions that only you can answer. We have clients that are overachievers and well on their way into the fourth industrial revolution, and we have clients that believe Industry 4.0 will not impact them. Which one do you want to be?
What does a manufacturer need to be doing to be prepared to be a player in Industry 4.0?
Those manufacturers that can introduce and implement technology into their organization will be in the best position to be a player in the next industrial revolution. Getting the organization aligned and prepared to make the right investments, and have the ability to train and attract a more technological workforce will have the most success. Every company is different and at different stages of their lifecycle. Making an assessment of how your organization will be impacted is a good starting point. We are assisting a lot of companies in implementing various cloud based software solutions including ERP, MRP, or apps to help them get connected and make more real time decisions. Several small manufacturing clients of ours are also investing in collaborative robots. The investment is much less than most think and the return has been greater than most expected. 3D printing has also been on the rise among middle market manufacturers along with production simulation software. Think about how you can improve your customer experience. Is it through innovative solutions? Better or faster service? Again, the move to more customizable products and speed to market are certainly points to consider as your company moves through the next industrial revolution.
You're Invited! Annual Not-For-Profit Accounting Update
Thursday, September 26, 2019
Hosted at Detroit Historical Museum
Middle Market Manufacturing Outlook
Wednesday, October 23
Hosted at the Detriot Athletic Club
7:30 AM - 11:30 AM