According to a 2016 PwC report, 62% of Middle East organisations expect to have advanced levels of digitisation and integration by 2021. While this indicates a strong appetite in the region for Industry 4.0, it is worth pointing out that the transition from initial pilot stage to the large-scale roll-out of an Industry 4.0 and digital transformation project is no easy task.
In its Digital Manufacturing Global Expert Survey 2018, McKinsey highlights how even successful pilot projects often fail to make it into everyday industrial life.
According to McKinsey, there are three main reasons for this:
- No clear change vision or detailed implementation road map
- No executive leadership of the transformation project
- Technical infrastructures that hinder roll-out
From our practical experiences, we have found that taking a critical look at the existing technical environment is a vital first step. It is an evaluation process that can help organisations to gauge well in advance exactly how simple or complex it will be to transfer promising Industry 4.0 pilot projects into everyday operations.
Assessing the following six capability areas can help regional organisations shine a spotlight on where additional work on the IT infrastructure needs to be undertaken, and which of the options for action on the path to digital transformation should be prioritised.
#1 Ability to scale IT infrastructures, cloud
Any digital transformation, Internet of Things, machine learning, artificial intelligence or robotics, will require IT services and performance that is only technically achievable and economically viable via cloud infrastructures.
Cloud services ensure that applications are available quickly and are demand-oriented and scalable, whether for pilot projects, test environments, peak loads or standard processes. Adopting a cloud strategy also ensures that the IT team can focus on tasks that add strategic business value, rather than being caught up managing operational routines.
#2 Ability to reach consensus, central data and analytics
Industry 4.0 solutions will affect a wide number of different business areas, so everyone involved must be able to participate in making decisions on the viability of any proposed innovation-driven change. Enabling these joint decisions means everyone in the decision-making circle will need cross-departmental access to all relevant data and a consolidated view of all relationships and consequences.
Today’s integrated ERP systems are key to enabling these vital decision-support capabilities. Centrally capturing and analysing information from operational, finance and corporate management areas of the business, these platforms make it possible to identify dependencies and model different scenarios. This ensures that decisions can be made using comprehensive and reliable data that is supported by all parties involved.
#3 Ability to change processes, business process management
Inflexible business processes can hamper a firm’s ability to grow or evolve and from experience, this is often down to the business software which organisations use.
Either processes are controlled via multiple individual solutions, which means that process changes to an isolated system can trigger a whole cascade of follow-up measures and interface problems. Or the central management system is so complex that the overview of processes and interfaces is missing. As a result, processes cannot be designed flexibly, and changes can only be made by specialists at great expense.
#4 Ability to connect from production to management, MES integration
Improvements in manufacturing generated from Industry 4.0 solutions can only be fully exploited if all business units are able to benefit. This means that as soon as the Manufacturing Execution System, MES is directly connected to the ERP system, the advantages of a smart factory can also be applied to business processes such as sales, service and support, purchasing, or business development.
The ERP-MES connection is also essential for directly evaluating the return-on-investment generated by Industry 4.0 measures in a financial context, so as to support future investment decisions.
#5 Ability to analyse performance, KPIs
From intelligent control systems to new human-machine interfaces with voice-controlled technologies or data glasses, the implementation of Industry 4.0 technologies has a far-reaching impact on familiar processes and performance values.
To obtain precise figures from the outset and understand the influence of innovative technologies on business results, an integrated Enterprise Performance Management, EPM will be helpful.
As an integrated element of modern ERP systems, EPM provides industry and role-specific key performance indicators KPIs. This enables all hierarchies and areas of responsibility to be transparently represented, so that weak points can be identified and KPIs achieved. Leveraging an integrated EPM, enables organisations to pinpoint which individual digital transformation measures have had an impact on value creation and business development as a whole.
#6 Ability to cooperate, ecosystems
Digital transformation is often accompanied by new business models and services that require close cooperation with partners and customers. According to a recent study by PwC, manufacturing digital champions are highly adept at connecting people, systems and partners across the extended value chain, as well as enabling multichannel customer interactions, either directly, or through third parties.
Similarly, in its 2018 Global Manufacturing Outlook report, KPMG highlights how supply chains are evolving into multidimensional ecosystems that enable growth-oriented organisations to develop a much higher level of collaboration and networking with partners, suppliers and customers.
Capitalising on the business opportunities created by this interconnectivity, however, depends on having a broad access to data and the ability to manage data exchange in a seamless manner. To achieve these twin goals, the ERP system, as a platform, will need to be based on modern software architectures that make it possible to integrate innovative collaboration technologies such as digital twinning, blockchain or IoT into automated processes for collaboration in ecosystems.
If the ERP system lacks this technical integration capability, the IT environment will become unmanageably complex and the advantages of Industry 4.0 initiatives will not be realised, or only selectively.
The process of assessing current technical capabilities and identifying potential Industry 4.0 implementation hurdles will help Middle East companies define a future strategic direction for growth more clearly, to make investment decisions accordingly.
With the right technology in place, cloud scalability and connected platforms that make it easy to integrate and automate operations and supply chains, successful Industry 4.0 pilot projects can become a measurable reality. Delivering the analytics-enabled intelligence will make it possible for transformation projects to be implemented in consensus by decision-makers across the business, and for bottom-line benefits to be appropriately evaluated and refined.
- Transition from pilot stage to large-scale roll-out of an Industry 4.0 project is no easy task.
- Industry 4.0 solutions will affect a wide number of different business areas, so everyone involved must be able to participate.
- Enabling joint decisions means everyone in the decision-making circle will need cross-departmental access to relevant data.
- Inflexible business processes can hamper a firm’s ability to grow and this is often down to the business software.
- Manufacturing digital champions are adept at connecting people, systems and partners across the extended value chain.
- If an ERP system lacks integration capability, the IT environment will become complex and the advantages of Industry 4.0 will not be realized.
Andy Coussins at Epicor elaborates on six areas that manufacturing companies need to assess before any Industry 4.0 transformation project.