Industry 4.0 adoption with the right focus

Long before the COVID-19 pandemic, companies were already seeing the significant benefits that Industry 4.0 technologies can provide when adopted at scale. The pandemic’s disruptions have underscored that integrating advanced technologies better equips organizations to achieve operational excellence—the foundation of long-term resilience to and sustained competitive advantage.

Recent evidence shows that the move towards digital transformation is gaining momentum across virtually all sectors. In fact, in a survey of more than 400 global manufacturing companies, 94 percent of respondents indicated that Industry 4.0 helped them to keep their operations running during the crisis, and 56 percent said the digital transformation they undertook was essential to their pandemic responses. Conversely, for those companies that hadn’t scaled—or even begun—their digital transformation, the past year has served as a serious wake-up call to review operational strategies and refocus on Industry 4.0 capabilities.

Breaking out of the ‘pilot trap’

Indeed, our yearly global survey of manufacturing companies indicates that more than ever, most companies remain stuck in a “pilot trap” when it comes to Industry 4.0 implementation. In late 2020, 74 percent of respondents indicated that they were facing such challenges—even more than the 70 percent who said so in 2017. Yet over the years it’s also become increasingly clear what it takes to break free from the trap: a clear articulation of the company’s desired future, an understanding of its most pressing business problems, and a highly specific perspective about which technologies could address them.

Business looking to free themselves from the pilot trap have additional resources as well. One is the Smart Industry Readiness Index (SIRI),a neutral, third-party review that evaluates the industry 4.0 readiness of a company’s production capacity. The assessment is comprehensive, reviewing processes (including operations, supply chain, and product lifecycle), technology (automation, connectivity, and intelligence), and organization (talent readiness). And it’s been endorsed as a standard assessment by the World Economic Forum (WEF), in partnership with a network of leading technology companies, consultancy firms, government bodies, and industry and academic experts.

Delivered by a worldwide pool of certified assessors, SIRI has been used by more than 500 company sites across 15 countries, delivering insights to help industrial companies benchmark the progress of their digital transformations. SIRI therefore serves as a sort of guide on the digital journey. And in some cases, SIRI is also a catalyst, encouraging organizations to (re-) start, scale, and sustain their adoption of Industry 4.0.

Through a clear definition of maturity levels, SIRI allows companies to understand what best-in-class looks like, where they stand compared to peers in their industry, and set their aspiration accordingly.

Targeting the right Industry 4.0 priorities

For users such as the site head at the Infineon Plant in Singapore, SIRI revealed opportunities to investigate new dimensions not considered previously, so the company could pursue its Industry 4.0 strategy in a more targeted fashion. Advanced analytics–enabled scheduling and dispatching increased personnel efficiency by 50 percent, while a manufacturing control tower eliminated rework and an IoT-enabled manufacturing system reduced material cost by 10 percent.

A healthcare company that suspected large differences in operational effectiveness at its plants used SIRI to evaluate Industry 4.0 maturity across all manufacturing sites. The exercise enabled the organization to assess site-specific issues and surfaced opportunities that were being missed during the overall digital-transformation journey. In particular, the company found that at some locations, limited digital integration and manual data transfers held the transformation back, while others lagged behind in using advanced analytics to visualize shopfloor performance. The results also pointed to a need for workforce learning and development to drive capability building.

A Latin American pharmaceutical company had identified the need for an independent view their industry 4.0 maturity of their plants. Despite having addressed lean transformations at several sites, the company had yet to explore tech-enabled operational transformations. SIRI offered a holistic view of smart-industry potential, which helped company leaders prioritize their efforts around the business.

For manufacturers, digital is no longer optional. With the right approach and support, digital transformation is possible for companies regardless of size or sector—and Industry 4.0 leaders are already realizing the benefits of their investments. By focusing digital efforts on the strategically important business opportunities, companies can achieve real scale at an accelerated pace. That’s how long-term strategic advantage is built.

To find out more about SIRI, please contact us.

Matteo Mancini is a senior partner in McKinsey’s Singapore office, where Alpesh Patel is a partner and Tingfeng Ye is a consultant; Gustavo Marteletti is a consultant in the Buenos Aires office, and Laura Requeno is a consultant in the Abu Dhabi office.

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