Understanding the ROI of Industry 4.0 projects

The World Economic Forum estimates that by 2020, corporate investment in new technology will reach $2.4 billion per year globally. Investment in the Industrial Internet of Things (IIoT) is expected to comprise much of that investment, as organizations strive toward Industry 4.0.  

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Meanwhile CFOs and other business leaders often struggle to justify investing in the technologies necessary to achieve Industry 4.0; after all, these technologies offer little in the way of historical data to aid fact-based risk analysis and decision-making, the usual benchmarks for making major financial decisions.

To truly understand the potential ROI of Industry 4.0 projects, focus on specific use cases that have proven ROI. This approach ensures that any Industry 4.0 initiative is focused not merely on adopting technology for technology’s sake, but on solving a specific business or operational challenge that impacts profitability.

Transparency

The value of achieving transparency lies in the ability to apply the data you collect, to make meaningful business decisions. Increased transparency offers ROI at every level of an organization, from providing C-level executives with data to measure progress toward strategic goals, to giving line workers the information they need to identify potential issues, and  to proactively seek resources or assistance.

One concrete benefit of transparency is improved quality control. The wealth of data that can be collected in the Industry 4.0 factory enables rapid detection of quality problems. For example, data from a production line can be used to identify problems and inform solutions. In the Industry 4.0 facility, Zero Defect Manufacturing (ZDM) and Total Quality Management (TQM) are attainable objectives.

Reduced downtime

Maximizing Overall Equipment Effectiveness (OEE) is critical for maximizing profitability. Technologies such as machine data collection help track asset uptime and identify performance trends. They also generate alerts whenever equipment goes down, so that it can be brought back online with minimum delay. This directly translates into reduced downtime and increased production efficiency.

The implementation of IIoT technologies also allows organizations to move from preventative maintenance (which involves unnecessary downtime when equipment is taken offline for maintenance sooner or more often than required) to predictive maintenance. Machines can self-monitor mean time to failure (MTTF); end of life (EOL); and other data regarding equipment conditions, and analysis of that data provides predictive insights that help maximize OEE.

Fewer bottlenecks

Every factory floor has bottlenecks. Adopting technologies that support work logging, machine data collection and visual management dashboards can help identify the specific machines or workstations that create bottlenecks, so that you can proactively prevent work from stacking up--which increases OEE time and on-time deliveries, while reducing lead times.

One potential, and often overlooked, source of bottlenecks is temporary workers, who may struggle with complicated standard operating procedures (SOPs) or lack access to the latest documents and training materials. Implementing technologies such as digital workbooks or interactive instruction guides deliver ROI through increased worker productivity.

Mass customization

Most of the 20th century saw the manufacturing industry looking to create economies of scale through mass production. But the advent of new technologies has enabled a new era, where mass customization can drive ROI by shortening the supply chain, localizing manufacturing and even improving customer satisfaction. While mass customization is more frequently associated with B2C manufacturing (think of the flagship Adidas speedfactory in Ansbach, Germany), B2B organizations such as glass manufacturing and construction firms are adopting the approach, usually through 3D printing technology.

 

 

Conventional operational technology (OT) like supervising control and data acquisition (SCADA) and distributed control systems (DCS) are difficult to reconfigure to accommodate new technology or update industrial processes. But the Industrial Internet of Things (IIoT) makes it easier to couple OT with IT, so that industrial automation processes can be easily reconfigured in a much shorter time frame--making mass customization much more cost-effective.

Factors that contribute to increased ROI

ROI on Industry 4.0 projects can vary widely. For example, according to the World Economic Forum, industry leaders (which tend to be larger by revenue) achieve productivity gains of about 70%, while industry followers (including many SMEs)  are more likely to see gains of approximately 30%. Regardless of your organization’s standing in the industry, certain factors can help maximize the ROI of Industry 4.0 projects.

  • Strong executive leadership: A successful journey to Industry 4.0 requires strategic vision and alignment across all parts of the organization. These must originate at the top of the organization. Leaders should frequently and authentically voice their support for achieving Industry 4.0, not only through organization-wide communication, but also through the allocation of resources and the prioritization of Industry 4.0 initiatives.

  • Combined deployment: Companies that deploy multiple technologies, such as robotics alongside cognitive technologies, enjoy productivity gains about three times higher than those of companies that deploy a single technology. For example, robotics alone will increase productivity, but pairing them with cognitive technology (such as machine learning or data mining) will likely yield even greater returns.

  • Employee engagement: Organizations that dedicate time and resources to change management and employee education early in the digitization process see more enthusiastic adoption, which indirectly drives ROI as workers are better equipped to understand and execute new technology-powered SOPs. Employees often fear that new technology will take their jobs away. Emphasizing that a new technology will help eliminate highly repetitive tasks--and that knowledge of the technology is a valuable skill--usually eases employee concerns.

  • Technology infrastructure: Building out strong capabilities in cloud computing, cybersecurity and interoperability provide the necessary technological infrastructure for Industry 4.0 technologies. Consider these the foundation upon which to build an Industry 4.0 factory.

Despite the absence of conventional benchmarks of ROI, it’s possible to grasp to potential returns on Industry 4.0 by examining your organization’s specific use cases. Contact us to explore the potential ROI of Industry 4.0 technologies for your firm.

 

Would you like to find out how you can successfully promote your Industry 4.0 ideas in your company? Take a look at our free webinar with CEO Oliver Stollmann.

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Topics: Digitization & IIoT, Industry 4.0

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