Manufacturing lighthouses demonstrate solid fourth industrial revolution initiatives

Many manufacturers are piloting fourth industrial revolution initiatives, but few have managed to integrate the latest technologies at scale to realize significant economic and financial benefits, and instead, remain stuck in "pilot purgatory," according to the World Economic Forum and McKinsey & Co. Their newly released joint report, Fourth Industrial Revolution Beacons of Technology and Innovation in Manufacturing, found that as a result, 70% of manufacturers are at higher risk of permanently falling behind so-called lighthouses.SEE: Digital transformation: An IT pro's guide (TechRepublic)

The term refers to manufacturers that demonstrate digital manufacturing and globalization 4.0, and exhibit all of the essential characteristics of the fourth industrial revolution by utilizing automation, analytics, IoT and digitization, to connect their value chains end-to-end, according to the report.

"We are seeing an increase of companies bringing 4IR into the heart of their operations, but the vast majority of organizations are not moving fast enough," observed Enno de Boer, a partner and global leader of manufacturing at McKinsey & Co., USA, and one of the report's authors.

"By delaying the adoption of these technologies, organizations are going to find it increasingly difficult to catch up-the time is now for the manufacturing sector to embrace 4IR across the enterprise."

The WEF and McKinsey studied more than 1,000 leading manufacturers of different sizes that "represent the leading edge of adopting technology at scale," and conducted site visits to the "most advanced sites," the report said.

Three technological megatrends that are principal drivers of this transformation in production are connectivity, intelligence and flexible automation, according to the report.

Other findings from 4IR sites

Another key finding was that Europe and Asia are embracing 4IR much faster than the US, with 41 of 44 total lighthouses named in the report. Companies are generating value from 4IR technologies beyond the factory-14 of the 28 newly identified lighthouses are integrating end-to-end manufacturing innovation from their suppliers to their customers and beyond, the report found.

Job automation is forcing companies to evolve their operational models and upskill workers to use cognitive and creative skills that have no AI equivalent, the report also found. The select few manufacturing sites found in the US can be a beacon for a sector in need of innovation, the report noted. The report recognized the following lighthouses as having the most advanced production sites, including factories operated by: Bayer (Italy), BMW (Germany), Bosch (China), Danfoss (China), Fast Radius with UPS (US), Foxconn (China), Haier (China), Johnson & Johnson (Ireland), Phoenix Contact (Germany), Procter & Gamble (Czech Republic), Rold (Italy), Sandvik Coromant (Sweden), Saudi Aramco (Saudi Arabia), Schneider Electric (France), Siemens (China) and Tata Steel (the Netherlands).

Lighthouses are widespread and are enablers of human capital

In an increasingly digital world, companies are right to be concerned about their proprietary systems and technology, the report stated. "However, lighthouses recognize that the benefits of transparency and growth opportunities far surpass the potential for competitive threats."  Contrary to widespread concerns about worker displacement, the lighthouse factories are not deploying 4IR technology to replace operators, the report said. A separate McKinsey finding suggests that fewer than 5% of occupations consist of activities that are 100% automatable with today's technology, while 62% of occupations have at least 30% of automatable tasks, according to the report. "Lighthouses employ different fourth industrial revolution use cases to transform their operations,'' the report stated. "They have, on average, 10-15 use-cases at an advanced stage and are working on the development of an additional 10-15. Accordingly, lighthouses are resetting industry benchmarks for operational and financial key performance indicators (KPIs)." Other key findings are that 4IR innovation is accessible not just to large organizations but also to small- and medium-sized enterprises (SMEs) that can "achieve transformative impact by focusing on pragmatic solutions that do not require large investments." Despite the misconception that legacy equipment and older facilities create a barrier to fourth industrial revolution innovation, the report finds that most of these lighthouses were actually created by transforming existing brownfield operations. The report stresses that digitalization among SMEs is critical if they are to optimize their supply chain. It also issues a series of recommendations, among them:

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