January 19, 2018

Industry 4.0 Technologies Adoption - Guidelines for SMEs

Industry 4.0 is term for the application of a set of new technologies on production of goods. Germany has taken the lead in announcing the fourth industrial revolution.German machine and plant manufacturers are currently engaged in developing products and processes using the new technologies. Some perceive it as an opportunity to expand their business and some perceive it as a 
challenge to overcome and stay and succeed in business. Industry  4.0 is applicable in case of SMEs also. But definitely for SMEs, it is challenge to a greater extent. The challenge for small and medium businesses is first  the task of reducing the declared benefits  of Industry  4.0 technologies to viable
development stages that show tangible benefits for their own company research, development, design and production activities. The possible project ideas are to be quantified  monetarily into revenue/cost figures and cash inflow/outflow figures to do engineering economic analysis and financial analysis.

Industry 4.0 - Brief Introduction

Modern information and communication technologies are merging with production technologies to form new methods of design and production.  The information related to consumer and business products products in use and also information related to processes as they are performing the operations will be available in in real time at each stage of the supply chain through networking of all partners involved in the entire value-adding process. This can  lead to dynamic, real-time optimization,  self-organization, self-maintaining  cross-company networks.

In practical terms, the introduction of Industry 4.0 results in ability to adapt more individually to the needs of the customers and  offer a high variant diversity down to a batch size of 1 at prices close to mass production prices. The approaches of Industry 4.0 allow to build production networks that produce efficiently and effectively at low costs.

Industry 4.0 - Opportunity to Earn Additional Revenues and Profits 

 The technologies and the solution ideas so far discussed in the literature relating to Industry 4.0
are  paving the way for new product innovations, product-related services and improved production processes.  Thus Industry 4.0 can help companies to improve productivity and reduce costs of production. This can result in price decreases and increase in sales. Also, existing products can be improved and new products created with additional functionalities that increase sales due to  the enhanced usefulness and value contribution at the user end.

How to Adopt and Realize the Potential of Industry  4.0?

The technologies for comprising  the Industry  4.0 opportunity set are already available as technically feasible solutions. But the real benefits of Industry 4.0 revolution will only unfold through  a clever
combination of these technologies by product solution architects in various product segments. At the moment,  large number of companies are unaware of the road leading to the identification and successful combination of Industry  4.0 solution approaches. Industry, academic institutions and governments have to put in lot of effort to create useful frameworks to spread the adoption of Industry 4.0 and turn the anticipated/estimated/forecasted potential into reality.

The German mechanical engineering industry association has come out with a guide proposing a framework giving guidelines for adoption of Industry 4.0 concept by SMEs of German industry,

Objective of this guideline

The guideline is developed to  support small and medium sized companies of the German mechanical engineering industry in identifying potentials for products and production with a systematic process for using  Industry  4.0 set of technologies and in developing their own specific ideas in this respect. The guide presents a suitable procedure for direct application in any company.

The procedure in this guide is divided into five process steps.

Preparation > Analysis > Creativity> Evaluation> Implementation

Preparation phase

An in-depth knowledge of the products currently being produced and sold and the relevant market
and of  own production technology and process is the starting point for elaborating product ideas and
improving production. So preparation phase focuses on the knowledge regarding the current operations,  technologies and market conditions

Analysis phase

The analysis phase aims at identifying the expertise available in the company concerning Industry  4.0 technologies. The analysis may indicate the need for acquisition of additional knowledge and the company has to take steps to acquire sufficient knowledge by buying books, deputing personnel to seminars and also sponsoring personnel for e-learning courses. Plant visits may also be encouraged to develop understanding.

Creativity phase

The aim of the creativity phase is the generation of new ideas and the subsequent elaboration
of concepts for business models. The new ideas normally will be in the existing products or nearby product areas. Sometimes even totally different product ideas may come up.

Evaluation phase

The objective of this phase is the assessment of the proposed business models for strategic, business and financial fit.  For this purpose, the business models proposed have to be ranked according to their market potential or to their potential for production respectively as well as according to the required resources for implementation. The aim is to identify business models with a high market potential, low resource requirement,  and utilization of the company’s strengths.

Implementation phase

Finally, the project team makes recommendations of the projects for acceptance by  the company

The five step procedure can be conducted as a workshop in SMEs and the result of the workshop
can be transferred to suitable Industry 4.0 projects for practical implementation.

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