Disruptive technologies and megatrends are bringing radical changes to manufacturing as we know it, demanding new ways of thinking and execution. Faced with the inevitable force of Industry 4.0, organisations must embrace change and take advantage of the opportunities. By Vince Randall, Vice-President – ANZ at Epicor.

Industry 4.0 represents the digitisation of manufacturing, realising the potential of the Internet of Things (IoT) combined with artificial intelligence and data science. It is something Australian manufacturers need to be ready for, as to some extent, it is already happening.

CSIRO has called for Australia’s manufacturing industry to “evolve into a highly integrated, collaborative and export-focused environment that provides high-value solutions” over the next 20 years. It says Australian manufacturers must increase participation in global value chains and invest in and employ sensors, data analytics, advanced materials, robotics, automation, 3D printing, and augmented and/or virtual reality.

In 2016, a Prime Minister’s Task Force on Industry 4.0 was established and industry leaders met to discuss private-sector collaboration and the need for a set of common standards. This was consistent with an announcement regarding global IoT standards issued by the German Plattform Industrie 4.0 group and the US Industrial Internet Consortium (IIC). Germany and the US have been early adopters regarding Industry 4.0 and can be a source for technology, strategies, approaches and success stories guiding the way forward.

Manufacturers must embrace and adapt to this new industrial revolution. If they fail to do so, they run the risk of falling behind and losing to competitors.

IoT is not the future

IoT is no longer a futuristic discussion, especially with analysts predicting 55% of businesses will see return on IoT investments in two years or less. The market isn’t yet saturated with IoT devices, nor are Australian manufacturers fully entrenched in the world of IoT, but this ROI prediction is certainly encouraging.

By 2020 there will be billions of connected devices in use. Some research forecasts 30bn such devices, and Gartner predicts the value of connected devices will reach $20bn by 2020. The data generated by the increase of connected devices and machines represents a significant opportunity. Determining how to best identify, capture and incorporate increased data volumes can help organisations understand their market and customers better, as well as gain market share.

Paying attention to the megatrends

Various manufacturing megatrends will continue to have an exponential impact on your operations.

Demographic shifts — We see population growing in some nations and shrinking in others, an expanding middle class, consumer markets shifting from the West to the East, and an ageing population with fewer people entering the manufacturing field. Take heart that technology continues to make everyone easier to reach and attract, including the millennial generation.

The globalisation of future markets — Companies will expand operations farther around the globe, with worldwide exports expected to triple by 2030. Exports from emerging and developing countries will quadruple, and regional and bilateral trade agreements are likely to further open the world’s borders. Technology is a big enabler of globalisation, not only through eCommerce and the opening up of other sales and distribution channels, but also with regard to having enterprise resource planning (ERP) system support for trading across borders.

Scarce resources — Thanks to increased energy use and requirements, we’re going to need more power. Resources are growing scarcer despite the focus on climate change and sustainability, and there will be continued reliance on fossil fuels. This could potentially be mitigated by innovative recycling technologies and using technology platforms to monitor efforts.

Knowledge and gender gap — Manufacturers will feel the challenges of a decreasing talent pool. There won’t be enough skilled people to perform the jobs of the future, though we are becoming a more educated world with enrolment in formal education continuing to rise. The gender gap is unlikely to be resolved. The available pool of workers will likely come from developing countries. An ever-increasing mobile workforce will continue to present challenges. However, technology can help. Think of the possibilities when it comes to collaborating with millennials, enabling mobility, connecting a diverse and dispersed workforce, and engaging the mobile consumer.

Embrace the change

The customer is changing. We are entering an era of the global customer, based in geographic areas that have not previously been a traditional focus for Australian manufacturers. The new customer is more mobile, aware and demanding, with an increased desire for customisation and personalisation, and a requirement for delivery when and precisely where they desire.

Those who want to run the factories of the future will need to shed the old mindset of waiting for new technology to become the norm before embracing it. Strategically implementing technologies like social, mobile, analytics and cloud, alongside operational technologies like sensors, machine-to-machine communication, additive manufacturing and robotics can help you realise the tremendous opportunities at hand for manufacturers.

New connections between machines, production processes and systems will marry the world of production and networking in a connected environment, and ERP will become even more central to production. To prepare for Industry 4.0, ERP vendors are moving away from pre-built interfaces and formulas to develop highly connected systems that conduct operations at the production line level, whilst giving business decision makers the real-time data they require. The Industry 4.0 compatible ERP system will fully integrate with manufacturing execution systems (MES) and make it possible to track and document the transformation of raw materials through to finished goods. Crucially, manufacturers need to address whether their existing ERP environment is ready to support such a journey towards Industry 4.0.

For manufacturers, growth in an Industry 4.0 environment will be intrinsically linked with a business’ ERP system. Certainly, the boundaries between production and management must disappear, and ERP and MES systems must form an integrated unit if businesses are to realise the growth opportunities presented by this new age of intelligent manufacturing. Taking a critical look at the existing IT environment in your business is the first step towards understanding how ready you are for Industry 4.0.