Industry 4.0 keeps making headlines as the digitalisation of manufacturing picks up pace. But what does it actually mean for Australian manufacturers? By William Poole.

Drive north from Melbourne CBD for about an hour, and you could until recently have been forgiven for not noticing Merrifield at all. It won’t show up in a search on Google Maps; switch to satellite view and for the most part it’s just empty, green fields. It doesn’t have a Wikipedia page. Or a pub. But all that is set to change.

The area is currently undergoing an ambitious development program, with plans to build homes for up to 7,000 residents, retail and leisure facilities, and a business park projected to create 20,000 jobs. And in addition, Merrifield is now home to one of the most advanced manufacturing facilities of its kind, rated among the top factories in the world implementing the principles of Industry 4.0.

DuluxGroup’s new Merrifield site is the biggest water-based paint plant in the Southern Hemisphere, occupying a footprint of 22,000sqm – larger than the playing area of the Melbourne Cricket Ground (MCG). When it reaches full production, the $165m facility will produce around 75 million litres of paint a year, with the creation of more than 60 jobs. The plant has been in operation since February, and according to Kevin Worrell of Dulux, it’s already surpassing expectations.

“We’re seeing around about a 25% energy efficiency over what we designed for,” says Worrell, who worked as project lead in the development of the new plant. “This factory is really, really agile. We’ve got the ability to go down to as small as one pallet of paint in a batch, to 30,000 litres of paint in a single batch, and all the stops in between. That agility gives us an advantage over the opposition.”

That agility is the result of an extensive collaboration between Dulux and Siemens Australia, aimed at achieving the complete, end-to-end digitalisation of all processes at the Merrifield site. For Dulux this enables a high degree of flexibility in meeting the current and future demands of its customers, while lowering the cost of production by slashing waste. It also provides Dulux with access to an unprecedented mass of data, which will allow it to continually refine and optimise its products and processes.

The facility has definitely put Merrifield on the map. In April, Siemens showcased the project at the Hannover Messe international trade fair in Germany as an example of the world’s best practice in Industry 4.0 manufacturing. For Worrell, it represents a model for Australian manufacturing to emulate.

“My message to Australian manufacturers is ‘Get on board’,” he says. “This makes Australia competitive again. We don’t need to be cheap labour, we need to be smart labour, and that’s what these plants will give us. Everybody’s got a smile on their face. People are happy to work here!”

So what exactly is Industry 4.0?

For Dr Nico Adams, Director of Swinburne University’s Factory of the Future advanced manufacturing facility, Industry 4.0 can be defined in two ways.

“You can look at Industry 4.0 as a set of technologies, none of which are new,” he explains. “They’ve been around for 20 years – autonomous robots, Cloud computing, data analytics, additive manufacturing, and so on. What’s new about Industry 4.0 is that these technologies have become really cheap and really accessible, even to SMEs. And because of that they have now started to impinge on each other. They are interacting. And it’s in that interaction where the second definition lies. Industry 4.0 is really a way of fundamentally changing the way in which you create and capture value.

“In a classical manufacturing paradigm, for example, I make an air-conditioning unit, I sell you that air-con unit, I put a service contract around it so if it breaks I come out and address it, and our transaction is done. In a digitalised, Industry 4.0 world, I’ll make a contract with you that I’ll keep your house at a certain temperature range all the year round. To do that, I’ll come into your house; I’ll put in sensors to understand the temperature your house is at, and the temperature of the environment around your house; I’ll put in insulation; I’ll put in the air-con unit I continue to manufacture. But you’re not paying for any of this. What you’re paying me for is that service: keeping the house at a certain temperature all year around.

“So you’ve got a fundamental business model shift, from selling an object to in essence selling the function of an object. What enables that is that technology set, but what it’s leading to is a profound change in the way you create and capture value, and to me really, that’s the interesting definition of Industry 4.0.”

Adams highlights several companies successfully putting these ideas into practice. Rolls Royce has moved from selling aircraft turbines and engines, to providing an uptime guarantee of flight hours for its clients’ aircraft fleet. Michelin has equipped the truck tyres it makes with sensors so it can predict problems before they arise, reducing downtime for its customers, and thereby saving them money. For companies such as Rolls Royce and Michelin, what this brings is ‘stickiness’ – with outcomes like these, clients are unlikely to change suppliers.

Adams’ favourite example is Trumpf. The German manufacturing equipment producer began its Industry 4.0 journey when it started putting sensors into the machines it made and connecting them to the web, enabling Trumpf to monitor them and extract data about their performance. Ultimately this allowed Trumpf to move from an outright purchasing model – where you spend several hundred thousand dollars and get a laser cutter – to a lease model or a pay-per-use model.

“For smaller companies who can’t afford massive investments in equipment, that’s a game-changer,” says Adams. “But then Trumpf realised ‘Our connected equipment has to sit within an ecosystem of other equipment in the factory. We need to orchestrate those interactions somehow’. So they developed a manufacturing execution system, which they then commercialised through a software company called Axoom. So here’s a manufacturer becoming a software company.”

But it doesn’t end there. Some customers still wanted to buy equipment outright, but were finding it increasingly difficult to access finance. So what did Trumpf do?

“They applied for a banking licence. So now we’ve got a manufacturer who’s also a bank, and by being a bank they can back their own customers. And how do they de-risk the operations of the bank? Through the data insights they get from the connected equipment and the platform. So this is starting now towards building up manufacturing platform ecosystems . And personally I find that the most thrilling example.”

A common misconception about Industry 4.0 is that it is a phenomenon confined to giant corporations like Toyota or Apple (or Dulux), with vast sprawling factories staffed entirely by robots, and that it would not be applicable to the small and medium-sized enterprises (SMEs) that form the backbone of Australian manufacturing. Adams is quick to dispel this perception, pointing to a number of Australian businesses who are implementing Industry 4.0 through bottom-up experimentation.

One is Sutton Tools, who brought in a couple of research students and some cheap electronic components to extract data from the CNC machines in its workshop, enabling better predictions about the performance of those machines and the quality of the cutting tools they were turning out. Another example is Tradiebot Industries, a start-up that recently started a project with Swinburne, funded by the Innovative Manufacturing Cooperative Research Centre (IMCRC), to develop a system that automatically works out how to repair impact-damaged car bumpers by combining robotics, 3D scanning and additive manufacturing.

Britannia’s digital revolution

Another Australian manufacturer that has begun its own implementation of Industry 4.0 is Britannia Metal Industries. Founded in South Melbourne in 1941, the company initially established itself as a supplier of sheet metal components to the plumbing industry, but over the subsequent decades it evolved into a jobbing shop for a diverse array of industrial clients.

Today Britannia is one of the longest continuously operating sheet metal shops in Melbourne, with around 50 staff at its plant in Clayton. The company provides design and manufacturing solutions for a client base primarily consisting of OEMs in sectors ranging from medical devices, heating & cooling, and electronics, through to trucks, caravans and commercial construction.

One reason for Britannia’s enduring success has been its ability to remain ahead of the pack by consistently investing in the latest state-of-the-art equipment. An early adopter of CNC machinery, it bought its first CNC brake press in 1987, its first CNC punching machine in 1988, and its first laser cutter in 2001.

“It’s been a characteristic of the business from the early days that we continued to look internationally for trends and movements in processes and equipment,” says Martin Solomon, General Manager – Sales at Britannia. “When we bought the first punching machine, that machine was one of the first handful of automated punching machines in Australia. From then on, we have continued to invest in equipment for the future of ourselves and our clients.”

The latest step in Britannia’s technological evolution lies not so much in the acquisition of individual machines. Instead, it involves the processes by which those machines communicate with each other, and the channels via which each job moves through each stage in the manufacturing process.

“Our business is high-mix, low-volume ,” explains Martin. “Last year we did in the order of 12,700 different parts, all under ISO 9000 (quality standards) and part revision control. That requires a lot of effort and used to take a mountain of paper. Traditionally our work is cut, fold, weld, insert, powder coat, assemble, pack and ship, so you have to transfer all the information for customer requirements etc, from sales, through engineering to all those processes. And the traditional pathway for that is the drawing and paper job traveller.”

For smaller job shops performing comparatively simple jobs, the job traveller might simply comprise a routing card and a drawing of the part – a single sheet of paper. For the sort of more complex work Britannia undertakes, where jobs often involve complicated assemblies of numerous components, the job traveller is significantly larger – as Martin describes it, “an encyclopaedia”. This meant shopfloor staff were often spending more time on paperwork than actually making products. Britannia saw an opportunity to streamline this.

“We started with a young tradesman who was an employee here working part time while completing an engineering degree,” says Martin. “This guy had the opportunity to see both sides of the business, and he had a flair for IT. He and his Production Manager put together a proposal to automate some parts of the process, and free up time for the guys to be able to do what we wanted them to do – putting weld metal down or laser cutting parts – not shuffling paperwork to find the next operation. After a couple of discussions with senior management, it seemed the project was viable and the potential for a win-win was enormous.”

Over the subsequent two years, Britannia has converted itself into a semi-paperless environment. On the shopfloor each employee has a terminal at their place of work, allowing them to operate with no physical documentation. The job traveller hasn’t completely disappeared, but it’s shrunk from the encyclopedia of old to one or two pages.

“The only reason we still have those couple of pages is to do with the office,” Martin adds. “The factory doesn’t want it at all. So there’s a transition in place where the paper will completely disappear over the next couple of months.”

One striking aspect of the project has been that it hasn’t really entailed the introduction of any elaborate new technology. Instead it involved streamlining the utilisation and interconnection of existing systems such as ERP, CNC machinery and CAD/CAM software, so they work together more efficiently.

“It’s sad to say, but we had all the technologies already, we just didn’t know how to join them together,” says Martin. “The reality is that it’s all about application. It’s about seeing the possibilities of joining several dots together. We always had an ERP system, we always had electronic storage of drawings, and we always had an electronic version of the routing card, which enabled us to print the physical version. We had all these bits but we never had the foresight to join them together.”

On Britannia’s shopfloor, the impact is clear. At each machine, jobs are called up on screen and transferred direct to the CNC control; under the old, paper-based system, the operator would have had to stand there inputing details by hand, leaving expensive equipment waiting idle in the process. While the company has yet to quantify any definitive returns in terms of productivity or efficiency – perhaps understandably, given that the project is still a work in progress – but Martin acknowledges there have been demonstrable benefits. Management has improved visibility over each job as it moves through the manufacturing process, and staff have voiced their approval of the new system.

So what’s next? Martin concedes that progress on further digitalisation has lately become slightly stalled, but this ironically has been another by-product of Britannia’s transition to Industry 4.0. The company was recently bought by the Design Group, and one factor that made it such an attractive acquisition was the paperless system and processes it had put in place. And now, having established those structures in its own operations, the team at Britannia is now helping its new parent organisation implement a similar transition. For Martin, the key lies in realising that the concepts surrounding Industry 4.0 can be adopted by any manufacturing business.

“I think the biggest part is to see that you can actually do this,” he says. “This wasn’t something out there in Elon Musk land, this is something that any business can do, probably with the software they’re running now. But you have to have people involved in the process to be able to see the wood for the trees and say ‘Yes. You used to do it that way, and it’s fine, but there is another way’.”

Bringing in outside expertise

What’s notable about Britannia, as well as Sutton and Tradiebot, is that each case hinged on some form of collaboration with universities or research bodies. Doctor Nico Adams believes this is crucial, as it allows the companies to de-risk the process of developing what are often quite untested ideas.

“You almost need to be a bit of a scientist within your company,” he explains. “You need to follow a hypothesis and experiment to see whether you can prove the hypothesis – in this case a business benefit or outcome. Critical to that is how you de-risk the experimentation, and that’s exactly where university-industry collaboration comes in.

“Universities are repositories of really expensive, state-of-the-art equipment that companies can tap into to develop new products and processes. There’s a lot of expertise and people that companies can tap into, at almost no cost to them. In Swinburne we’ve got really short internships, or we can place someone for 12 months in your company. In many ways getting new innovations and technology out of universities into companies is often via people in internships. Internships are where you test a wild idea and if it fails it doesn’t matter so much because the cost is relatively low.

“Also don’t forget that universities are really good at leveraging money. There’s a lot of funding schemes out there to support manufacturing companies to undertake industry-led research. As companies develop ideas, we can actually work with them to find the right funding.”

Nonetheless, Adams stresses the importance of having a clear objective in mind: “When people come here and say ‘How do I get into Industry 4.0?’, we tend to change the conversation. The first question we always ask is ‘What’s the business outcome you want to create?’ Because it’s not about the technology. In Industry 4.0 the technology is only ever a vector into integrating business outcomes. So be really clear on what the business outcomes are. What’s the question you’re seeking to answer? What’s the hypothesis you currently have?”

As a university with a strong background in manufacturing, Swinburne is committing significant resources to Industry 4.0, via the Factory of the Future in particular, but also throughout its Innovation Precinct and the wider university. As well as assisting manufacturing companies in taking advantage of the digital economy, it’s doing a lot of work in preparing the manufacturing workers of the future. This encompasses both training students who have yet to enter the workforce and retraining existing workers, but it also entails equipping people with the capability to constantly adapt and update their capabilities in a highly dynamic, ever-changing market for skills. The university is also putting Industry 4.0 principles into practice in its own operations, with an ongoing drive to digitalise processes across the organisation.

“Digitalisation changes the way in which we do business. So Swinburne has become really an Industry 4.0 university. And we are investing significantly: we have recently announced an Industry 4.0 Testlab around the development of a new carbon-fibre 3D printing process, led by Professor Bronwyn Fox.”

Originally a chemist by training, Adams’ first forays into the world of Industry 4.0 began at Cambridge University in the UK. He began building information systems to deal with material science data, after which it was not a big step from materials informatics to manufacturing informatics. This in turn led to a job offer from CSIRO, where Adams worked with its Manufacturing and Data61 data research arms. He also served as Programme Lead for Industry 4.0 and Digital Transformation at the IM CRC, before joining Swinburne in February.

A pivotal experience came while he was at CRSIO, when Adams and a colleague were approached by the Federal Department of Industry, who’d been working with manufacturing companies in Queensland: “One company they looked at, when they got a purchase order, would have a fully trained engineer sit there and retype it by hand into an ERP system. This activity alone cost the company about 1.4 % of its turnover. And they had margins of 10%, so 14% of the profit has just evaporated.”

Adams and his colleague initially thought the problem would be confined to just this company, but as they dug deeper they saw it replicated again and again, across the manufacturing spectrum. Extrapolating that productivity loss across the entire industry, the cost to the Australian economy is likely to amount to billions of dollars.

“That’s really when there was the realisation that we’ve got to do something about this, and how this whole thinking about digitalisation in manufacturing started,” he adds. “And some of the technology we were working on for materials informatics was actually applicable to that problem.”

Adams argues this issue surrounding productivity proves that Industry 4.0 is not just an optional measure that Australian manufacturers might consider adopting, but a prerequisite – something we need to embrace if we are to remain competitive globally. This is backed by a 2014 survey by PricewaterhouseCoopers, which found that by 2020 German manufacturers will have digitalised roughly 80% of their value chains. For Germany this would yield a productivity increase of roughly 18%. Given the gulf that already exists between German manufacturing and its international rivals, this is a daunting prospect. But for Adams, the goal for Australia should not merely “keeping up with the Joneses”, but to truly capitalise on the opportunities presented by Industry 4.0.

“What I hope the Australian manufacturing sector will do is to take the opportunity to come up with significant new business model innovation,” he says. “We’re never going to compete on mass production. We’re always going to compete on manufacturing things with highly differentiated value. It’s mass customisation, it’s lots of one object for markets of one. But even more so, I hope that we’ll take that and we’ll push it further and come up with significant innovative new business models that create that stickiness, that scalability, that you need to just participate in global value chains in these days. For me this is all about business innovation.”