The Fourth Industrial Revolution: What is it? How Do We Operate In It?

Scott Bolick, Head of Idea to Performance, SAP
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Scott Bolick, Head of Idea to Performance, SAP

Manufacturers today are facing challenges and opportunities their predecessors couldn’t have fathomed. “Always on” technology is delivering the world to our fingertips via ever smarter devices, resulting in customers who are more knowledgeable and demanding than ever.  Customers today–both business and consumer–no longer want to just search for products.  They want to collaborate to tailor products to their specific wants and needs.  It is leading to a world in which the “batch of one” will be the norm, instead of massive batches of identical products. Taking it a step further, customers are increasingly questioning the concept of a product, and are pushing to buy outcomes, rather than physical goods. Successful manufacturers understand that, with these changes, we have entered a Fourth Industrial Revolution. In this new space, everything is connected– machines with machines, people with people, and products with products.

The New Demand

What does an outcome-based sell look like?  We have seen precursors of outcome driven business models for several years.  Aviation engine manufacturers sell “hours of powers,” while urban residents have been renting “miles or hours of car use.”   The trend is clear that outcome purchases will grow as customers seek to avoid costly capital expenditures, desire a more sustainable lifestyle, and recognize that technology can now remotely optimize a machine’s performance.

While consumers are calling these shots, manufacturers will realize that responding is not as simple as upgrading a few  machines.  They recognize that every aspect of daily life is changing, exactly as we have seen in past industrial revolutions. It began with the mechanization of formerly craft processes with steam and water power in the first industrial revolution; mass production with the electricity in second industrial revolution; and computerized global efficiency in the third industrial  revolution.  In order to succeed in the long-term, manufacturers have to introduce or adapt to new business models, and the plant along with it. People and processes  associated with the business must be as agile as consumers are, and everything must be connected, to be as smart as new products are.  This truly demonstrates the fourth industrial revolution.

Supplying the New Demand – In a New Way

The fourth industrial revolution brings two worlds together: industrial manufacturing and enterprise IT. Modern information technology has created new information-sharing  environments that can integrate business information from production planning to customer information with relevant information from the Internet, and operational data information from manufacturing plants, supply chains, and increasingly,products. The combination of this information enables both increased efficiency and effectiveness.

We can see this synergy when looking at something as basic as a vending machine. Previously, a maintenance worker would have a number of machines under his  management. This entailed driving to each machine, checking inventory, performing quality controls, and checking for any needed repairs. Oftentimes, this visit could only take
place weekly, depending on the volume of machines under the worker’s care. Should a machine break down the day after his visit, or run out of a popular item, it would result
in a loss of sales, not to mention some unsatisfied customers.

Now, equipped with the technology outlined above, these problems all but vanish. Thanks to sensors embedded in the machine, a problem like low or sold-out inventory is  reflected in a software system at the warehouse and available to the maintenance worker on his device.  Inventory availability is validated, the worker’s truck is loaded with the item, and once delivered, the machine registers its “normal” status once again.

The New Technology

But remote service management applications are just the tip of the iceberg of applications that can be built to change the value proposition of Industry 4.0. Taking it a step further to the supply chain, manufacturers can track machines that are in transit, sending signals from the road indicating problems that can lead to breakdown. The truck can  then be rerouted to get the machine fixed before a breakdown occurs. This scenario is incredibly valuable when you imagine it applied to a refrigerator keeping cool milk or medicine.  In the case of a windmill farm, it is understanding the maintenance and performance of all of the windmills, and knowing as the electricity is being generated how  productivity can be optimized across a network of windmills.

"Information exchange across a value chain has become far easier than we could have ever imagined with Cloud technology"

And that brings us to technology as an incredible enabler in generating insights, exchanging information, and making processes simpler.  First, information exchange across a value chain has become far easier than we could have ever imagined with Cloud technology. This exchange can publish information once to many business partners or  automated  data about a machine’s performance. Second, insights can now be generated by leveraging in-memory technology, aggregating huge volumes of valuable data to gain business insights, in addition to massive data analysis combining information from the operational and enterprise worlds.  Let’s take machine performance as an example.  We can now easily supplement information about a machine’s maintenance from an enterprise resource planning (ERP) system with operational data about its  temperature, energy consumption, pressure, etc as well as third-party data, like weather. This combined data can then be mined with predictive analytics to prevent breakdowns. This moves companies from preventative maintenance, to predictive maintenance. Third, we also now have 3D technology that can be delivered on a mobile device, so repairs on the machine can be performed on time with step by step visual instructions.

The combined power in this scenario is that repairs are done when needed, not when scheduled. The likelihood of first truck roll (or boat roll, for offshore windmills!) success increases. The need for apprenticeship of new employees declines.  The cost of maintaining equipment decreases, and the confidence in offering outcome-based services grows.

So how do we operate in this new industrial revolution? What does it take to succeed? It is an evolution that will make successful those who adopt now. What we see is that the technology is out there that will enable companies to meet this emerging demand – manufacturers just need to connect with it. They need to deploy a technology foundation
that enables them flexibly grow their business in the face of quickly changing demands. These examples show that we are indeed living in a brave new world, and the companies that will succeed are those that are taking steps now to implement a flexible and agile new platform that enables the implementation of this technology. It’s the  choice of a new  generation – and it’s here to stay.
 

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