The ML Council’s latest Factories of the Future survey suggests that manufacturers are at the end of the first phase of their journey to Manufacturing 4.0, and are now taking concrete steps to deal with challenges and create lasting competitive advantage.


Back in 2011, at the annual Hannover Fair exhibition, the German manufacturing industry began talking in earnest about what it called Industry 4.0, the idea that manufacturing was undergoing a fourth industrial revolution based on advanced information and automation technologies.

At that time, the extent of change and the amount of work required by this revolution was not yet well understood, but in the years that followed it became clearer that Industry 4.0 – or what the Manufacturing Leadership Council later called Manufacturing 4.0 – was indeed a wholesale reimagining of how things are made.

Excited by the possibilities created by pervasive networking, data generation and software, increasingly powerful computing platforms, advanced robotics, and new production methods and materials, manufacturers throughout the world now see a future in which factories and plants will be able to build more customized products faster and more efficiently and will run not only in a more automated fashion but also with the power to eventually manage themselves.

Getting to this future state, however, has not been fast or easy for many manufacturers. The technology building blocks required, it has become clear, are perhaps the easier part of M4.0’s multi-dimensional challenge. Far harder are the cultural, organizational, and leadership and workforces changes that also have to be accomplished.

What all of this means is that the industry has been going through a series of phases on its journey to M4.0, a trip that has seen many companies begin with becoming aware of what M4.0 is and could be, to experimenting with pilot projects, to attempting to devise multi-year M4.0 roadmaps. What’s become clear over time is that there are many steps on the way to becoming a digital business which require much time and effort. In the last few years it has seemed that the industry has been slogging its way forward at a slow pace, prompting much debate on just how long the transition to M4.0 will take. But now, according to the ML Council’s new Factories of the Future survey of U.S. manufacturers, there are emerging indications that the industry may be at the end of the beginning of its journey to M4.0.

Moving Beyond the Awareness Stage

The new survey shows, for example, that only 29% of respondents are still in the phase of either becoming aware or conducting research about M4.0. Meanwhile, 38% say they are implementing M4.0 in either single or companywide projects and another 14% say they are conducting exploratory pilots (Chart 1). And the most common projects are around manufacturing data analysis (66%), production process digitization (62%), supply chain integration (55%), and predictive maintenance of plant floor equipment (48%) (Chart 3). Even though most manufacturers say that, today, the degree to which they have digitally transformed the spectrum of their business functions is still low, momentum appears to be building.

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When asked the extent to which their production operations have undergone the digital transformation inherent in M4.0, for example, only 21% of respondents indicated a “high” degree of transformation has taken place. But 41% say they are in the stage of a “moderate” degree of transformation, suggesting that, should progress continue, they will cross the chasm to that higher level at some point in the future. Similarly, with regard to the product design function, only 17% of survey takers say that a high degree of digital transformation has taken place, but 38% say they are at a moderate degree of transformation (Chart 4).

And when a deeper dive is taken in specific areas about the extent of digitization today and expectations over the next five years, it becomes clear that manufacturers are determined to truly become digital businesses. In fact, if their expectations over the next five years are realistic, the industry is in for massive, digitally-driven change.

Take the production process. Today, two-thirds of respondents have already left the “just getting started” stage of digital transformation and are moving along the tracks of change. Only 2% say they are completely digitized today but 52% say that this process is largely or somewhat digitized. In five years’ time, however, 43% expect to be completely digitized (Chart 5).

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“The most important business factor cited to justify the embrace of Manufacturing 4.0 is a need to remain or become more competitive.”

A similar scenario appears to be playing out in the integration of plant floor equipment and quality systems as well as in electronic integration with customers and suppliers. In the former process, only 7% say they have “extensively” integrated equipment with quality systems, with another 36% saying they have “partially” done so. But in five years, 64% expect to be able to report extensive integration has occurred (Chart 6). On the customer and supplier front, a similar swing in numbers is expected (Chart 8).

The Glittering Promise of Technology

On the technology front, survey respondents express strong feelings about the impact of new IT and production technologies on the operations of their factories and plants. An astonishing 90% say they believe that machine learning and cognitive computing technologies have the potential to enable factories to operate more autonomously and even heal themselves(Chart 10). Perhaps more soberly, 43% say that 3D printing has the potential to speed up their companies’ digital transformation (Chart 9).

And when asked about a range of technologies they are using today in their factories as well as what they expect to use in two years’ time, augmented and virtual reality, artificial intelligence and machine learning, analytics and Big Data, and digital twin technologies command the greatest attention (Chart 11).

The interest in all of these tools and techniques is being driven by basic business factors, including a connection to M4.0. This year, the most important business factor driving their companies’ move toward M4.0 is the need to remain or become more competitive, cited by 67% of respondents. The second most cited factor is operational efficiency (57%) and the third is cost reduction (48%), a perennial factor (Chart 14).

And in terms of benefits they expect from M4.0 in their factories and plants, the most cited benefits, by far, are greater speed and flexibility (67%), followed by cost reduction (52%), and improved product quality (45%) (Chart 15).

M4.0 Challenges Are Many

As they go about M4.0 projects and prepare their manufacturing operations as well as their companies for the digital era, manufacturers appear well aware of a long list of challenges they need to address and overcome in order to ensure the success of their transition to M4.0.

The good news, according to the survey, is that much activity is underway to deal with them.

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When asked where their companies stand with regard to taking action on a range of things that could accelerate the journey to M4.0, respondents indicated they are most active in upgrading existing IT systems (55%), providing greater data and cyber security (53%), finding skilled people (48%), and developing an M4.0 strategy and engaging in change management (both at 45%) (Chart 16). As manufacturers execute their M4.0 projects and start to sow the seeds of digital transformation in their factories and plants, they will continue their journey along the M4.0 maturity curve, hopefully creating and benefitting from the unique competitive advantage a strong majority (59%) expect from the fourth industrial revolution (Chart 17). No one knows or can predict with certainty, of course, what lies ahead on that curve or how long it may stretch. What we do know is that factories and plants will not remain as they were, and that the ones that master change most effectively are likely to be the winners of tomorrow.

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