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Industry 4.0 set to transform global businesses as investments increase

Oct 31. 2016
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By THE NATION

INDUSTRIAL COMPANIES across the globe are poised to integrate interconnected digital technology as “Industry 4.0” approaches, according to PricewaterhouseCoopers.

The transformation’s implementation is “in full swing all around the world”, said the PwC report “Industry 4.0: Building the Digital Enterprise”.

The term “Industry 4.0” refers to the fourth industrial revolution. It focuses on the end-to-end digitisation of all physical assets and processes as well as integration of value-chain partners into digital ecosystems. Data and analytics are a core capability for Industry 4.0.

The PwC report is based on a poll of more than 2,000 participants from nine major industrial sectors. The study was conducted across 26 countries.

About one-third of the companies surveyed rate their level of digitisation as high. This value is expected to rise on average to 72 per cent from 33 per cent within the next five years.

Leaders of industrial compa-|nies are now digitising essential functions within their internal |vertical value chain, as well as with their horizontal partners along the supply chain. They are also boosting their product portfolios with digital functionalities and introducing innovative data-based services.

Vilaiporn Taweelappontong, lead partner for consulting services at PwC Thailand, described how Industry 4.0 uses smart technology and real-time data to increase productivity and reduce costs.

“Over the next five years, we expect companies to increase additional revenues by an average of 2.9 per cent per year and reduce costs by an average of 3.6 per cent annually. In absolute terms, this corresponds to [US] $493 billion in increased annual revenue per year and $421 billion in cost savings,” she said.

Big impact

Global industrial sectors will invest $907 billion (Bt31.7 trillion) per year through to2020 to embrace Industry 4.0, the report says.

A major focus of these investments will be on digital technologies like sensors or connectivity devices, and on software and applications such as manufacturing execution systems. In addition, companies are investing in training employees and driving required organisational change. 

More than half, 55 per cent, of these companies expect their investments to yield a return within two years, given an investment of around 5 per cent of their digital revenue. 

More than 80 per cent of companies expect data analytics will have a significant influence on their decision-making processes within five years. While they feel confident in acquiring the necessary technology, these businesses see challenges in the lack of internal digital culture, vision and training – as well as in a lack of specialists. 

For example, almost 40 per cent of companies rely on the analytics expertise of individual employees rather than having a dedicated data analytics department. 

The study also says that data security is prerequisite for successful digitisation.

“Strong risk management and data integrity systems can help businesses avoid breaches and manage disruption to operations better,” Vilaiporn said.

Although companies worldwide are pressing ahead with Industry 4.0, the study shows that the level of digital integration will be broadly comparable among all regions in five years, with Japan, Germany and the United States at the forefront.

Companies in Japan and Germany are the furthest along in digitising internal operations and partnering across the horizontal value chain. In the US, new business models are emerging as companies move quickly to digitise their product and service portfolios. 

Manufacturing companies in China are focusing on reducing costs to hold up better against international competitors. 

 

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