Ready – or not – for Industry 4.0?

Departments - From the Flight Deck

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August 8, 2017

Some of the largest publicly traded U.S. manufacturers are extremely wary about Industry 4.0 and other forces transforming their business, according to the recently released 2017 Manufacturing RiskFactor Report (https://goo.gl/HN8LJM) from professional accounting and services firm BDO USA LLP.

BDO’s analysis is based on 100 companies’ most recent annual reports to the Securities and Exchange Commission and includes the 20 largest companies in the transportation equipment sector. The list features aerospace companies General Electric, Boeing, United Technologies, Lockheed Martin, Honeywell Int.’l, General Dynamics, Textron, and Spirit AeroSystems.

Industry 4.0 – also called the Fourth Industrial Revolution, the Industrial Internet of Things (IIoT), and digital manufacturing – promotes machine data exchange, cloud connectedness, autonomous operation, Big Data analytics, and relies on a host of sensor and software technologies.

Based on the frequency of mentions, 91% of the top 100 manufacturers report concerns about information technology (IT) systems and infrastructure, 94% cite risks related to corporate strategies, 96% cite cybersecurity risks, and 87% note concerns about product innovation in implementing Industry 4.0.

The 100 manufacturers represent the food, auto, truck, plastic, rubber, machinery, and metal fabricating industries, so how did the subset of aerospace manufacturers rate their Industry 4.0 readiness? Pretty darn well.

I asked Eskander Yavar, national leader of Management Advisory Services in BDO’s Houston, Texas office, to provide insight on the report. He assured me that aerospace companies were further ahead than most, citing the example of jet engine manufacturers offering analytics as a service and using Big Data to plan maintenance and correct operational deficiencies. Nor did he see any uptick specific to aerospace companies in concerns about cybersecurity – they are already dealing with it.

Yavar described a parallel with Industry 4.0 adoption in the advent of cloud computing. “Five years ago, we tried to introduce the cloud option for enterprise resource planning (ERP). A few clients were apprehensive, they didn’t know what it meant, didn’t know where data was going, or how secure it was. Today, if we introduce a technology that doesn’t have a cloud component, clients are asking why not?”

Yavar says larger aerospace companies are leading the way, but some manufacturers are still trying to understand how to add connectivity within their operations; how to be more connected to suppliers and customers and leverage the digital economy. He emphasizes that a company needs consistent systems and processes to gather the data to enable connectivity – they must build a solid foundation to support the next layer.

“The larger tier players driving Industry 4.0 are going to start to dictate to their supply chain vendors on what they need to be doing, so they may not have a choice because their customers are demanding more digital connectivity,” Yavar says.

The smaller players may not feel obligated today, or need Industry 4.0 to be competitive tomorrow, but they will need it in the future. Does your company have a roadmap to implement Industry 4.0? If so, are you making progress on that road? – Eric