The fourth industrial revolution requires transformational change at a pace that the majority of manufacturers are not matching, according to new research from KPMG International.
If manufacturers continue on the current trajectory, they are likely be disrupted by competitors and new market entrants. KPMG advises CEOs to form a top-down strategy to carry out large-scale change now in order to meet the realities of manufacturing in today's market.
"Few organisations have developed holistic, end-to-end interconnectivity -- our definition of the highest level of Industry 4.0 maturity -- among today's breakthrough tools and technologies. Most are still at the beginning stages, where investment is made based on projected cost savings," said Doug Gates, global head of industrial manufacturing at KPMG.
"The digital revolution is about so much more than efficiency, and manufacturers not embracing a new business model will likely face threats to their survival in the very near future."
The new report "A Reality Check for Today's C-suite on Industry 4.0" identifies a false sense of security held at the top levels of many manufacturers. As organisations implement single-project, bottom-up approaches to transformation -- from physical plant changes to integration of big data -- they cite cost efficiencies as proof of transformation.
Companies may see their bottom lines increase in the short term, but KPMG has found that individual initiatives are proving to cost more and yield less in the longer term when business has to undergo a course correction due to the incredible pace of change experienced by the manufacturing industry.
"We're seeing organisations reap only marginal value from pilot projects that are disconnected from each other and a larger strategy," said Mr Gates. "It's similar to the person who stops taking their antibiotics early because they feel better -- it may be okay today, but that short-sightedness is going to cause a more difficult problem to solve later."
Many companies in Thailand are also struggling to keep up with the pace of change and make the necessary technological adaptations to reach Industry 4.0, said Tidarat Chimluang, head of industrial markets at KPMG in Thailand.
"This is especially true in the agricultural and food processing industry, a staple industry of Thailand," she said. "According to a study done by the University of the Thai Chamber of Commerce, less than 3% of small businesses and less than 5% of medium-sized businesses in the industry are considered part of the digitally focused 4.0 era.
"The government's Thailand 4.0 scheme will hopefully help push industry in the right direction. What is important is that companies need to realise they need to prepare for the future, envision a big-picture strategy that best suits their firm and make the firm agile in response to change."
KPMG suggests manufacturers define what the organisation needs to look like tomorrow to be competitive or disruptive. With that in mind, they should design a strategy with a detailed plan and create a culture that supports wholesale change. Organisations with that foundation are well placed to lead the change being seen in industrial manufacturing today.
With holistic business transformation the end goal, where do manufacturers start? KPMG offers four keys to Industry 4.0 transformation:
Build the strategy from the corner office, not the plant floor.
Redesign your organisation from functional silos to a value network.
Create a dynamic culture that embraces the enterprise value of new digital technologies.
Throw out your current key performance indicators; it's time to rethink how to measure success.
"If manufacturers aren't well on their Industry 4.0 journey by 2020, they will have a problem keeping up with new market entrants," warned Mr Gates.
"They don't have to have completed the journey, but they must have the foundation in place: a strategic approach, a holistic plan of transformation and the right culture to embrace change."
To read the report and for other Industry 4.0 topics, visit https://bit.ly/2CVW7a9
