How to avoid a nightmare with Industry 4.0

Friday, June 28, 2019

President of Fulcrum ConsultingWorks, Inc.

Target OnlineWe all know of companies that spent millions of dollars implementing an ERP system yet couldn’t ship on the go-live date. We all know manufacturers who bought an expensive piece of new equipment with a very high predicted return-on-capital that didn’t’ meet those expectations.

As each of us looks to Industry 4.0, understanding and care must be taken to avoid those miseries. So, what do we do differently this time?

First and foremost, understand that problematic technical and data implementations are rarely technical issues; they are thinking issues!

The ERP nightmares are frequently because internal understanding and decision-making wasn’t consistent with how the software works. That’s not a software problem; that’s a thinking problem. I am familiar with a company that couldn’t ship on go-live because they had made decisions regarding product serialization that made finding and shipping product near impossible. Just because the software can handle serial numbers doesn’t mean the users make good decisions about when and how to assign them. You can no doubt share stories you’ve heard or lived.

Equipment is often justified on labor savings, yet there is no intention to fire anyone. If the business requiring that equipment expands and hiring can be avoided, the savings might be real. Otherwise, it was simply making the numbers be what they needed to be.

A lean company knows that the philosophy is about people, not automation. There is no automation or technology purely for its sake.

Elon Musk missed that part of the conversation when he promised to “out Toyota Toyota.” In fact, his Tesla factory offers a grand example of the Dunning-Kruger effect in play. Automating poorly designed and understood processes is a thinking issue. Automating and building in new technologies to reduce labor is a very poor concept. Thinking we know more than we do, or not thinking deeply, can cost a fortune.

Many of you see Industry 4.0 as a means of providing additional value, or cutting costs, or as something everyone else is doing. These are steps you can take to ensure your efforts are successful:

  • Ask yourself “why?”
  1. If there’s not a clear business reason, which could be concepts like safety or reduced unplanned downtime or easier correct assembly, don’t start. Even an “what the heck is this new technology” effort should have a business purpose at its core.
  • Pilot, to learn what you don’t know about the technology, but more so what you don’t know about your processes
  1. Start simple. This is no place for the big bang approach to technology.
  2. Is it more helpful to know humidity, temperature and vibration, or rate of change in those factors, or something else? The answers can be verified during a pilot.
  • Once confirmed you are collecting good valuable data and making improved decisions with it, roll out this particular use case.
  1. If the data is interesting but irrelevant to your behaviors, then move along to a different pilot; if it is helping you better identify and solve problems, then roll it out where logic suggests.  A single piece of equipment or single example is rarely worth the effort.  Leverage what you’ve learned to benefit your constituencies.
  2. Then, move on to an additional use case and start over with “why?”
  3. If yours is a very large company and wants to pursue multiple use cases at once, be sure that a business leader is in charge of the entire effort. Having operations lead one, marketing another, and finance yet a third won’t end well without coordination and communication.
  • While manufacturers often start looking inside the operations, many of the new technologies are better leveraged by looking externally. Can data from your installed base help you design longer lasting more reliable equipment? If you’re not making your customers more competitive, you’re easily replaced. Don’t overlook them in evaluating Industry 4.0 capabilities.

Many of us are old enough to remember grocery store checkouts with little price stickers on items; we’ve been scanning barcodes for decades to ensure common (and hopefully correct) pricing and manage inventory.

QR codes have become a common tool to provide product information. RFID surrounds us.

Your business is not immune to Industry 4.0. Not each of the technologies included in the term impact you or provide the same value to your industry, but it’s better to identify proactively those that will.

Blockchain, data analytics, VR and AR, apps, sensors, and additive manufacturing are just a few of the components of manufacturing in the 2020’s. Done right, you won’t waste any money or time learning which are more important to your future business. Selecting “none of the above” would be a mistake. 

Whatever you do, don’t just throw money at Industry 4.0. Solid strategy and thinking are much more crucial to your success than anything else.

Becky Morgan is an operations strategist working with leaders of mid-sized manufacturing companies. Subscribe to her newsletter and receive a free copy of her e-book, Strategic Profits.