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How can industries in the Middle East leverage Industry 4.0 to accelerate growth?

26 February 2018

Industry 4.0, also termed as the fourth industrial revolution, refers to data exchange and automation in manufacturing technology. The revolution is driven by the Internet of Things (IoT), cloud computing, data integration and other technological advances; which have been introduced to production and manufacturing systems to optimize delivery processes.

The concept essentially aims to combine the individual processes and computing performed by factory machines and import them on a cloud system, allowing the workflow and management of machines to be handled remotely.

Industry 4.0 is predicted to lead to the creation of “smart factories” that will self-manage processes and issues, modernizing conventional factories that previously used offline systems with little to no inter-connectivity. Manufacturing execution systems (MES) were a common way to determine the running and functioning of factories. The concept will therefore have to evolve to avoid being left behind.

Industry 4.0 or Industrial Internet of Things

Industrial Internet of Things (IIoT) is a component of the Internet of Things (IoT) phenomenon. IoT refers to a network of computers, devices and objects that collect and share substantial amounts of data. The data is shared on cloud technology and converted to useful information for end users. For instance, American machinery and equipment firm Caterpillar recently established a partnership with Uptake, an industrial analytics company, to help Caterpillar customers better understand the health of their equipment, and to monitor and optimize their fleets more effectively.

Although the terms IIoT and Industry 4.0 are sometimes used interchangeably, IIoT is simply a part of Industry 4.0. McKinsey defines Industry 4.0 as the next phase in the digitisation of the manufacturing sector, driven by four disruptions: rising data volumes, computational power and connectivity, new low-power wide-area networks; the emergence of analytics and business-intelligence capabilities; new forms of human-machine interaction such as touch interfaces and augmented-reality systems; and improvements in transferring digital instructions to the physical world, such as advanced robotics and 3D printing.

 

Expected market size of Industry 4.0 components

 

Global Impact of Industry 4.0

Experts predict that Industry 4.0 will lead to the creation of a huge market. Gartner estimates that the Internet of Things (IoT) market will be worth almost USD 3.7 trillion by 2020 In addition, Morgan Stanley predicts that the cyber security market, which is a prerequisite of Industry 4.0, will be worth USD 183 billion by 2020. IDC also thinks that the virtual and augmented reality market will be worth USD 162 billion by then. Overall, component markets of Industry 4.0 are expected to exceed USD 4.4 trillion by 2020. Analysts do, however, believe that the true value of Industry 4.0 comes from the integration of manufacturing, analytics and data with automation which makes way for new operating models. A global report on Industry 4.0 forecasts that the global Industry 4.0 market will reach USD 214 billion by 2023 – 30% higher than the initially projected value. McKinsey expects that globally, it is expected to deliver between USD 1.2 trillion and USD 3.7 trillion in value. According to a PwC survey, companies worldwide are set to invest approximately 5% of their revenues annually on digitisation and based on the industry sectors surveyed, this would equate to a total global investment of USD 907 billion per year. In contrast, UK firms expect to invest approximately 2.5% of their turnover.

 

Expected growth of Industry 4.0 market by 2023

Expected value due to Industry 4.0

 

To improve and drive manufacturing through Industrial IoT; Schaeffler, an automotive and industrial supplier, formed a strategic partnership with IBM’s Watson IoT platform to extend their business model and include cognitive solutions to their products. In one application, Schaeffler aims to enhance its predictive maintenance systems for railways, to help improve efficiency and safety through cognitive insights from the cloud. Smart bearings will be able to measure their own vibration, temperature, torque and speed; triggering alerts and informing railway operators about potential safety issues.

 

Global and UK's expenditure on digitisation or digitization

 

The acceptance and applications of Industry 4.0 are not limited to USA and Europe, McKinsey research mentions that the Association of Southeast Asian Nations (ASEAN), whose member economies have significant manufacturing components, has the potential to capture productivity gains worth USD 216 billion to USD 627 billion of this value.

 

Productivity Gains due to Industry 4.0

 

Is the Middle East adopting Industry 4.0?

Industrialisation presents significant opportunity for the Middle East as established industrial sectors lead to nations that are well-equipped to deal with economic volatility. The UAE, for instance, is aiming to increase the contribution of the manufacturing sector in the country’s GDP to nearly 20% by 2021, which stood at 14% in 2014.

 

Percentage contribution of Manufacturing sector in UAE GDP

 

PwC research finds that amidst cost competition in the Middle East, Industry 4.0 creates potential to save USD 17.3 billion annually in cost savings and gain USD 16.9 billion in additional revenues from digitisation and integration. It also suggests that companies in the Middle East are making significant investments, leading to digitisation.

Middle East’s industrial sector has taken a head start to digitize its core through IIoT and cloud computing. For instance, the region’s booming aviation industry uses digitisation of customer experience to provide passengers with greater control and customisation of the service they receive. Furthermore, airlines continue to enhance their service offering by adding new services, improving customer experience and providing a more personalized customer journey.

 

Impact of Industry 4.0 in Middle East

 

 

Similarly, Ducab – one of the Middle East’s leading manufacturers of energy cables, plans to utilize Industry 4.0 for a complete supply chain transformation. Ducab aims to collect existing data from machines and integrate it with supplier data to streamline the process, improve logistics and efficiently track in-transit inventory, thereby saving time and reducing costs.

UAE stands at the forefront of establishing the Industry 4.0 masterplan. The country has formed AI, 3D printing and autonomous transportation strategies for the coming years – all of which play a strategic role in the implementation of Industry 4.0.

 How can industries take advantage?

 

  • Improved decision making

Not only does Industry 4.0 transform the way companies operate and produce goods, but it also affects how ecosystems function. It impacts the interaction between suppliers, customers, investors, and other stakeholders. The latter allows all parties to interact more efficiently and permits them to predict, as opposed to react.

Connectivity forms the backbone for Industry 4.0 and through a connected web of devices, machines, control systems and IT systems; data is gathered, analysed, and interpreted through system-built intelligence that understands the meaning and capability of data. The data is then turned into usable information to provide decision-making criteria or “intelligence.” This means that data must be connected and then analysed in order for it to become information, which needs to be collated and visualized to become intelligence.

In the age of the Industrial Internet of Things (IIoT), this level of connectivity leads to much better decisions. Monitoring means that maintenance can be better planned, and downtime can be reduced. Software and the use of stored historical information means that best practices can be identified and replicated, tweaks can be made, productivity can be improved and more can be achieved with existing assets.

GE Aviation, for instance, changed their business model from traditional manufacturing and selling of aircraft engines to selling services based on flight hours. They installed sensors in their engines which collected and transmitted data. The latter allowed them to use predictive analytics to reduce maintenance costs and engine downtime, lowering costs for the customer.

 

  • Smart creation

Industry 4.0 guides the way products are designed and developed. The use of sensors, wearables, data analytics, machine learning, advanced manufacturing in the form of additive manufacturing, advanced computer numerical control and robotics enable product improvements – such as enabling rapid prototyping and testing or adding connectivity to previously unconnected products.

Smart products allow tracking of their own activity and results, along with activity tracking of other products around them. These products generate data which shows how well they are functioning. For instance, equipment in a shipping port or construction site detects potential mechanical breakdown and allows it to be prevented. The products’ next generation will compare the efficiency of multiple machines and recommend efficient deployment options. Another example is a motor vehicle software which enables cars, trucks, and other vehicles to be repaired via downloaded software updates. 

 

  • Transforming Supply Chain

Companies are reliant on their supply chain network, which takes its unique shape depending on the operational needs of the company. Industry 4.0 aids in the creation of a ‘smart factory’ which connects supply network with logistics capabilities, and informs planning and inventory processes, along with numerous other capabilities. The latter enables organizations to know things they didn’t know before.

Digital technology impacts consumer interaction with a company’s products and services. The latter creates an array of supply chain-related challenges and opportunities, which can be improved using Industry 4.0 solutions.

A fully integrated Industry 4.0 experience could make complex supply chains frictionless. It could improve visibility across the network, thereby reducing risk and increasing flexibility. In addition, it adds several benefits such as enhanced coordination and innovation through accurate data. It can also help lower inventory levels with more accurate forecasting. The main advantage, however, comes when the value chain becomes a value network, allowing data to be shared in real time across the network with the help of integrated data across systems.

 

Components of Digital Supply Network

 

For instance, UK-based grocery chain Tesco reduces chances of product stock-outs to maximise revenue. They utilise predictive analytics tools to forecast the demand of weather-dependent foods like ice cream using weather data. The tools then adjust nationwide inventory order levels to ensure availability. Tesco claims to have saved around USD 140 million through the reduction of wasted stock. If they were to do this manually, it would not have allowed fast-enough reaction time.

Since the Digital Supply Network (DSN) is always on, location-based tools and sensors continuously transmit data to provide integrated views of multiple facets of the network with little to no latency. DSN can also address additional issues within the supply chain beyond simply overcoming latency challenges making DSN is more than just faster data transmission. It illustrates how companies can develop a complete picture of the total supply network leading to informed strategic decisions.

 

  • Changing customer experience

Research finds that approximately 90 percent of B2B buyers conduct online research when purchasing industrial products. 60 percent of the buying process is therefore completed before customers and salespeople meet. Furthermore, many B2B buyers purchase industrial products online.

Several manufacturers have built high-touch sales and account management teams, often with considerable technical sales and account management capabilities. In some situations, however, manufacturers may be able to scale back investments in high-touch teams as new digital platforms are used in both direct and indirect sales. Xerox, for example, automated its sales and support tasks to enable sales teams to focus on closing sales while creating digital solutions to address some of the more common initial questions occurring earlier in the sales cycle.

Across all stages of the customer journey, Industry 4.0 can create new opportunities for innovation and growth. Data gathered through intelligent products and services can enable a deeper understanding of customers. Information from connected systems can enhance the customer experience, direct selling and marketing strategies, and better enable companies and their partners to offer post-sales support to customers, strengthening the customer relationship.

Industry 4.0 technologies transform the customer experience, in both digital and physical environments. Companies are either exploring how to enhance the physical experience or bring it to their customers using Augmented Reality and Virtual Reality (AR/VR). In some cases, the AR/VR platforms enable customers to try out products and quickly narrow down their preferred features in a realistic, immersive experience, rather than viewing a limited set of products in a more constrained environment.

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