According to research from KPMG International, the fourth industrial revolution (Industry 4.0) requires transformational change at a pace the majority of manufacturers are not matching.
If manufacturers continue on the current trajectory, KPMG warns they are likely be disrupted by competitors and new market entrants.
KPMG is calling for CEOs to form a top-down strategy and implement large scale change now in order to meet the realities of manufacturing in today’s market.
Commenting on the research, Doug Gates, Global Head of Industrial Manufacturing at KPMG, said: “Few organisations have developed holistic, end-to-end interconnectivity – our definition of the highest level of i4.0 maturity – among today’s breakthrough i4.0 tools and technologies. Most are still at the beginning stages, where investment is made due to projected cost savings. 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.”
In the report, A Reality Check for Today’s C-suite on Industry 4.0 – experimentation is ending, KPMG says it has identified a false sense of security held at the top levels of many manufacturers. As organisation implements single-project, bottom-up approaches to transformation – from physical plant changes, to integration of big data – cost efficiencies are cited as proof of i4.0 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 change course due to the incredible pace of change experienced by the manufacturing industry.
Doug Gates, global head of industrial manufacturing at KPMG, said: “We’re seeing organisations reap only marginal value from pilot projects that are disconnected from each other and a larger strategy. It’s similar to the person who stops taking their antibiotics early because they feel better – it may be OK today, but that shortsightedness is going to cause a more difficult problem to solve later.”
Tidarat Chimluang, head of industrial markets at KPMG in Thailand, said: “Many companies in Thailand are also struggling to keep up with the pace of change and making the necessary technological adoption to reach industry 4.0. This is especially true in the agricultural and food processing industry, a staple industry of Thailand. According to a study done by the University of the Thai Chamber of Commerce, less than 3 per cent of small businesses and less than 5 per cent 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 Thailand’s industry towards 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 for change.”
“If manufacturers aren’t well on their i4.0 journey by 2020, they will have a problem keeping up with new market entrants. 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,” said Gates.