Digitisation drives quantum leaps in performance

Companies that successfully implement Industry 4.0 no longer need to choose between focusing on a better top or bottom line. They can improve both at the same time. Over the next five years, the companies we surveyed expect to reduce costs by an average of 3.6% p.a. and increase annual revenues by an average 2.9%. First movers who combine high investment levels with advanced digitisation are set to achieve even more dramatic gains. If even half of these expectations are met, Industry 4.0 will reshape the competitive landscape and bring fundamental change to established industries.

By 2020 our participants are expecting revenue to rise by 2.9% per annum and costs to reduce by 3.6% per annum
Lower cost and greater efficiency measures

The new competitive landscape

Our survey respondents anticipate significant gains from the implementation of Industry 4.0 initiatives. On average, companies expect to reduce operational costs by 3.6% p.a., while increasing efficiency by 4.1% annually. 

Some of the anticipated cost savings can be achieved by implementing smart manufacturing initiatives. For example, companies are moving to integrated planning & scheduling for manufacturing. Such systems combine data from within the enterprise – from sensors all the way through to ERP systems – with information from horizontal value chain partners, like inventory levels or changes in customer demand. Integrated shop floor planning improves asset utilisation and product throughput time. Another example is predictive maintenance on key assets, which uses predictive algorithms to optimise repair and maintenance schedules and to improve asset uptime.

System based, real time end-to-end planning and horizontal collaboration is now possible using cloud based planning platforms. Companies that use such systems to become better integrated with horizontal value chain partners, including suppliers and key customers, can significantly improve efficiencies and reduce inventories. In addition, the implementation of track and trace devices on products will lead to better inventory performance and reduced logistics cost.

Efficiency gains of the magnitude uncovered by our survey have the potential to change the competitive landscape within a very short space of time. If even half of the expectations outlined above are realised, some companies may find themselves unable to compete. In an increasingly cost competitive market, no industrial company can afford to lose out in operational efficiency against their market peers. The next two to three years will be crucial for companies looking to catch up.

Significant revenue opportunities ahead

Survey participants expect additional digital revenues of 2.9% p.a. until 2020. To generate these additional revenues, companies will introduce new industrial products with digital features and augment their existing portfolio. Digital services based on data analytics, or even complete digital solutions serving a customer ecosystem, will drive breakthrough revenue growth.

In addition, real time data availability will enable companies to manufacture personalised products and customise solutions. These customised products usually generate significantly higher margins than mass manufactured offerings. Improved customer insight from smart data analytics also allows companies to better focus on additional high margin business.

In the new industrial reality, most companies (86%) expect to secure simultaneous gains from both lower costs and added revenue in the next five years.  And the impact is far-reaching for every industry we studied. At least a third of companies in every sector expect to secure efficiency gains and cost savings of more than 20% and many anticipate that these will be accompanied by additional revenues of the same magnitude.

Digital and big data to drive revenue

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Contact us

Jesper Vedsø
Tel: 3945 9144

Dr. Reinhard Geissbauer
EMEA Industry 4.0 Leader
Tel: +49 170 939 1263

Stefan Schrauf
EMEA Industry 4.0 co-lead
Tel: +49 151 461 23326

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