Time to Accelerate in the Race Toward Industry 4.0

Time to Accelerate in the Race Toward Industry 4.0

          
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Time to Accelerate in the Race Toward Industry 4.0

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    The Status of Adoption

    Companies on both sides of the Atlantic understand that the adoption of Industry 4.0 brings important benefits. Three-quarters of German respondents and two-thirds of US respondents associate Industry 4.0 with increased productivity and cost reduction. In addition, many respondents (48% in Germany and 43% in the US) associate it with revenue growth.

    The pace of Industry 4.0 implementation is similar in the two countries. As shown in Exhibit 1, 19% of German companies have implemented either a full Industry 4.0 concept (such as a smart factory) or first measures toward a concept (such as the introduction of autonomous robots), compared with 16% of US companies. German companies are off to a somewhat faster start of implementation despite the common perception that US companies are the front-runners in embracing digital transformation.

    exhibit

    Furthermore, German companies appear to be better prepared to adopt Industry 4.0. Almost half (47%) of the German companies have developed their first full Industry 4.0 concepts, and only 18% of German respondents say that their company is not yet prepared to introduce Industry 4.0 technologies. In contrast, only 29% of US companies have developed their first concepts, and 41% say that their company is not yet prepared.

    In terms of manufacturers, German companies appear to have higher ambitions than their US peers with respect to applying, or planning to apply, advanced technologies. For example, approximately 60% of German manufacturers have applied, or plan to apply (within the next one or two years), digital factory logistics or predictive maintenance, compared with approximately 40% of US manufacturers. (See Exhibit 2.)

    exhibit

    German companies’ strong ambitions for Industry 4.0 reflect their need to overcome the challenges of significant factor costs that arise from high wages and a less-flexible labor market. These factor costs encourage companies to strive for greater productivity and, thus, promote faster adoption of new technologies. The fast pace of adoption in Germany is also fueled by companies’ advanced industrial-manufacturing capabilities. Companies can apply these capabilities to accelerate the introduction of new digital technologies, thereby reducing costs, increasing flexibility, and accelerating the speed of manufacturing. For example, German manufacturers lead in robotics adoption, enabling a higher level of automation and promoting productivity gains. In 2014, the rate of robotics penetration in Germany was among the highest: 292 industrial robots per 10,000 workers in manufacturing. This level of penetration exceeded the level achieved in the US (164 per 10,000 workers) by 78%.