To improve performance and gain a competitive edge, manufacturers must adopt the new digital industrial technologies that are collectively known as Industry 4.0. Leading manufacturers are already applying these advances in order to bring products to market faster, reduce their cost bases, and build new revenue streams. The value created by Industry 4.0 vastly exceeds the low-single-digit cost savings that many manufacturers pursue today. The new technologies promise to revolutionize manufacturing, thereby shifting the competitive balance among countries and transforming the industrial workforce. (See “Industry 4.0 Revolutionizes Manufacturing.”)
Industry 4.0 refers to the convergence and application of nine technologies: advanced robotics; big data and analytics; cloud computing; the industrial internet; horizontal and vertical system integration; simulation; augmented reality; additive manufacturing; and cybersecurity. Companies unlock the full potential of Industry 4.0 by coordinating the implementation of those technologies—for example, by deploying sensors to collect data within a secure cloud environment and applying advanced analytics to gain insights. (See Industry 4.0: The Future of Productivity and Growth in Manufacturing Industries, BCG Focus, April 2015.)
In this way, a manufacturer can create an integrated, automated, and optimized production flow across the supply chain, as well as synthesize communications between itself and its suppliers and customers. This end-to-end integration will reduce waiting time and work-in-progress inventory and, ultimately, may even make it possible for manufacturers to offer mass customization at the same price as mass production.
As adoption proceeds, the labor cost advantages of traditional low-cost locations will shrink, motivating manufacturers to bring previously offshored jobs back home. Manufacturers will also benefit from higher demand resulting from the growth of existing markets and the introduction of new products and services.
The profile of the workforce will also change. The critical Industry 4.0 jobs—such as for data managers and scientists, software developers, and analytics experts—require skills that differ fundamentally from those that most industrial workers possess today. Manufacturers will need to take steps to close the skills gap, such as retraining the workforce and tapping the pool of digital talent. Moreover, manufacturers will need to create new jobs to meet the higher demand. (See Man and Machine in Industry 4.0: How Will Technology Transform the Industrial Workforce Through 2025?, BCG Focus, September 2015.)
The race is on to adopt Industry 4.0. Earlier this year, a BCG study found that companies in the US and Germany have implemented Industry 4.0 at approximately the same pace. (See Time to Accelerate in the Race Toward Industry 4.0, BCG Focus, May 2016.) To gain further insights about the status of Industry 4.0 adoption by US manufacturers and the challenges they face, BCG surveyed 380 US-based manufacturing executives and managers at companies representing a wide range of sizes in various industries. Although the majority of respondents said that they are prioritizing Industry 4.0 adoption, we found conflicting views on a number of issues. Most companies have implemented only one or two isolated aspects of Industry 4.0, such as robotics or big data. The real value is achieved when manufacturers maximize the impact of these advances by combining them in a comprehensive program. Our findings point to the need for US manufacturers to gain a deeper understanding of how they can apply Industry 4.0 and accelerate the pace of adoption. The winners will approach the race to Industry 4.0 as a series of sprints but manage their program as a marathon.