business strategies · Global economy · Global trends · Growth & Profitability · Industry 4.0 · manufacturing · New Technology · Successful Strategies

Industry 4.0 LEAN’s next step

Industry 4.0 by Ketan Deshpande Minnesota MN

Industry 4.0 provides additional tools to companies LEAN journey

Until now companies have pursued traditional lean manufacturing tools to achieve productivity improvements. For many the traditional LEAN principles are fully integrated in their operations, and significant improvements are becoming harder and harder to find. However, today’s globally competitive market place requires the companies to improve profitability, quality, service, competitiveness and speed to retain customers and acquire new ones – it is very evident that this market dynamics is not going to change.

Industry 4.0 promises to transform the industries and provide additional productivity, quality, flexibility, customization and competitiveness gains to companies that embrace this change. Many companies are taking a “wait and see” approach however they will find themselves catching up to the early adopters.

Proven elements of LEAN—such as waste reduction in the form of machine breakdowns or non-value-adding activities—will remain fundamental. At the same time, advancements in data collection, sensors, robotics and automation, new technologies (including 3-D printing), and increased computing power will enable advanced analytics and give established methods a new edge.

Companies will use these additional LEAN tools to implement a new ways of working for three dimensions that have long been recognized as pivotal: technical systems (processes and tools), management systems (organization and performance management), and people systems (capabilities, mind-sets, and behavior). In addition, a new dimension concerned with data, IT, and connectivity will emerge as another core value driver.

In other words, Industry 4.0 can be understood as digitally enabled lean. For example, companies have long optimized yield, energy, and throughput by improving process steering. Now new sensors, more data, and advanced analytics can boost the ability to solve problems and identify sophisticated improvement measures, resulting in smarter solutions and new productivity gains. These advances can be complemented with digitally enabled transparency regarding performance. Take the case of performance management on the shop floor. At a typical plant today, performance management happens more or less after the fact, when performance is checked at the end of the shift. In a digital world, performance deviations can be monitored in real time and addressed immediately. However, implementing the newly identified measures requires organizational transformation—new ways of working, new approaches to performance management, and new capabilities. All of these changes will bolster the pathway to the real revolution: creating self-optimizing assets that do not require operator interventions.

Taking LEAN to next level

Industry 4.0 transformation is very similar to LEAN transformation and hence companies can use similar strategies to achieve untapped productivity and profitability gains

Non-traditional productivity gains

As cost pressure across all industries continually increases, companies face the need to improve productivity by two to four percentage points every year. Our estimates, based on numerous studies, show that digitally enabled advancements are unleashing the potential to create value equivalent to efficiency improvements of 15 to 20 percent. This productivity leap will not come from the application of a single solution. To generate meaningful impact, companies will have to address all elements of profit and loss while also applying a broad range of solutions at scale. For example, a reduction of total machine downtime by 30 to 50 percent—a feat possible with predictive maintenance or remote monitoring—will greatly increase asset utilization. Labor efficiency is another area with high potential. Digital performance management combined with advanced robotics and automated guided vehicles can further automate manual work (for example, in picking and in-plant transportation) and has the potential to improve labor productivity by an additional 40 to 50 percent. Advanced analysis of granular data on machining processes, generated in real time, will be fundamental to identifying and addressing the underlying causes of process inefficiencies and problems with quality—faster and more effectively. Furthermore, forecasting processes that draw heavily on big data already can drastically reduce inventories and improve service levels today.


IT enables Industry 4.0 but should not drive implementation. Companies tend to start by considering how to apply the new approaches to their IT systems. They should focus instead on how they will conduct their business in the future, thinking through changes from a value-chain and business-case standpoint. For example, one global sportswear company is working to bring its shoe manufacturing closer to the customer. This move changes the traditional long cycle of production in low-cost countries and subsequent shipping to stores. As inexpensive, faster, and more flexible robots become available, manufacturing of products such as shoes and clothing can be located near customers—even in high-cost locations such as Germany. In short, time to market, delivery time, freight costs, and customer focus (based on personalization) dramatically improve when taking advantage of the new opportunities provided by digitization.

Management leadership

Few companies are taking a structured approach to implementing  Industry 4.0 levers. According to McKinsey research, only 16 percent have a clear strategy in place, and only 24 percent have assigned clear responsibilities regarding Industry 4.0 efforts. Even companies in this select group tend to make one of two missteps: either they assign Industry 4.0 responsibility to a staff function with no direct execution power, or they place the required responsibility far too low in the management hierarchy.

In either case, realizing full impact potential is jeopardized. Ultimately, embarking on the Industry 4.0 journey means taking a risk—and risk taking cannot be delegated. Top management must therefore take ownership and apply a programmatic approach in order to drive value quickly and effectively. This high level of prioritization helps determine the success of an Industry 4.0 transformation, just as it did for lean.

Change Management (technology and people)

Technological solutions, such as those including robots or advanced-analytics algorithms, are easy to access and install; in fact, such tools are already commodities in many situations. However, it takes a combination of technology and the corresponding domain knowledge (in value chains, maintenance, or process modeling, for example) to produce actions that deliver value. What’s more, implementing these actions typically requires redesigned work processes and new capabilities, both of which necessitate organizational transformation. Company leaders must lay out a strategy in advance to build or buy the capabilities they will need or to partner with organizations that can provide the capabilities.

Comprehensive strategy for transformation

Successful lean transformations do not focus on improving the maintenance process alone but consider the production site as a whole. Work toward Industry 4.0 requires a similarly broad approach. In this case, companies will need to address the entire value chain, apply a full set of levers or solutions, and have a clear plan for scaling up new approaches across their entire network.



ketan_sharad_deshpande_maple_grove_minnesotaThe author, KetanDeshpande, lives in Minnesota and writes about a variety of topics in his blog such as global economy, market and industry trends, successful strategies for businesses, and others. Leveraging his global strategic leadership experience from the manufacturing industry to offer insights in to how businesses can meet the sustainable growth and profitability goals.

Ketan Deshpande is also passionate about sustainability and renewable energy; he curates and shares latest updates in his blog posts. Recently the Southern Minnesota Municipal Power Agency(SMMPA) of Litchfield, Minnesota, endorsed Ketan Deshpande for an energy conservation project.

This blog also features memorable events, travel experiences and his favorite places to visit in the great state of Minnesota.

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