Europe and USA are foreseeing prevalence of the Internet of Things in manufacturing and the consequent technology-driven changes which promise to trigger a new industrial revolution. In Germany, this phenomenon is referred to as Industry 4.0. The basic principle of Industry 4.0 is that by connecting machines, work pieces and systems, businesses are creating intelligent networks along the entire value chain that can control each other autonomously.
The third era of industry came about with the advent of computers and the beginnings of automation, when robots and machines began to replace human workers on those assembly lines. One of 10 “Future Projects” identified by the German government as part of its High-Tech Strategy 2020 Action Plan, the INDUSTRIE 4.0 project represents a major opportunity for Germany to establish itself as an integrated industry lead market and provider.
At the time of independence, Pakistan Industries was barren. Till 1965 the industries were organized in a way to start exporting under liberal policies. Next preceding 7 years was growth in industry slowed and then from 1972 onward progress was meager and unstable. In 80’s Industrial growth had increased due to the rapid expansion of domestic demand and encouragement for export. In the 1990’s decade, again growth was declined comparing to 80s. The new century begins with progress and growth in Pakistan and after 2010 the progress again slowed down.
From mid-90s exporters faced customers’ extended requirements beyond the product quality and cost and these were related to Quality and Environment Management systems. As the business volume and operational loads were increased industries were voluntarily embracing ERP and Automation.
Process improvement, increasing efficiency and cost reduction were major concerns of the management running a business on large scale. Complexities of supply chain hurting business after 2010 due to shorter product life cycle and decreasing customer tolerance time.
Today, the industries’ infrastructure is being scaled up and built out for the 3rd Industrial Revolution in Pakistan. Pakistan has been forefront on the development of digitalized communication and support services has been developed to the extent to support 3rd Industrial Revolution.
Fourth Industrial Revolution (FIR) and Factories
Fourth Industrial Revolution (FIR) is a synonym of Industry 4.0 both indicating that 3rd Revolution has been ended and Industry 4.0 is going to change the way the manufacturing industry will design, manufacture and selling products. The digitalization of the industry will generate considerable improvements in productivity and speed to market for both new and existing product offerings.
The digitalized communication internet is converging with a digitalized renewable energy internet, and a digitalized, GPS-guided and soon driverless transportation and logistics Internet, to create a super-Internet to manage, power, and move economic activity across society’s value chains. These three Internets ride atop a platform called the Internet of Things.
There are differences between a typical traditional factory and an Industry 4.0 factory. In the current industry environment, providing high-end quality service or product with the least cost is the key to success. Whereas, in Industry 4.0 era focus would only on flow and speed of materials, cash and information.
The Smart Factory
The merging of the virtual and the physical worlds through cyber-physical systems and the resulting fusion of technical processes and business processes are leading the way to a new industrial age best defined by the INDUSTRIE 4.0 project’s “smart factory” concept. Smart factory products, resources and processes are characterized by cyber-physical systems; providing significant real-time quality, time, resource, and cost advantages in comparison with classic production systems.
The smart factory is designed according to sustainable and service-oriented business practices. These insist upon adaptability, flexibility, self-adaptability and learning characteristics, fault tolerance, and risk management.
Pitfall in aligning with Industry 4.0
Industrial 4.0 will make manufacturing cheaper for developed world as the human cost will be replaced with automation and robots and materials will flow fast. This will have the major impact on the developing countries like Pakistan, it will be very difficult to export value added items to developed world markets because shorter customer tolerance time and higher supply chain complexities would act as obstacles in serving customer.
Pakistan Industries must realize that Supply Chain is nonlinear and Complex. Companies that will move to Industry 4.0 without transforming supply chain into a demand driven operating model risk to become efficient at manufacturing the wrong thing. It does not matter how cost efficient you are producing something: if there is no customer demand for it then you will end up with the wrong inventory in the wrong place and you will not generate returns for the company. In pure pull environment without end to end visibility in supply chain the risk of low customer service level is very high. While managing the S&OP with material requirement planning in accordance with DDMRP methodology will result in improved flow, improved ROI and higher customer and supplier satisfaction.
Exponential Growth enabler DDMRP
To cater actual demand as in the process digitization needs that every demand must be met very fast then management of the flow of goods must be of prime importance. To become Demand Driven means that all supply chain management processes act according to the actual demand. Currently, Demand Driven Material Requirements Planning (DDMRP) is now practicing internationally with great success. DDMRP aims at protecting and promoting the flow of relevant materials and information throughout the supply chain to improve the return on investment. DDMRP is an approach to decrease lead times, improve customer service and availability with lower global inventory levels. The DDMRP method replaces conventional ineffective planning methods and recognizes the supply chain focusing on flow.
Industry 4.0 is not about product innovation it is about integrating cross disciplinary engineering/technology throughout the value chain. It enables to understand the needs of customization and use of technology in fulfilling the customer requirement with high service levels, if it will combine with DDMRP.
Roadmap for Pakistani Industries
By 2030, it is estimated there will be more than 100 trillion sensors digitally connecting the human and natural environment in a global distributed intelligent network. For the first time in history, the entire human race can collaborate directly with one another.
Pakistan business community must create NEW DOORS & WINDOWS before entering in the era of Industry 4.0. Just walk on without considering global changes and remain unresponsive with the need of change will ultimately perish SLOW firms and only FAST ADAPTERS will survive in the future. Prevalent pillars of improvement i.e. past practices, ERP system, mass scale production and the addition of resource will be failed to reduce volatility in Industry 4.0 era challenges. Suggested NEW DOORS & WINDOWS for SMART Management are as follows for immediate consideration:
- Knowledge and skill set will be different as people with digital knowledge will be required in future for which we need to prepare people for enhanced planning capabilities. Information flow will be fast and more precise that will require people with the relevant skill to understand the signals fast and act fast.
- Online business will be the future and supply chain system need to cater these channels. It will have a major impact on the distribution system as some of the current processes will become obsolete. A different model that has fast, accurate and flexible with effective reverse supply chain capability will be required to install.
- Customer service will be more difficult. Pakistan Industries needs to be LEARNING ORGANIZATION to survive under the most competitive environment of Industry 4.0 era. A rapid change for bringing digital revolution without streamlining the supply chain will be counterproductive and disturbing.
- Demand planning process must be aligned to act quickly and correctly on accurate, real and fast communication with the consumer.
- A different type of leadership will be required to manage a different class of employees where flexible working environment and rewarding as per the result will be key to retention. Everything will be in real-time action to benefit both the employees and the employers.
- Firms must strive to become Demand Driven Adaptive Enterprise and must adopt Demand Driven Operating Model to manage an end to end supply chain.
- Following parameters in conjunction with other performance indicators must be used for measuring business success:
- Return on Assets/Cash Equity
- Lead time to serve customer
- Customer service level