Return On Investment (ROI) is a hot topic for mid-sized manufacturers interested in investing in operational improvements on the factory floor. Regardless of how much your team plans on investing in digital transformation, that expenditure should positively impact profit.
Recently, factory floor investments for mid-sized manufacturers have focused on an even hotter topic: Industry 4.0.
This ‘fourth industrial revolution’ utilizes computers and sensors on the factory floor to capture valuable statistics that can be used to increase profit and efficiency.
The ROI for Industry 4.0 can seem less tangible to manufacturers since improvements rely on better usage of data. Industry 4.0 relies on modern smart technology to acquire data that can be turned into actionable intelligence, instead of simply adding a new piece of automation. Ultimately, if data is not being measured accurately, it cannot be improved.
When considering your potential ROI for Industry 4.0 implementation, there are a few key areas to focus on.
Assess your key performance indicators (KPIs)
The four areas where mid-sized manufacturers will see a return on investment from Industry 4.0 implementation are product quality, machine availability, efficiency (i.e. cycle time and labour efficiency) and energy consumption. By closely tracking KPIs before, during, and after implementation, mid-sized manufacturers can demonstrate proven ROI. KPIs can also highlight areas that would benefit from smart technology to improve performance. However, if your implementation has no payback for the bottom line there could still be qualitative benefits for the organization. Qualitatively, Industry 4.0 provides better data in a timelier manner which can benefit more than just profits.
Establish the biggest pain points in production
Manufacturers want to know the best strategies for implementing Industry 4.0 to increase efficiency. The secret is targeting areas on your factory floor where inefficiencies could greatly hinder profit margins. Remember, Industry 4.0 can be taken on in-bite sized pieces, so not everything needs to be changed at once. By targeting the biggest pain points on the factory floor, mid-sized manufacturers can use actionable data to improve performance while demonstrating ROI for smart manufacturing costs. Short periods of change, such as 90 to 120-day increments, should be used and measured against these pain points, so that manufacturers can move towards digital transformation without breaking the bank.
Work out what Industry 4.0 means for your employees
The latest U.S. Bureau of Labor report showed a marked decrease in new hires in the manufacturing sector since May 2020 and many manufacturing floors are struggling with employee retention. Implementation of Industry 4.0 means that employees will not have to capture data points with pencil and paper which improves data accuracy. An improvement in data accuracy brings consistent product quality and less complaints brought to the production floor. Efficiency and the right technology are important to everyone, especially the operators of manufacturing equipment since it affects their daily job.
Also according to the Eurofound (2019) future of manufacturing in Europe research report (Publications Office of the EU, Luxembourg), “Macroeconomic estimates indicate that a further increase in global tariffs will have a more severe impact for jobs in the EU than in other parts of the world. They lead to a 0.3% fall in employment in the EU by 2030. Of all sectors, manufacturing sees the largest percentage decline, of 1.1%.”
This means it is likely that manufacturers will be particularly stretched when it comes to manpower in the coming years, with production expected to remain high despite lower employment.
Implementation of Industry 4.0 means that employees will not have to capture data points with pencil and paper, which improves data accuracy. An improvement in data accuracy brings consistent product quality and fewer complaints brought to the production floor. Efficiency and the right technology are important to everyone, especially the operators of manufacturing equipment since it affects their daily job.
Put plans in place to ensure ROI
The final step is adopting the right tools to ensure the move to Industry 4.0 is a profitable one in terms of ROI. This process can be done in a short space of time (as quickly as a couple of months) if manufacturers embrace sprint methodologies. These involve rapidly assessing current machine quality and data gathering capabilities, before incorporating new technologies that make it much easier to unify and analyse data across various different systems. This results in a much wider range of actionable insight being available to the business, which translates into improved ROI in the long run.
Reaping the rewards of hard work
In the end, big investments should show big results. When implementing Industry 4.0, mid-sized manufacturers should track KPIs, target weak areas, and improve the employee experience to demonstrate a proven ROI. By not implementing the technology for Industry 4.0, mid-sized manufacturers risk incurring a cost of inaction (COI) which is the cost of lost opportunity. Historical habits on factory floors can also affect the bottom line.
Although because a process has always been performed a certain way, there could well be ways of making the task more efficient. Inaction may feel safer, but it does not build a stronger factory floor.
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Magic’s FactoryEye helps you unleash real-time data from your existing systems, by using our low code ‘plug-and play’ integration tool, machines sensors and smart dashboards.
From shop floor to top floor, Magic’s FactoryEye helps you focus on KPI’s that optimize your business performance over time and improves your overall efficiency.