The New Industrial Revolution

Executives discuss the implications of "Industry 4.0" for their enterprises

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We live in a largely connected world where people think of something and they do it, or they want something and get it instantaneously. This mindset is driving the need for changes in manufacturing.

The relationship between industry and technology is constantly evolving. Yet there are specific points in history that represent quantum leaps forward in terms of productivity and efficiency. First, production was mechanized using water and steam power. Then electricity enabled greater mass production. More recently, electronics allowed vastly increased automation of processes. Now the proliferation of sophisticated technologies is generating a constant stream of data that holds tremendous potential.

To discuss this dawning revolution – commonly referred to as "Industry 4.0" – and its diverse implications, Baird convened a panel of senior executives from industrial companies around the world.


What specific technologies are moving the needle on Industry 4.0 and where might this trend be taking us?


The new industrial revolution is about extracting real value from large volumes of data that are inherent in every part of the manufacturing and industrial enterprise. When we think about smart manufacturing or the connected enterprise, we typically think of five technologies that are foundational: a secure network infrastructure; a multidiscipline control and information platform; scalable, high-power computing resources; information management and analytics; and mobility with modern human-machine interface technologies.


It's ultimately about the pursuit of greater efficiency – the integration of man and machine with underlying constant data analysis. The part that's truly intriguing is taking data analytics and translating them into the mobility element through enterprise software, improving the logistics and fueling your supply chain requirements. This feeds into autonomous robotics and predictive safety systems.

From a penetration standpoint, I think we're still relatively in our infancy. The market is enormous, and penetration of advanced industrial automation equipment is probably somewhere between 15 and 30% with projected double-digit growth over the next five to ten years. It's truly a massive opportunity.


This question really gets at the overall potential for automation technologies and what full penetration might look like. I think ultimately we can envision a lights-out manufacturing facility or an operator-free environment as indicating full adoption. We see machine vision as a key enabling technology.

In the markets served by Cognex, we see automotive and semiconductor manufacture as perhaps further down the road of adoption. But even so they are still less than 25% penetrated. At the other end of the spectrum, the consumer electronics market literally has hundreds of thousands of people involved in executing basic assembly tasks by hand that in the long run will be done better when automated with machine vision and robotics. That market might have less than 5% penetration of the kind of technologies we're talking about.


What is driving the adoption of these technologies and what benefits are companies seeing?


From our perspective, the two most important drivers are productivity and global competitiveness. These can translate into lower cost of production, faster time to market, improving asset uptime and managing enterprise risks.


Competitiveness is certainly a key driver. There's a desire to have real-time insight into your business and the ability to apply the necessary measures to enact the required changes. However, I wouldn't necessarily point to cost as a universal driver for companies to pursue new technologies and solutions. Over time technology advances and the cost goes down.

For us, the core drivers are changes in customer expectations and behaviors. We live in a largely connected world where people think of something and they do it, or they want something and get it instantaneously. This mindset is driving the need for changes in manufacturing.

Robotic arm over assembly line
Ultimately we can envision a lights-out manufacturing facility or an operator-free environment as indicating full adoption. We see machine vision as a key enabling technology.


It's all about flexibility and the ability to scale up or down very quickly in a very rapidly changing environment.

From my standpoint, I think it's home delivery that's pushing all that flexibility. Amazon Prime and others have pushed the world to same-day or next-day delivery as the expectation. And whether you're delivering groceries or consumer products, suppliers must cope with the demands of building infrastructure to accommodate rapid delivery.

I would tell you that I see our customers making investments less because of the cost of labor, but more for the need for flexibility and time required to train labor or deal with turnover. It's better to automate and optimize processes that can handle that up-and-down flexibility. If you've got the process right, you can do it with fewer people.


What are some of the challenges to adoption and how are they being addressed?


Data security is certainly a potential barrier to adoption. Today, the vast majority of our customers connect our vision and ID products to automation controllers, which then connect to ERP systems. In this sort of traditional closed-network factory environment, their existing security systems work well. But the real value of Industry 4.0 is the adoption of Internet-connected devices across dispersed manufacturing locations. This is inherently more complex from a security standpoint, and that is holding up adoption.


We're seeing the same things. And the concern is that, as Industry 4.0 moves toward the truly connected enterprise, it opens up more threats of opportunity. Right now there are some standard protocols for cryptography in development, and you'll probably see that more and more embedded into the devices themselves as the processing power within the devices themselves becomes more robust over time to handle such algorithms. Still, I would say it's in its infancy, so customers are still approaching it in more or less the traditional way.


This is definitely a growing concern for our large, multinational clients. These are the big retailers and Internet companies of the world, and they're frequently convinced that they are going to be targeted by hackers. So they're extremely vigilant, yet they still need to remain connected. And that can present challenges.

For example, when working within a company's carefully established security guidelines, you might find that the company's own subsidiaries – particularly those that operate in other parts of the world – don't always necessarily follow those guidelines. And there's a risk to suppliers of getting caught in the middle. We just have to be very careful about what we deliver to customers, and work to ensure that plays very well into their network security efforts.


I think the best approach to security is defense in depth, which is really building layered security solutions and utilizing reference architectures for implementing end-to-end security.

Security is a constantly moving target. For the security solutions that are implemented today, we have to build in the ability to continually update those solutions so we can maintain a desired level of resiliency and confidence for manufacturing companies to secure their manufacturing operations and their enterprise.

I don't believe it's necessarily more of a barrier to adoption than it is for the day-to-day business you and I do electronically. Whether it's email or banking or shopping, security is an issue for all these different types of operations that we do over the Internet every day. It's no different in the manufacturing world, and I don't think the threat is going to keep the manufacturing community, the production environments, from adopting modern technologies. But it is an issue that needs to be addressed.

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I see our customers making investments less because of the cost of labor, but more for the need for flexibility and time required to train labor or deal with turnover.


Another barrier we've encountered is a shortage of qualified engineering resources at manufacturers that can successfully deploy technology, particularly in markets that need to scale production very quickly. There are projects that our larger customers in fields such as consumer electronics or logistics would like to do, but available engineering resources make it difficult or impossible to hit desired timeframes.


We're also seeing a lack of people in industrial and manufacturing engineering departments who have the available bandwidth to manage these projects. Once they commit, it becomes an issue of training, but in our software world the engagement of the customer – and their ability to get engaged and help train their own people to effectively own the software – can tell you a lot about how successful a project is going to be.

It's worth mentioning that lead times are shortening as well. We already talked about the global move to a rapid delivery model and how that's changing our customers' worlds. Many have competing investments they've made in different technologies or different ways of doing things that they're looking at, but they are all requiring the suppliers of automation to dramatically cut their delivery and implementation times. Customer preferences also shift very fast, so there's a lot more mass customization than ever before.


What do you see as the next "big things" that could push the evolution further faster?

I think manufacturing will change more in the next ten years than in the past fifty due to the rapid evolution of information and communication technologies.
Robotic assembly line


There is enormous untapped demand for this technology. In developed markets, opportunities relate to reducing labor costs and improving product quality, which are huge. There's even more opportunity in evolving markets, where companies have traditionally built manufacturing organizations around a low-cost, high-volume model, and now need to raise their quality in order to be globally competitive. In these markets, opportunities are related to error proofing, improving through-put and also, as strange as it sounds, addressing labor shortages. More engineering resources would accelerate the ability of companies to take advantage of the inherent potential of these new technologies. Generally, we only see high levels of engineering capability today in very advanced industries, such as consumer electronics, automotive, and to a certain degree, logistics.


To me, it's a continuum of putting the power of the microprocessor to work on the shop or distribution center floor. A generation ago, we were automating what people could do. Then we got to the point where we're automating well beyond what an individual can do and now we're getting to the whole next generation of where that's headed.

In our world, it's more of a question of how you can efficiently distribute finished products and get them to the right place. We're about using all that data analytics and sensing and capability to be able to get to the volumes you need to get to very quickly and very accurately.

The big driver for us is accuracy. You have to have 100% accuracy all the time. Frankly, that often means removing people from the process, developing vision systems, leveraging software, using bar coding. It's a drive to get rid of all errors because if you ship those errors out, the cost is just horrendous.

Robotic assembly line at a distance


There's another element to this, albeit a more intangible one: Many companies have a great interest in reducing their liability or reducing their risk. Food and drug safety and security companies are a great example. But the benefits – how do you measure them? Minimization of impact to brand equity, overall cost, the cost of a recall, the impact of a recall and the savings associated with avoiding one. Those are huge potential cost savings opportunities that really speak to the importance of risk mitigation going forward.

I also see the processing power of microchips growing exponentially and driving the adoption of Industry 4.0. The emerging technologies really are going to be focused in the software, the enterprise software, the analytics capability, taking all this massive data from the smart connected devices, converting it, transforming it into the knowledge and then the ability to make decisions.

We talk about taking an intelligent platform from a reasoning standpoint, being able to make adaptive decisions, embedding that technology into autonomous devices, converting the decision capabilities of this analytics software into the physical manifestation, whether it be through collaborative robotics as everyone's talking about most recently or if it's autonomous self-guided vehicles, and empowering them with so-called autonomous decision-making that's collaborative in the environment, in the production environment. It's really an exciting time to be part of the industry. It's a great time to be in this market and we're really looking forward to what's next.


I think manufacturing will change more in the next ten years than in the past fifty due to the rapid evolution of information and communication technologies. Robotics, new materials, advanced analytics and optimization algorithms, learning systems, micro grids, modeling and simulation, and high-performance computing – these are just a few examples of technologies that will transform manufacturing in the next decade.

I agree that this is a great time to be in automation and manufacturing. I'm really excited about the future because the rapid technology evolution is accelerating the connected enterprise and the transformation of manufacturing to yield unprecedented benefits in productivity and global competitiveness in the next five to ten years.

Close-up of circuits/microchip
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