How to make a profit with Industry 4.0?
Digital Transformation is promising to change our lives in different ways. However, for companies selling goods, the best way to change their lives is… to make more money!
In this post, I am going to show you how the Industry 4.0 key technologies will increase the chance of making more money throughout the “making-money” process.
Sales and Margins
If your company sells goods, there are basically 2 ways to increase profits: selling more goods, and increase margins:
How to increase Sales?
We can split the process in 2 groups:
- Selling more goods now;
- Predict customer needs and plan to sell more goods in the nearly or middle/long term future.
The main activity will be to design and develop new attractive products. In this sense:
- Simulation (i.e. modeling, rendering, discrete event, finite element analysis, just to cite the most used) are nowadays essential tools to design and then select the best concept to be developed;
- Similarly, Augmented and Virtual Reality are amazing technologies that help designer in troubleshooting and optimization. Moreover, these technologies are fantastic to present an idea to your stakeholders, to make them understanding the full picture, i.e. how it looks like and how it works with a much better feeling than a simulation on a screen;
- To understand market needs and to explore what competitors are doing, it is also essential to do Market Research. In this sense:
- The Cloud (i.e. google, social media…) is an extraordinary source of information. If the three largest popular social media sites were countries, they would be in the top 10 of most populated nations. And number one is “a social media country”:
- IoT is also a great way to keep product’s traceability and to have customer’s feedbacks. Due to their flexible presentation, QR codes can be placed on point-of-purchase displays and publications, on product packaging, business cards, in television ads, on ticket stubs or on direct mail, and provide a valuable means for consumer communication for marketers. Another important characteristic of QR codes is the possibility of tracking user behaviour and providing statistics about each code (Big Data Analytics, or BDA). Analytics record how many times a code has been scanned, location of individuals scanning, user interests associated with a particular code, etc. Furthermore, these codes can be used by creative agencies to create curiosity among users regarding their brand campaign by simply hiding rewards and discount offerings within a QR code.
To increase your sales now, Figure 4 shows what the main steps are:
- To increase your product performance (i.e. design quality), you can exploit Simulation, VR and AR, as previously discussed;
- To reduce your Process Variability:
- It is essential to collect and analyze data. As Deming said: “without data, you are just another person with an opinion”. Therefore, similarly as for Market Research, IoT, the Cloud and BDA are essential to collect data from your process and analyze them properly;
- Standardization in another fundamental concept. For example, how to ensure that corporations with different sites worldwide, produce the same goods following exactly the same instruction? Using the Cloud is the answer. Cloud-based Work Instruction guarantee that everyone uses the latest issue of the latest instruction;
- Automation enhance high repeatability and reproducibility by definition. The next level is to use Autonomous Robots, including Automated Guided Vehicles and Cobots. These robots have smart sensors and a level of Artificial Intelligence and Machine Learning features to be able to take decisions autonomously
- 1-to-1 customization is probably the main revolutionizing idea of a smart factory. Traditionally, the scale economy is the best solution to keep cost low, but there is a compromise: product’s variation is limited. Once, Henry Ford said: “A customer can have a car painted any color he wants as long as it’s black”. The solution is to develop a Reconfigurable Manufacturing System, and the best way to do that is to exploit Lean 4.0. What is Lean 4.0? Essentially, it is the application of Industry 4.0 technologies to Lean principles. You can find more details on a previous post;
- Develop a proper price strategy. Hence, it is possible to sell more goods if your price is accessible to your market, but, on the other hand, you can’t lower the price too much, as you want to maximize your margin (therefore your profit). Yet, Market Research is a valid tool to explore the market. And yes, IoT, the Cloud and BDA are still valid technologies to use.
How to maximize Margins?
To maximize margins, there are two ways:
- Increase the final price
- Reduce your costs
We have already discussed about the importance of developing a proper price strategy, therefore let’s focus on how to reduce costs:
- Reduce Waste: this is probably the primary way to reduce cost. We have already met the Lean 4.0 concept (click here);
- Lean 4.0 is probably the best option to improve efficiency. Overall equipment effectiveness (OEE) is a measure of how well a manufacturing operation is utilized (facilities, time and material) compared to its full potential, during the periods when it is scheduled to run. it identifies the percentage of manufacturing time that is truly productive. An OEE of 100% means that only good parts are produced (100% quality), at the maximum speed (100% performance), and without interruption (100% availability).
- Reduce the process variability: again, we introduced this concept when we discussed how to increase products performance;
- Process Improvement is an ongoing effort to improve products, services, or processes. These efforts can seek “incremental” improvement over time or “breakthrough” improvement all at once. Delivery (customer valued) processes are constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility. And, again, Lean 4.0 is definitely the best solution.
In this post, I described how the Industry 4.0 key technologies will increase your chance of making more money throughout the “making-money” process. Lean principles, associated with I4.0 technologies, are promising to improve the chance of selling more products now and to develop outstanding future products. Marke Research will get a massive benefits in terms of data collection and analysis. Yet, Lean 4.0 principles will lead to the develop of Smart Factories to enable 1 to 1 personalization and they are promising to maximize margins by reducing waste, process variability and by increasing efficiency at the same time.
Want to know more about Industry 4.0 key technologies?
Accialini Training & Consulting offers support in different ways:
- Sign up for our online courses. For more info, visit skills4i.com, the new e-learning platform designed for and made by Industry Professionals;
- Sign up for our recurring Industry 4.0 webinar events;
- Contact us to discuss your particular needs more in detail: [email protected]
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