Capturing value at scale in discrete manufacturing with Industry 4.0

The efforts of many companies to apply Industry 4.0 solutions are stuck in “pilot purgatory.” Determining where to focus and how to scale can help generate a meaningful, lasting impact.

Industry 4.0 could have an estimated value-creation potential for manufacturers and suppliers of $3.7 trillion in 2025, and hopes are high that it could bring the next industrial revolution to discrete manufacturing. Yet only about 30 percent of companies are capturing value from Industry 4.0 solutions;at scale today. Companies tend to envision technology development going forward instead of identifying the areas of largest impact and tracking these back to Industry 4.0 value drivers. Furthermore, governance and organizational anchoring are often unclear. The consequent hurdles—resulting from limited resources, high cost of scaling, a lack of clarity about business value, and an overwhelming number of potential use cases—leave the majority of companies stuck in “pilot purgatory”;(Exhibit 1).

Exhibit

To provide a perspective on how to get “unstuck,” our new report—Industry 4.0: Capturing value at scale in discrete manufacturing—illuminates two key issues: where to focus and how to scale.

Drawing on the latest McKinsey research and a series of interviews, we arrived at a number of key insights.

Where to focus: Factory archetypes and industry-specific key value drivers

We see two main dimensions that differentiate factory types with regard to their Industry 4.0 key value drivers: number of variants produced in a factory and average lot size. Along these dimensions, we have identified three factory archetypes, with specific productivity imperatives that help to identify industry-specific key value drivers (Exhibit 2):

Small-lot manufacturing aims to remain efficient down to lot size 1.

Mass-customized production focuses on enabling a certain degree of product variance while upholding high throughput and consistent quality.

High-volume production aims for fully automated production and maximized overall equipment effectiveness (OEE), with enough flexibility to adapt to the product mix.

Exhibit

For each factory archetype, the relevant key value drivers are crucial for generating impact at scale. Industry 4.0 target pictures for machinery (small-lot manufacturing), automotive (mass-customized production), and consumer electronics (high-volume production) provide real-world...