INDUSTRY 4.0
Intelligent Factories Report
All of our customers have initiatives that are looking at how they're going to change for the future MIKE LACKEY
GLOBAL HEAD OF SOLUTION MANAGEMENT FOR DIGITAL MANUFACTURING
INTELLIGENT FACTORIES REPORT
INTRODUCTION
Intelligent Factories Intelligent Factories are meeting the demands of today and defining the future of manufacturing through SAP’s Industry 4.0 initiative
T
he manufacturing sector has pioneered global shifts in commerce and trade since the first industrial revolution brought affordable consumer products to the masses. Automation, a commonplace feature in factories and production plants for generations, increased efficiency, delivered better value to stakeholders and customers alike, and placed safety at the forefront of the workplace. Today, assailed on all sides by the global disruption of a prevailing pandemic, regionalised geopolitical complexity including Brexit or trade wars, and customer demands that can shift with the wind, manufacturers stand on the digital transformation of Industry 4.0, the next seismic shift. Positioned at the centre of this industry shift is the Intelligent Factory, a self-optimising, data-driven strategy that will define the future of manufacturing and production. Agile enough to overcome unforeseen disruption and prescriptive enough to drive and shape the direction of consumer habits and expectations, Intelligent Factories
promise to revolutionise the quality, customisation and speed of delivery in everything from specialist medical equipment to consumer running shoes. The result is an industry that realises change is a necessity rather than a means to a competitive edge. “All of our customers have initiatives that are looking at how they're going to change for the future,” says Mike Lackey, Global Head of Solution Management for Digital Manufacturing at SAP. Lackey is at the forefront of SAP’s Intelligent Factory initiative, driving agility, efficiency and resilience, to deliver on the customer demands of today. Here he explores the Geopolitical benefits this model upheaval brings to efficiency, can fluctuate resilience, and agility, demand between and outlines how SAP is guiding businesses through their digital transformation journey to future growth and innovation.
400% 50%
capacity down to
capacity
SAP INDUSTRY 4.0
EXECUTIVE INTERVIEW
The Intelligent Future of Manufacturing
I
SAP’s Mike Lackey explores the benefits Intelligent Factories bring to efficiency, resilience, and agility, and how SAP is guiding businesses through their digital transformation journey to future growth and innovation
n light of global disruption and shifting customer demand, the manufacturing sector finds itself faced with too many questions and not enough answers. The solution is Intelligent Factories, says Mike Lackey, Global Head of Solution Management for Digital Manufacturing at SAP. Rather than promising a one-sizefits-all solution, the model is infinitely configurable and as varied as the business cases and disruptions it aims to solve. Lackey describes the system as “self optimising”. Driven by data, the Intelligent Factory can react to immediate issues, as well as improving over time to minimise disruption and boost efficiency in the long term. “As the factory is producing more intelligent products, and as it incorporates more intelligent assets, you’re able to collect more data than ever before,” Lackey explains. “But it’s not just about more data, it’s about 4
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looking at the real data that impacts the business and acting upon it. To bring cost, customer, and supplier data all down to the shop floor, that’s what we mean by the Intelligent Factory.”
MIKE LACKEY
INTELLIGENCE IN THE PANDEMIC ERA The COVID-19 pandemic has been an eye-opening experience for business leaders, accelerating the rate of change across all industries. Though the global outbreak is the most extreme circumstance, manufacturers are all too familiar with the disruption of global events beyond their control. Geopolitical upheaval such as Brexit and global trade wars brought their own set of complications to the sector in 2020, while earthquakes, tsunamis and other natural disasters can be equally damaging, as evidenced in the ongoing shortage of semiconductor chips. In these situations, demand can fluctuate between 400% capacity down
INTELLIGENT FACTORIES REPORT
to 50% capacity, or more. With Industry 4.0, businesses are able to consolidate their entire global operation, shifting production on a global-level. “Wherever operations are based, whether Asia, Europe or North America, businesses cannot look at each plant as a single silo. They must look at all plants in their global operation, and how best to leverage those to deliver on all their customer demand. By building standardisation and intelligence into those plants, they can understand where to move production. They can see the impact on their business.” Lackey considers the prevailing congestion in global ocean freight and shipping, and whether flying goods could be a suitable alternative. “That adds an exponential cost, but by bringing all of that data together, professionals can clearly assess what the impact will be on the business, on profitability, and on the actual ability to
To bring cost, customer and supplier data all down to the shop floor to aid decision making that's what we mean by the Intelligent Factory deliver. All that data together gives them the ability to make the decisions to best support their customers. RISE OF THE INTELLIGENT CONSUMER With more information at their fingertips than ever before, the intelligent consumer is another major forcing factor for manufacturing. Demand for more personalised products is growing at both an enterprise and consumer level, alongside expectations that they are produced from sustainably sourced materials, and delivered in a time frame of their choosing. Responding to that demand will be critical for growth, says Lackey: “They’re willing to pay for that level of customisation,” Lackey says. “And the companies that are offering that level of customer service, that are customer driven and are making decisions based on data-driven information, are the ones that are going to succeed. When you start going from mass production to mass customisation, though, you still have to hit volumes. There’s still a production plan to adhere to, and high sap.com
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SAP INDUSTRY 4.0
Mike Lackey from SAP talks about Supply Chain
quality standards - all of which must be delivered with the resources on hand. Bringing intelligence to the process allows manufacturers to respond faster and achieve these outcomes.” Here Intelligent Factories come into their own. Quality control at every step of the process creates a virtuous feedback loop, empowering
All that data together gives them the ability to make the decisions to best support their customers 6
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employees and leveraging data to eradicate missteps sooner, rather than as a reactionary step. AI and ML technologies which “can see more than the human eye” can automate this process, freeing humans to spend time on value-add tasks. “The result is more quality throughout the entire system,” Lackey says. “You’re demanding more quality from your suppliers, more quality from the design phase, and you have better visibility into your planning. That makes everything that comes together on the shop floor even stronger, and the quality level goes up exponentially.” INTELLIGENCE POWERED BY SAP Intelligent Factories is, in many ways, the culmination of SAP’s industry
INTELLIGENT FACTORIES REPORT
defining Industry 4.0 initiative: operated by Empowered People, leveraging Intelligent Assets, to produce Intelligent Products. “We’re tying everything in to digital supply chain, how assets are managed, the OEB, and keeping machines running at 99.9% uptime and efficiency. SAP is also bringing in the environmental and sustainability concerns, ensuring we know if the materials are sustainably sourced and processed, the carbon footprint of the factory, and what that means to corporate compliance reporting. And then there’s
The innovation that we're delivering can take our customers through that entire journey, fully integrated throughout the supply chain health and safety, guaranteeing workers are operating safely. And SAP brings that all together. “The innovation that we're delivering can take our customers through that entire journey, fully integrated through end-toend business processes,” Lackey says. "We're delivering value with all the assets and the innovation and the applications you need for digital transformation that is connected through your supply chain. And that's a big win for our customers when they have the agility and resilience to respond to changing customer demand eliminating waste and complexity.”
MIKE LACKEY TITLE: GLOBAL VICE PRESIDENT OF SOLUTION MANAGEMENT, DIGITAL MANUFACTURING Mike Lackey joined SAP in 2008 through the acquisition of Visiprise and is the Global Head of Solution Management, Digital Manufacturing. With previous roles at Visiprise, NetVendor and Teradyne Manufacturing Software Group, Mr. Lackey has a unique set of knowledge that covers both manufacturing software and design collaboration along with over 30 years of experience in the manufacturing sector. Early in his career, he started as a manufacturing engineer with DCA/ Attachmate, which provided him with invaluable first-hand knowledge and understanding of how SAP customers can use SAP’s Digital Manufacturing Solution Portfolio to improve their global operations. Mr. Lackey earned a Bachelor of Science degree in Industrial Engineering from Georgia Institute of Technology and an MA in Business Administration from Mercer University with dual concentrations in International Business and Marketing.
SAP INDUSTRY 4.0
INTELLIGENT FACTORIES BY THE NUMBERS
$210 billion
Investment in Industry 4.0 is expected by 2026 Source: Facts & Factors
8 10
70%
in manufacturers agree intelligent automation will help their business improve results
of manufacturers in “pilot purgatory”, unable to scale smart factory innovations
Source: 2020 IBM Institute for Business Value
Source: McKinsey
59% 88%
of manufacturers say Industry 4.0 will have “significant impact” on the industry in next five years
of manufacturers forecast an increase in smart devices and embedded intelligence in their production processes within two years…
46%
…despite this just of company executive have full access to the data access they need for Industry 4.0 analytics and planning Areas of biggest performance improvements from Industry 4.0
85%
Machine reliability and uptime 8
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84% Product quality
83% Customer Satisfaction
Source: MPI/SAP
FEATURE HEADER INTELLIGENT FACTORIES REPORT
Top challenges of Industry 4.0 Network capacity to handle Industry 4.0
18% Network capabilities to handle Industry 4.0
Adapting existing technologies
Impact of Industry 4.0 in next 5 years 4%
Limited impact
6%
33% Some imapct
No impact
24%
19% 19%
20%
Assembly
28%
Warehousing
Welding
37% 40%
29%
Packaging
37% 39%
27% 26%
33% 39%
26%
38%
25% 24%
Fabrication/ Stamping
22%
Additive Manufacturing
22%
Some application
Source: MPI/SAP
30%
Document Management
Heat-treating
39%
30%
Shipping/Logitistics/ Transportation
Maintenance
Significant imapct
Incorporating smart devices and embedded intelligence
Processes where smart devices and embedded intelligence has been applied
Plating or Painting
56%
Identifying opportunities and benefits
33% 43% 38%
Significant application
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