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Supply Chain Graphic of the Week: Barriers to Adopting Industry 4.0


Let's Start with What it Is, where No One Quite Agrees; McKinsey Says Barriers Range from Data Integration Issues to... A Lack of Courage?

March 23, 2016
SCDigest Editorial Staff

If you are a manufacturing company, you may now be well down the path to adopting so-called "Industry 4.0" thinking  and technologies.

What, never heard of it? Well, we've heard of it, but can't claim any particular expertise, but nonetheless we were intrigued by a recent article from the consultants at McKinsey that identifies some of the key barriers to getting there.


But let's start with the basics: what is Industry 4.0? Wikepedia says it a "collective term embracing a number of contemporary automation, data exchange and manufacturing technologies," and that it is connected to the concept of the "smart factory."


The "4.0" comes from this being the fourth revolution in manufacturing, starting with (1) the initial industrial revolution in the late 1800s; (2) mass production, powered by electricity, in the 1900s; (3) computers and automation in recent decades and now (4) a new cyber or digital world being adopted in manufacturing.


McKinsey has a different take, saying we get to the new 4.0 from this being the fourth major upheaval in recent manufacturing history, following the Lean revolution of the 1970s, the outsourcing phenomenon of the 1990s, and the automation that took off in the 2000s.


It further states that Industry 4.0 is "the next phase in the digitization of the manufacturing sector, driven by four disruptions: the astonishing rise in data volumes, computational power, and connectivity, especially new low-power wide-area networks; the emergence of analytics and business-intelligence capabilities; new forms of human-machine interaction such as touch interfaces and augmented-reality systems; and improvements in transferring digital instructions to the physical world, such as advanced robotics and 3-D printing."


So it's a pretty broad term, clearly meaning different things to different people/companies, but McKinsey says that "Call it whatever you like; the fact is, Industry 4.0 is gathering force, and executives should carefully monitor the coming changes and develop strategies to take advantage of the new opportunities."


So SCDigest thinks we better all get on the bandwagon to one degree or another.


So while some companies - and the government of Germany, which helped coined the term  in 2012 - have already started the journey, many have clearly not. Why is that?


McKinsey recently published the graphic below, based on a major survey of manufacturers across the globe, that identified the top barriers to Industry 4.0 adoption:



The barriers on the left, for the average company just getting started, are interesting, ranging from the expected (e.g., difficulty coordinating across disparate teams and functions) to more provocative (e.g., the lack of "courage.").


The barriers on the right being encountered by companies already moving down an Industry 4.0 path are also interesting, though as usual data integration challenges are on the list. The lack of knowledge about what third-parties really have the expertise is also interesting.


We do believe an Industry 4.0 train is leaving the station, though the journey will vary considerably by manufacturer. But these barriers from McKinsey do seem like ones companies ought to prepare for.


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