Are you data ready? How Industry 4.0 is transforming manufacturing in Australia

28 October 2019

Shane Swift , Associate Director, Technology Advisory |

It is undeniable that we live in the age of data. Regardless of your industry or business size, data is being used to inform, innovate and drive business decisions every day.

Industry 4.0, also known as ‘the fourth industrial revolution’, is characterised by this interconnected relationship between technology and data – the more data businesses can collect and interpret, the better they can innovate and develop new technologies and processes. This in turn enables them to collect and utilise more data to make better decisions and so on. By using data and technologies such as automation, predictive modelling, AI and machine learning and advanced robotics, businesses can optimise the manufacturing process to create ‘smart factories’.

These smart factories are where the physical and digital worlds converge as operations technology and information technology integrate across the manufacturer’s value chain to become one collaborative and seamless system. As a result, smart factories have the ability to make decisions autonomously across the entire supply chain - such as running diagnostics immediately as needed, or altering production volumes according to real-time demand.

Therefore, it’s no surprise we are now starting to see more and more manufacturers investing in their data capability - as even small improvements in collecting and utilising their data can result in substantial productivity and efficiency gains toward overall business growth.

However, access to quality data is critical for them to work.

When deciding on what technology you will invest in, you must be asking yourself – what data do you need and, what enabling technology is needed to unlock insights and create business value. With this in mind, what key data trends can you expect to see more manufacturers using to transform their business?

The top 3 data-driven trends coming out of Industry 4.0

While there are many digital and data trends coming out of Industry 4.0, we have shared our top three to show the benefits of incorporating these into your manufacturing business.

For more information on Industry 4.0 and how data can be used in your business, please see our Guide to Industry 4.0.

1. Industrial IoT (Internet of Things)

IoT is the creation of a ‘network,’ where technologies such as production equipment, sensors and software all collect and exchange data throughout the manufacturing process. This greater interconnectivity between digital and physical devices can provide real-time insights into operating and supply chain efficiencies, predict future maintenance needs (preventative maintenance), reduce costs through inventory optimisation and help you to make more strategic business decisions. For those manufacturers who sit on Level 1 of the Industry 4.0 middle market maturity model, exploring the possibilities of IoT is a great place to start an Industry 4.0 transformation journey.

2. Cloud technology

When people think of cloud technology, they most commonly associate it with the storage of data or information in a virtual, internet-based space commonly called ‘cloud’. This virtual data storage allows for greater visibility and more informed decisions making, as real-time data can be accessed, processed and shared instantly.

However, cloud technology covers a much larger suite of virtual, computing services and resources including analytics, software, intelligence and networking, just to name a few. The common factor in all of these is that they are ‘delivered’ via the internet allowing for greater speed, accessibility and flexibility. One of the main benefits of cloud technology is that it can scaled up or down as a business needs, providing greater agility in the innovation process - for example - rapid product development. It also decreases the barriers to accessing substantial computer power for smaller firms who don’t need large capital outlays as they can ‘rent’ the storage and compute resources they need when they need them.

More recently, we have started to see the emergence of hybrid cloud solutions – a mixed environment where a private and public cloud combine. This often gives businesses the best of both worlds; the security and customisation of the private cloud (or enterprise clouds) and the size, speed and scalability of a public cloud (such as AWS, GCP, Azure). One of the great benefits of hybrid clouds is that they allow businesses to quickly and seamlessly scale up their resources temporarily during peak times while still ensuring that their ‘crown jewels’ are safe and secure.

Finally, transforming to the cloud also plays a critical role in supporting other technologies such as IoT, additive manufacturing and AI and automated robotics.

3. Advanced analytics and modelling

Manufacturers can use analytics to scrutinise each part of their supply chain to create value by customising and improve their processes as well as make more strategic business decisions.

  • Modelling helps overcome common business challenges like cash flow management, excess stock and raw materials and variability in product quality. Using business data, we can analyse their output needs and develop input projections over a period. Based on this, we can then go back and see if the raw materials purchased actually aligned to the projections or whether there was an excess. This shows you if you’re over- or under-investing in your stock level, which in turn may help free up cash flow.
  • Buyer behaviour is another example of how analytics can help analyse the purchasing behaviours of your customers to predict future demand levels, allowing you to determine the amount of inputs required and production load. This can help when making decisions about resourcing and pricing for future contracts.
  • Predictive maintenance is revolutionising manufacturing. Considering that manufacturing is driven by machines, having advanced analytics to forecast when a machine will fail or the types of common problems that could be encountered means less down-time, and improved maintenance means longevity of your critical assets.

Why is improving data capability so important for Australian middle-market manufacturers?

This largely comes down to the fact that there are now many more market pressures at play than ever before such as, increased automation; new entrants (including from alternative industries); regulatory shifts; increased security risks; a greater focus on cost and changing customer expectations - just to name a few. Together all of these changes have created a more challenging economy for manufacturers to navigate, leaving many businesses feeling overwhelmed when it comes to how best to respond.

However, it’s important to realise that these pressures also bring many opportunities. As manufacturers now have access to more and more data about themselves, their market and their customers, they can quickly identify deficiencies/areas for improvement in their business and develop targeted plans to combat them.

On the other hand, manufacturers that don't have a focus on, or an understanding of what data is available in their business are missing out potential opportunities and limiting their abilities to make good business decisions.

Some of the benefits of improving your data capability are:

  • Greater transparency into your cash flow
  • Improved optimisation of raw materials on hand
  • Stronger alignment of outputs to customer needs along the supply chain
  • Higher product quality
  • Early detection of skill shortages
  • Increased production efficiency and reduced downtime.

What can you do to build and strengthen your data capability?

1.    Have a plan for what you hope to achieve

Taking the time to brainstorm and develop specific objectives for what your business wants to achieve is crucial for effectively building your data capability. Identifying specific problems you’d like to solve and areas of your business that you’d like to improve can help you to focus your efforts and identify any areas. We can assist you with data capability assessments to discover where opportunities for your business may lie.

Some of the things you could ask yourself are:

  • What problem am I hoping so solve with my data?
  • What data do I currently have available in my business?
  • Are there areas where I could collect more data? Do I need external support and/or additional technologies to achieve this?

2.    Develop a data management framework

While having the data is important, it’s even more crucial that it is stored, processed and maintained in a way that ensures easy accessibility and accuracy. Key questions you need to ask yourself are – what does data management and information sharing look like in my organisation and for my suppliers?

As models and data using technologies are only as useful as the data put into them, it’s vital that you have the right data management framework tailored for your business. The key components of an effective data management framework are:

  • Data governance
  • Data architecture
  • Data modelling and design
  • Data security
  • Data quality
  • Data integration and interoperability
  • Document and content management
  • Reference and master data
  • Data warehousing and business intelligence
  • Metadata.

At BDO, we have considerable experience in helping businesses develop best practice data management frameworks and understand the specialised requirements manufacturers have when implementing them.

3.    Invest in getting the right capabilities

Your business might be data rich with lots of valuable information on hand, but to truly take advantage of it you need to have a team with the right skills to understand and apply your data.

At a management level, key decision makers need to be data literate; understanding how to interpret trends or changes and make strategic decisions with confidence based on them. For example, a decision to upgrade or expand a facility or to invest in a new technology or to release a product line. At a floor level, staff operating and managing the production line need the skills to effectively use and maintain new technologies and process information – for example, conducting maintenance and quickly and effectively responding to changes in the production line.

At the end of the day, no matter how good your tech and data is, it is how well you have prepared and trained your staff for the skill changes that Industry 4.0 brings, which will biggest successes for your business. To find out more about how to prepare your people for Industry 4.0, please see our article on the 7 C’s of championing change.

Overall, understanding and using data is critical for leveraging Industry 4.0, as it gives you and your staff more quality information to make better business decisions. Whether it is around ordering processes, capital investments, facility layouts, quality control or training and recruitment, investing in your data capability is investing in the future of your manufacturing business.

At BDO, our specialists in technology, data and people advisory have extensive experience working with Australian manufacturers to better understand and leverage the data available in their businesses, helping them to identify and resolve deficiencies, capitalise on opportunities and make confident data-driven decisions.

If you need more information on how we can help you transform your manufacturing business with data, refer to our guide or contact Shane Swift for more information.

Download BDO's Guide to Manufacturing 4.0