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Cost benefit analysis of Industry 4.0

Industry 4.0 encompasses the intelligent interconnectivity between automation, digitization, and data analytics. Manufacturers are in a race against time to gain a competitive advantage from Industry 4.0 investments.

The Great Recession of 2007-09, as well as the Global Pandemic in 2020 has made companies realize the importance of planning and evaluating technology spend to be able to quantify the returns and create a sustainable environment to promote efficiencies and positive outcomes. This has become a mandatory point during budget approvals for many manufacturers and large enterprises today prior to any technology related engagement.

The Fourth Industrial Revolution has an impact on the entire manufacturing value chain through effective utilization of all data into valuable knowledge to improve competitiveness, into new insights to raise productivity, and build the basis for new business models enabling a smart, intelligent, efficient, and connected factory.

Industry 4.0 digitises and integrates processes horizontally and vertically across the entire organisation, from product development and purchasing, through manufacturing, logistics and service. All data about operations processes, process efficiency and quality management, as well as operations planning are available real-time, supported and optimised in an integrated network.

More and more publications are emerging about the practical implementation of these technologies, but there is very little information regarding their costs and other cost related implications. Therefore, there is a considerable need to understand the commercial benefits of Industry 4.0, knowing that there will be a reliable return-on-investment, and paying for Industry 4.0 technology at a rate lower than or matching the expected commercial gains, will make the investments sustainable.

To be competitive, manufacturers need to invest in the right project in the right time in order to stay ahead in the competition and maximize profits. Companies must have a clear vision for the project, a concrete implementation strategy and a solid understanding of how it will produce a Return on Investment (ROI).

Every company has to recognise where the biggest opportunity for ROI lies and discover the best practices to achieve it. The ROI for IoT comes from the efficiency improvements achieved through actionable insights enabled by real-time data collected from machines across the value chain. These real-time insights, need to be used in a way that can reinvent business processes and business models.

These are few pieces of advice for better planning of an IoT solution for maximum ROI:

·         Determining company’s business objectives, goals and vision

·         Identify opportunities for improvements

·         Prioritize and identify low hanging fruits

·         Monitor efficiency improvements in one area and roll out to other process areas

·         Starting from small and then to scale big

Organizations have seen their ROI coming from multiple points shown below;

·         ~ 10-15% increase in plant availability

·         ~ 8-12% improvements in productivity through exception and alert management

·         ~ 6-8% savings in input material costs through data science predictability enablement

·         ~ 20-35% reduction in maintenance cost and planning time

·         ~ 2% manpower release per department in a factory and focus on core activity rather than data collection

·         ~20% improvement in operational efficiency

·         ~ 10% improvement in productivity and ~ 30-35% reduction in rejection rates

·         Proactive anomaly detection resulting in reduction of process variations & downtime events resulting in ~3-8% improvements in process yields

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