US $421 billion Productivity Cost Reduction Benefit for Year Due to Industry 4.0 - Productivity Analysis

PWC 2016 -  Industry 4.0 Utility - Revenue and Productivity  Potential - Survey based Study

Cost reduction of 3.6% per annum is the potential of industry 4.0. 

Digital technologies enable shorter operational leadtimes, higher asset utilisation, and minimum number of defects (zero defects). All put together our survey reveals the opinion of respondents that $421 billion per year cost reduction/productivity benefit is possible for the next five years (2016 to 2020).

Which individual companies are successful?

PWC's 2018 report indicates GE and Bosch.
GE made a claim in its annual report that its budgeted operating cost has shown a reduction of 0.5 billion. PWC report says GE already achieved One billion dollar cost savings by 2017.
Bosch also is targeting a cost reduction benefit of one billion dollar through IoT implementation.

https://www.pwc.com/gx/en/industries/industries-4.0/landing-page/industry-4.0-building-your-digital-enterprise-april-2016.pdf

The productivity analysis done and communicated by PWC consultants is very interesting and useful information. The analysis has to be extended to country level, enterprise level and department and process level. It is an activity of productivity management function to take up this analytical exercise.

Productivity analysis of new technology

Productivity analysis of new technology is an important step in applied industrial engineering. What PWC consultants attempted and did is an important exercise.


Analysis - Productivity Analysis of New Technology - Applied Industrial Engineering
http://nraoiekc.blogspot.com/2018/06/analysis-productivity-analysis-of-new.html


November 2018

McKinsey & Company - Sectoral Estimates of Productivity Improvement Potential Due to Industry 4.0

This new wave of technology and innovation offers companies opportunities not only to drive a step-change in productivity and efficiency, but also to capture strategic business value by establishing competitive advantage in the way they operate their entire “make to deliver” value chain. The nature and scale of the opportunities will vary from sector to sector and company to company, depending on factors such as value drivers, market dynamics, and operational maturity. However, we routinely see successful technology-enabled transformations dramatically shifting individual value drivers. For example, an aerospace manufacturer with a reputation for high quality but suffering from high labor costs and slow production implemented augmented-reality work instructions for complex assemblies to decrease error rates from 3 percent to nearly 0 percent while increasing productivity by 25 to 30 percent. Similarly, an auto manufacturer that needed to maximize its already highly automated process began analyzing available data for micro-losses in capacity to unlock an additional 3 percent of overall equipment effectiveness. Finally, an electronics manufacturer operating in a high-cost country virtually eliminated material handling labor using automated vehicles for material delivery and robots for palletizing.

For companies that aim well and execute effectively, the resulting cost reductions could be transformational. We estimate that productivity gains and cost savings alone could deliver near-term impact of 200 to 600 basis points of margin expansion across advanced industries, worth $200 billion to $500 billion (Exhibit 1). In the mid- to long-term, even more value could be unlocked through greenfield plants, network reconfiguration, and upgrades to core IT and operating-technology (OT) architecture.

Sources of Value Creation are information flow, intelligent analysis of data/information and automation of transaction processes.

The stages in supply chain process are 1. forecasting, supply quantity and inventory planning 2. procurement process 3. manufacturing and assembly 4. streamlining distribution and delivery

Sectoral cost reduction estimates in $ billions

Automotive                        73 -  178

Other Surface Transport     23 -   58

Aerospace and Defense      25 -   65

Other Industrials and          77 - 198
Semiconductors
Total                                  198 - 499

https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-next-horizon-for-industrial-manufacturing

How will the productivity benefits diffuse in the world GDP?

World GDP in 2017  $80 trillion

World 2017 80,934,771.03
https://data.worldbank.org/indicator/ny.gdp.mktp.cd

Applied Industrial Engineering - Framework - Process Steps - Narayana Rao

Monitor - Explore - Analyze - Develop - Optimize - Participate - Install - Improve

http://nraoiekc.blogspot.com/2018/05/applied-industrial-engineering-process.html

Learn - How to Become Industry 4.0 Digital Manufacturing Champion

PWC's Digital Champion Practices and Blueprinit
http://nraomtr.blogspot.com/2018/07/learn-how-to-become-industry-40-digital.html

Watch the PWC Webinar - Digital Champions Study


Updated on 23 June 2019, 10 July 2018