small business: Industry 4.0: why thousands of small businesses continue to view the digital transition with skepticism

Within the general framework of Industry 4.0, the digitization and interconnection of new and existing manufacturing technologies with a high degree of autonomy and intelligence offers many business opportunities for manufacturing companies. This has been recognized by governments, businesses and service providers and is demonstrated by Industry 4.0 policies and investments by India’s national and state governments to enhance demand and demand growth. offer. Importantly, the need for resilient and responsive manufacturing and supply chain businesses became evident during the height of the pandemic.

The pandemic has exacerbated the weakening of Indian manufacturing output since 2017-2018 due to unpredictable market dynamics in addition to changing political and regulatory trends. This digitization has catalyzed businesses and markets, and current times are expected to usher in industry 4.0 solutions more rapidly, through which digital technologies will be integrated into operational manufacturing processes. The resulting Advanced Digital Production (ADP) solutions can harness the leap forward in operational technologies and hence productivity and competitiveness.

Large companies in India are largely competitive with modern production capabilities. Advances in manufacturing over the past decade, driven by automation and robotics, have been key to enabling many large companies to participate in global value chains. And to keep up with the progress of Industry 4.0, early adopters are shifting to vertical integration of their manufacturing systems and processes. ADP solutions and services are largely enabled by artificial intelligence, machine language, big data analytics, cloud computing, Internet of Things and additive manufacturing, using real-time data collected with a widespread sensing and improving the use of automation and robotics, among others.

ADP enables companies to quickly capture customer experiences and expectations, as decision-making becomes seamless from boardroom to shop floor and back. With real-time data, companies are able to exceptionally optimize manufacturing costs and footprint. These smart companies are not only leading the way with the aim of gaining better market share and diversifying, the quality, precision and efficiency of resources also allow them to keep pace with global changes in manufacturing. to achieve global net zero goals driven by international climate change commitments.

Despite these promising opportunities, ADP’s transformation is also met with skepticism given the huge adoption gap of the technology, especially among MSMEs. India’s lower manufacturing maturity is a legacy challenge and a critical missed opportunity in the economy. Yet, in this post-pandemic peak era, as various reports share, the manufacturing sector wants to benefit from an accelerated leap to modern technologies and solutions. Yet the tendency for small businesses to view ADP “as an overhaul of existing equipment with complex technologies” or “not applicable” to their operations can be a serious deterrent.

Such obstacles can critically affect the ambitions of the Indian government under Atmanirbhar Bharat, especially the Production Linked Incentives (PLI) scheme to advance the country’s manufacturing sector. The program aims to reduce the import dependency of the 14 target sectors and boost competitive exports while generating employment. Without losing sight of the role of supply chains with strong backward linkages, the LIP program has clear intentions to improve their capabilities, including encouraging high-tech production in target sectors. Yet the near-missing business support ecosystem for digital transitions and the lack of information for selecting viable technologies, reliable vendors, skilled personnel, and appropriate financing present real-time barriers to the adoption of digital technologies. ADP in supply chains. Unfortunately, some small businesses have already found themselves stuck with digital solution technologies that were not aligned with their business needs. These white horses deter other companies from proactively deploying digital solutions to create productive connections with suppliers or buyers upstream and downstream in their supply chains.

The automotive sector in India is a good example. An indicator of India’s manufacturing economy, the automotive sector is valued at over $100 billion. Automotive industry stakeholders have expressed the need for stronger automation and technological advancement in their supply chains, although they have played a crucial role in making original equipment manufacturers (OEM) more productive and competent over the past six decades.

From designing major systems to high performance specifications while meeting emission standards and cost limits set by OEMs, reducing maintenance complexity and locally designing many components, the symbiotic relationships within of the multi-level supply chain are well established. Yet getting Tier 2 and Tier 3 suppliers to adopt digital manufacturing processes to support a seamless and sustainable transition across the industry is neither transparent nor straightforward. A recent study conducted by the United Nations Industrial Development Organization (UNIDO) with the Association of Automotive Component Manufacturers on “Assessment of the application of I4.0 and digitalization in the context of automotive component manufacturing in India” revealed only a minority of companies using advanced manufacturing. methods with numerical capabilities. While a quarter of companies surveyed said they use real-time data for assessment and decision-making, nearly 40% of companies reported a lack of technology to collect data from machines or operations.

The ambition to digitize manufacturing supply chains needs to be clarified at three levels: how individual companies process data (prediction; inventory reduction and closing financial cycles); improve overall supply chain productivity; and – thus joining the broader Industry 4.0 ambitions of leading companies or equipment manufacturers. The first requires clear demonstrations and support to supply chain companies; how are they positioned to take advantage of digitally controlled production activities and what are some of the near-term opportunities? This can be tracking resources, reusing components, reducing raw materials or waste generated (thereby meeting regulatory requirements) and improving worker productivity and safety (automation to perform hazardous operations) , for example.

What makes ADP exciting is the high degree of flexibility and modularity that is possible, allowing solution providers to reduce complexities, while ensuring customization and cost optimization for businesses. Above all, all these opportunities will be based on reliable and real-time data. The UNIDO study in the automotive sector observed that although various Tier 3 companies are already using simple sensor-based solutions to collect basic machine and operating data (e.g. temperature, vibration), data is manually entered by unskilled labor and manually entered into

by semi-skilled workers (increasing the risk of error). Although enterprise resource solutions have evolved over the past decade to meet various industry requirements and have become cost-effective, their usefulness is generally not maximized across the board. So generating data with simple digital solutions in Tier 3 businesses and forming baselines for broader supply chain goals could be a viable starting point. It also places a great responsibility on OEMs and leading companies to set ambitions.

It is evident that the Indian government’s objectives in promoting and supporting Industry 4.0 must be clear on how MSMEs can benefit from it and will be supported, including solutions for legacy equipment and technologies not compatible with digitization. This should be clearly identified in the ambitions of the various public policies promoting and supporting Industry 4.0 – defined for advanced centers of excellence, integrated industrial infrastructure facilities, joint engineering facilities centers, testing and certification centers and technology acquisition fund programs. These efforts would incentivize the necessary ecosystem actors, policies, and institutions to align with central and state government goals, signaling the necessary skills, resources, knowledge, and enablers. Most importantly, OEMs and Tier 1 companies, and their industry bodies, can spearhead change by leading broader stakeholders. For example, common facilities or tool rooms equipped with shareable software and hardware can allow individual companies to use their real-time machine data to gather in-depth evidence for decision-making, troubleshooting and predictive maintenance. . It can also allow companies to make incremental innovations to their products and processes. Importantly, improving the efficiency of supply chains can play a key role in securing cash flow to suppliers. As one industry expert points out, …the cost of delivering a product when there is no automation is high for the bank and there is little room for vendors like us to negotiate. frequently. Industry 4.0 solutions can thus enable companies to make end-to-end decisions using their own data and the opportunities for growth, productivity and competition are endless. The crux of the matter lies in defining ADP’s specific strategy for change.

Dr. Rene Van Berkel is Regional Representative and Head of UNIDO and Reshmi Vasudevan is National Project Coordinator, UNIDO.

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