Sep 11, 2020 | BLOG

Industry 4.0 and the Digital Factory: does it translate to the bottom-line?

Take a step back into the late 1700s and early 1800s where manufacturing went from hand packaging goods one-by-one to being mass-produced by machines fueled by the game-changing steam power. Fast forward a few decades, and now we have emerged into Industry 4.0 and the digital factory, or the Industrial Internet of Things (IIoT), that emphasizes the use of digital machinery.

Industry 4.0 connects physical production with smart digital technology, machine learning and data to create a type of ecosystem for companies that focus on manufacturing efficiency and profitability. While every company and manufacturer operate differently, they all share a common problem – the need for real-time insights to improve manufacturing efficiency. The use of new digital technology makes gathering and analyzing data faster, so business owners have better control and understanding of every aspect of their company to boost productivity, improve processes and ultimately drive growth.

This new revolution raises the question of what exactly is the future of the digitized machine, and what does it mean for companies in terms of driving bottom-line profits?

While the concept of Industry 4.0 and the digital factory drives intense focus on increasing productivity on the production floor, the biggest impact on productivity actually lies outside of the control of the factory manager:  demand is driven by the complicated mix of orders captured by the sales and marketing teams.  And as we all know, not all customers and products ‘are created equal’ in terms of how fast each order can be produced and shipped. Like cars on a freeway during rush hour, there are a lot of unnecessary ‘stops’ and ‘starts’. So in order to deliver on the promise of Industry 4.0, companies will need to integrate factory speed information coming from these newly digitized factories, with a coordinated effort by sales and marketing to optimize the product and customer mix so that the system flows at maximum velocity.

Profit velocity is the ‘true north’ for every business.  That is why we all scramble to report monthly and quarterly earnings.  Profit accrues in fixed increments of time. Businesses can’t maximize return on assets (ROA) unless they embrace time-based profit metrics. Yet almost all businesses tend to focus on profit per unit rather than profit each product yields per (machine) hour. The gap in data and analytics is massive.  Most companies simply do not know how to measure and track profit/hour for products and/or customers.

Executives who leverage time-based profit metrics in their decision-making can gain sustainable competitive advantage. Industry 4.0 brings the promise of linking the key factory rate information to the revenue, margin and cost information that is readily available in most companies ERP systems.  Until recently, there hasn’t been a readily available tool that allows manufacturers to link these disparate pieces of information:  factory rate and detailed product and customer transactional data.

Profit Velocity fits into this new Industrial Revolution by uniquely understanding how to pair the ‘right’ production rate data with robust revenue, margin and cost data to create strong means to manage product, customer and channel mix. Furthermore, you’ll be able to measure the speed of profitability by product, customer, factory, sales rep, customer or any other controlled variables in a matter of 2-3 weeks.

The way companies manufacture their products has drastically changed since the early 1800s. This new revolution of Industry 4.0 and the digital factory has revealed an advanced future into the digitized machine, and Profit Velocity has the only data velocity solution to gain more knowledge on how to truly maximize profits.

If you’re looking to expand your knowledge about the hidden profits within Industry 4.0, explore our eBook to see why the speed with which your products generate profits is so significant to your bottom line and your ROA. Look out for next week’s blog to learn if a smart factory and the role it plays in manufacturing is truly figuring out the velocity-based profits produced by each machine.

Connect with Profit Velocity to discover the answers waiting in your company data.