Industry 4.0: Capturing value at scale in discrete manufacturing

Executive summary

With an estimated value creation potential for manufacturers and suppliers of USD 3.7 trillion in 2025, high hopes are set on Industry 4.0 to bring the next industrial revolution to discrete manufacturing. Yet, only about 30 percent of companies are capturing value from Industry 4.0 solutions at scale today. Approaches are dominated by envisioning technology development going forward rather than identifying areas of largest impact and tracking it back to Industry 4.0 value drivers. Further governance and organizational anchoring are often unclear. Resulting hurdles related to a lack of clarity regarding the business value, limited resources, and an overwhelming number of potential use cases leave the majority of companies stuck in “pilot purgatory.”

To provide a perspective on how to get “unstuck” and finally capture real value through Industry 4.0 in discrete manufacturing, our report illuminates two key questions: where to focus and how to scale. Drawing on the latest McKinsey research and a series of interviews, we arrived at the following key insights:

I. Where to focus – factory archetypes and industry-specific key value drivers

Three factory archetypes define the productivity imperative, which establishes the relevant set of key-value drivers capturing impact at scale:

• Small-lot manufacturing aims to remain efficient down to lot size 1. Here, the key value drivers are an integrated product data model from engineering to commissioning, digital worker enablement, and data-driven OEE optimization.

• Mass-customized production focuses on enabling a certain degree of product variance while upholding high throughput and consistent quality. To this end, Industry 4.0 value is in closed control loops (enabled by sensor-based, in-line quality inspection), flexible routing, scheduling, load balancing and performance management, and the extension of automation to final assembly.

• High-volume production aims for fully automated production and maximized OEE with the flexibility to adapt to the product mix. Industry 4.0 key value drivers have closed control loops through sensor-based in-line quality inspection, conquering the remaining domains of manual labor through automation and traceability.

• Industry 4.0 target pictures, value drivers, and case examples for machinery (small-lot manufacturing), automotive (mass-customized production), and consumer electronics (high-volume production) provide hands-on examples of each archetype (please see Table 1 for an overview on where to find specific case examples).

II. How to scale – focusing on value, mobilizing the organization, and innovating the infrastructure

Three key principles guide Industry 4.0 value capture at scale:

• Think value-backward, not technology-forward. A focus on key value drivers and a compelling Industry 4.0 vision is crucial.

• Be people-centric, not tool-centric. Backed by top-management support, Industry 4.0 transformations need to focus on capability building and be pursued as a strategic organizational endeavor. As such, they should be informed by a clear business leadership mindset, not just by an engineering or IT process.

• Innovate the infrastructure towards an integrated technology stack and a clear target picture. Infrastructure should enable local operations before scaling globally, as many use cases deliver value already through on-premise infrastructure

Table 1 Overview of key-value drivers and case examples for analyzed industries

Read it here

by McKinsey & Company