The new face of Industrial competitiveness
Companies with strong technology competencies have a stronger chance to win markets in the short and medium terms because of their ability to enhance their competitiveness compared to their rivals. Efficiency is a key element in today's competitiveness. The distance between production and consumption is decreasing on yearly basis leading to intensifying and transforming the different types of competition. The profit margins across the value chain of most industries are getting squeezed and only a small number of the value chain members make acceptable or suitable profits. Other less fortunate members are making small profits or losing money. The value or space a company owns within the chain is important and defending it is critical.
Given the availability of multiple communication channels, the Internet, and the dynamic improvement of transportation in addition to financial system/platforms innovations, manufacturers are selling directly to customers, hence increasing competition intensity furthermore. Consumers have many options and easy access to products and services. The price is determined by the market and technology is getting closer to a state of free interaction between supply and demand forces.
All these current market realities lead to a high increase in competitive intensity and the real source of profitability comes from (1) better cost management, (2) product availability, and (3) the ability to innovate faster than the competition. The current competitive battle is based on improving efficiency on all fronts. Up to today, most manufacturers and Operators do not have a real measure of actual efficiency. They only have a calculation of theoretical efficiency. The advancement offered by the fourth industrial revolution (I4.0) such as the usage of different sensors and actuators along with other emerging technology (Augmented Reality, Artificial intelligence, big data analytics) enable business operators to measure their real and current efficiency and easily identify the critical areas of improvements, hence improving quality and speed of decision making dramatically.
Measuring the real efficiency does not only help in improving current manufacturing efficiency but also helps in moving the entire organizational performance to a higher level in the short-term and a complete shift in performance in the long term.
One of the key results of improving efficiency management is an expected decrease in scrap volume or rate. Scrap represents a key cost element and efficiency draining trap in many industries such as Steel, Plastics, and Textile industries. For example, the packaging industry hits 20% of scrap. Imagine if we can save 50% or more of such scrap. How can this improve our profitability? Our price agility? Furthermore, scrap measuring or calculating consumes manpower, devices, and time. Additionally, scrap measurements are reported after the event, giving very little room for corrective actions. In the case of scrap, same as other efficiency draining processes, the estimated scrap level needs to be projected before production.
We can observe that China has 21% of scrap consumption while Japan is 35%, Russia is 40%, the USA is 70%. By using IoT, Remote Sensing, and Digital Twinning technologies, a manufacturing plant can save over 30% of raw materials and semi-manufactured parts per year that can be directed to a better-utilized activity which hugely improves the Return on Investment (ROI).
The cost of such improvement is by far much less than the current cost of scrap. We can consider it a direct increase in net profit.
Important elements of the industry 4.0 concept are also interoperability & connectivity. A continuous flow of information between the devices and components, Machine-To-Machine interaction (M2M), manufacturing systems, and actors should be established as the first step in calculating the real Efficiency of operation. Hereby the machines, products, and factories can connect and communicate via the Industrial IoT. This is considered the starting level or baseline for the digital transformation of a manufacturing operation. The digital transformation process is a continuous process hence, a manufacturer focuses on the topmost impactful improvement areas in the beginning and moves further down the list.
A manufacturer can also deploy other emerging technologies of I4.0 (Such as Additive Manufacturing) to improve overall production efficiency. Scrap is just one area of improvement. Other areas such as quality, maintenance, logistics, inventory, product design, and even material flow can defiantly improve efficiency.
Better efficiency equals better competitiveness.
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