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Manufacturers focused on operating efficiency are missing the point of i4.0 entirely: KPMG

Industrial 4.0

Majority of manufacturers are falling behind the curve of the fourth industrial revolution and risking their survival.

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3 January 2019 – According to new research from KPMG International, the fourth industrial revolution (Industry 4.0 or i4.0) requires transformational change at a pace the majority of manufacturers are not matching. If manufacturers continue on the current trajectory, KPMG warns they are likely be disrupted by competitors and new market entrants. KPMG is calling for CEOs to form a top-down strategy and implement large scale change now in order to meet the realities of manufacturing in today’s market.

Manufacturers focused on operating efficiency are missing the point of i4.0 entirely: KPMG

Commenting on the research, Doug Gates, Global Head of Industrial Manufacturing at KPMG, said:

“Few organizations have developed holistic, end-to-end interconnectivity – our definition of the highest level of i4.0 maturity – among today’s breakthrough i4.0 tools and technologies. Most are still at the beginning stages, where investment is made due to projected cost savings. The digital revolution is about so much more than efficiency, and manufacturers not embracing a new business model will likely face threats to their survival in the very near future.”

In the new report, A Reality Check for Today’s C-suite on Industry 4.0 – experimentation is ending, KPMG has identified a false sense of security held at the top levels of many manufacturers. As organizations implement single-project, bottom-up approaches to transformation – from physical plant changes, to integration of big data – cost efficiencies are cited as proof of i4.0 transformation. 

Companies may see their bottom lines increase in the short term, but KPMG has found that individual initiatives are proving to cost more and yield less in the longer term when business has to course correct due to the incredible pace of change experienced by the manufacturing industry. 

Commenting on the research, Doug Gates, Global Head of Industrial Manufacturing at KPMG, said:

“We’re seeing organizations reap only marginal value from pilot projects that are disconnected from each other and a larger strategy. It’s similar to the person who stops taking their antibiotics early because they feel better – it may be ok today, but that shortsightedness is going to cause a more difficult problem to solve later.”

Tidarat Chimluang, Head of Industrial Markets at KPMG in Thailand, said:

“Many companies in Thailand are also struggling to keep up with the pace of change and making the necessary technological adoption to reach industry 4.0. This is especially true in the agricultural and food processing industry, a staple industry of Thailand. According to a study done by the University of the Thai Chamber of Commerce, less than 3% of small businesses and less than 5% of medium-sized businesses in the industry are considered part of the digitally-focused 4.0 era. The government’s Thailand 4.0 scheme will hopefully help push Thailand’s industry towards the right direction. What is important is that companies need to realize they need to prepare for the future, envision a big-picture strategy that best suits their firm and make the firm agile for change”

KPMG suggests manufacturers define what the organization needs to look like tomorrow to be competitive or disruptive. With that in mind, design a strategy with a detailed plan and create a culture that supports wholesale change. Organizations with that foundation are well placed to lead the change we are seeing in industrial manufacturing today.

With holistic business transformation the end goal, where do manufacturers start? KPMG offers four keys to i.40 transformation:

  • Build the strategy from the corner office, not the plant floor.
  • Redesign your organization from functional siloes to a value network.
  • Create a dynamic culture that embraces the enterprise value of new digital technologies.
  • Throw out your current KPIs; it’s time to rethink how to measure success

 

Says Gates:

“If manufacturers aren’t well on their i4.0 journey by 2020, they will have a problem keeping up with new market entrants. They don’t have to have completed the journey, but they must have the foundation in place: a strategic approach, a holistic plan of transformation and the right culture to embrace change.”

Click to learn more about the research and read details on the keys to success.

 

Thai version: เคพีเอ็มจี ชี้ผู้ประกอบการที่มุ่งเน้นเพียงการเพิ่มประสิทธิภาพในการดำเนินงาน กำลังมองประเด็นหลักของอุตสาหกรรม 4.0 ไม่ครบ

About KPMG International

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 154 countries and territories and have 200,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

About KPMG in Thailand

KPMG in Thailand, with more than 1,700 professionals offering audit, tax, and advisory services, is a member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

For media enquiries, please contact:

Ploi Phayakvichien

KPMG in Thailand

ploi@kpmg.co.th

+662 677 2034

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