The industrial sector has seen a fourth industrial revolution, characterized by the increasing digitization and interconnection of products, value chains and business models. Our study, Industry 4.0 – Opportunities and Challenges of the Industrial Internet, is based on a survey of 235 German industrial companies that was conducted by the market research institution TNS Emnid. It outlines the essential attributes, opportunities and challenges posed by this development. The companies surveyed belong to the manufacturing and engineering, automotive and process industries, as well as the electronics and electrical systems and information and communications industries.
The industrial companies surveyed will invest 3.3% of their annual turnover in Industrial Internet solutions, on average, over the next five years. This is equivalent to nearly 50% of planned new capital investment and equates to an annual figure in excess of €140 billion in terms of the European industrial landscape. These investments need to be leveraged along the entire value chain in order to achieve maximum success.
One-quarter of the companies surveyed have already extensively digitized their value chains. However, mostly only individual units and isolated applications have been automated and digitized to date. The companies expect that 86% of the horizontal and 80% of the vertical value chains will be highly digitized by 2020 and will therefore be closely integrated.
The industrial sector is required to produce ever-larger quantities using fewer raw materials and less energy. The Industrial Internet allows higher productivity and resource efficiency and thus creates the conditions for sustainable and efficient production. The companies surveyed anticipate an average efficiency increase of 3.3% per year across all industry sectors thanks to the digitization of value chains. This amounts to a total of 18% over the next five years. They expect cost reductions to lead to annual savings of 2.6%.
Companies that have already largely digitized their product portfolio have enjoyed above-average growth in the past three years. Half of the companies surveyed anticipate double-digit growth in the next five years due to the intensified digitization of their product and service portfolio. One in five companies even expects sales to rise by more than 20%. Overall this amounts to an average, incremental sales increase of 2.5% per annum. Compared with all industrial companies in the five core industry sectors, this is equivalent to an annual sales potential of more than €30 billion for Germany and rises to €110 billion for European industry as a whole.
Today, the efficient analysis and use of data is already hugely important to half of all companies surveyed. What is more, 90% of companies believe that the ability to analyze data will be critical to their business model in five years’ time. These companies mainly focus on the efficient sharing of data within their own value chain, the digital labelling of the products and the use of real-time data to steer their production.
Companies have to take all of the complex and cost-intensive steps at the same time in order to build up Industry 4.0 capabilities. Initial steps can be taken by ensuring the traceability of products and input components and manufacturing steps. Scanners throughout each step in the value chain can be used to generate production information across the value chain. This information allows initial digital process improvements and optimizations on which even more sophisticated efficiency programs can be built.