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Internet of Things March 2021 Viewpoints

Technology Analyst: David Strachan-Olson

The Pandemic's Impact on Industry 4.0 Adoption

Overview

A McKinsey survey is helping stakeholders understand the covid‑19 pandemic's impact on Industry 4.0 adoption. Many companies that scaled Industry 4.0 technology across their business before the pandemic hit were able to adapt to changing conditions quickly. Companies have a fresh urgency for deploying Industry 4.0 technologies—in particular those that provide flexibility and resiliency.

Description

Since 2017, McKinsey & Company has performed an annual survey of global manufacturing companies to assess the adoption of Industry 4.0 technologies. The results of the 2020 survey, which McKinsey performed six months after the covid‑19 pandemic began, provide insights into how the pandemic has affected the pace and direction of Industry 4.0 deployments. Overall, 94% of survey respondents said that Industry 4.0 had helped their organizations keep operations running during the crisis. In addition, 65% of respondents said the pandemic had raised the value of Industry 4.0 technology in their minds.

Many companies that had scaled deployments of Industry 4.0 technologies previously were able to leverage their systems to respond to the pandemic. McKinsey's report highlights a consumer-packaged-goods company that used a digital twin of its supply chain to run multiple scenarios to assist in planning and a personal-protective-equipment manufacturer that used augmented-reality-based remote assistance for commissioning a new manufacturing line. Meanwhile, some companies that had only experimented with Industry 4.0 deployments struggled. The pandemic provided a trial by fire that challenged Industry 4.0 implementations and legacy infrastructure for information technology and operational technology; McKinsey noted a sizable drop in the percentage of respondents saying that they had scaled Industry 4.0 technology successfully: 26% in 2020 in comparison with 44% in 2019. Finally, some companies had to slow or stop Industry 4.0 deployments during the pandemic because of a number of issues including travel restrictions, remote work, and cash constraints resulting from the pandemic.

Implications

The covid‑19 pandemic has brought significant disruption to a wide range of industries and will affect the deployment of Industry 4.0 technologies for years to come. A major impact of the pandemic has been a shift in strategic priorities for business operations and Industry 4.0 technology. Before the pandemic, many companies focused on deploying Industry 4.0 to increase productivity and reduce costs, but now flexibility, resiliency, and transparency are key operational objectives. This shift in strategic objectives will result in changes in the types of Industry 4.0 technologies companies deploy, with a greater focus on logistics and end-to-end supply-chain monitoring. Flexibility and resiliency will be key success factors going forward because companies want to be able to adapt to rapidly evolving markets. Looking further out, the extreme weather events that climate change causes could make operational disruptions more common in the future.

A longer-term impact of the pandemic could be a widening technology gap between companies as a result of Industry 4.0 decisions that companies made before the pandemic. Companies that were able to leverage existing Industry 4.0 deployments during the pandemic likely performed better than did competitors without these deployments. Now, tight budgets could cause companies already behind on Industry 4.0 adoption to fall further behind.

Relevant Areas to Monitor

  • Industry 4.0

    Industry 4.0 leverages machines, parts, and services that exchange data and self-configure to support dynamic, agile, and efficient manufacturing processes. Stakeholders expect Industry 4.0 to revolutionize manufacturing and industrial practices to create selfsufficient systems, but challenges could limit progress.

  • Digital Transformation & Disruption

    Digital transformation is the use of technology to change fundamentally how a company operates; it is not simply the use of technology to improve a company's core business. Many legacy companies may struggle to embrace digital transformation, which creates opportunities for new players to disrupt incumbents.

Impact Scale

On a scale of low, medium, or high, the anticipated level of impact for this topic is: High.

Impact Timing

On a scale of now, 5, 10, or 15 years, the anticipated impact timing for this topic is: Now to 5 years.

Opportunities in the Following Industry Areas:

  • Automotive/Vehicle
  • Consumer Packaged Goods
  • Infrastructure/Utility
  • Internet of Things
  • Manufacturing/Materials

Relevant to the Following Explorer Technology Areas: