Far too often, companies yield to the dazzle of Industry 4.0 without considering hidden costs of implementation and without weighing the possibility that low-tech solutions might handle some processes more simply and inexpensively.
The seductive power of Industry 4.0 solutions is on full display when production technology experts gather for peer meetings. Presenters proudly showcase their most recent work with complex 3D modeling solutions, the latest high-tech gadgets, or artificial intelligence algorithms. Frequently absent from these discussions is any comparison of the high-tech solutions’ potential impact and resource requirements with those of simpler alternatives.
To understand the problem of hidden costs, consider process automation. Clearly, process automation has revolutionized manufacturing during the past 50 years. But in justifying investments in automation, companies often evaluate only the direct cost savings (such as reducing the number of production line employees) and only cursorily review the fixed costs that the changes add. To automate processes effectively, companies incur incremental costs to employ technicians and engineers to operate and repair the new technologies, and they must enter into service agreements with equipment suppliers. Many companies also overlook the impact of automation on throughput. Throughput often falls short of expectations because equipment breaks down more frequently than expected (a common phenomenon with new technology) or because automation diminishes flexibility. For example, rigid metallic structures, such as automated conveyor systems, impose constraints on a production line’s structure and speed.
Although the problem of hidden costs persists, recent technological advances make it easier for companies to reduce fixed costs and improve flexibility. For example, the use of indoor GPS and RFID tags permits flexible layouts of shop floors and production lines, and smart collaborative robots can work side-by-side with humans and can be rapidly reprogrammed for diverse tasks. Digital technologies often bring significant hidden benefits related to improvements in quality, traceability, and speed, too. These benefits may compensate for hidden costs, but often they do not.
The other danger in the area of accurate cost evaluation involves failing to gauge the relative value of low-tech solutions to some process problems, which many companies overlook in their haste to adopt the latest digital technology. Even though bandwidth, cloud infrastructure, and processing power have become dramatically less expensive in recent years, many low-tech solutions remain more cost-effective than the digital alternatives. To invest wisely, companies need to compare the potential impact and resource requirements of high-tech solutions with those of simpler alternatives.
To improve their insight into costs and savings, companies should develop a business case for each Industry 4.0 investment under consideration. The evaluation should take into account all direct costs and savings, expected improvements in production efficiency, additional indirect costs (such as for service and technical support), and effects on flexibility and quality. Companies should compare this business case to alternative low-tech (and low-cost) solutions. Ultimately, even if a low-tech solution is more economical, a company may prefer to invest in an Industry 4.0 solution to promote learning, but at least it will know the decision’s true costs and benefits.
To help manufacturers anticipate and avoid these four hazards of Industry 4.0, we have developed a framework, called the salmon run checklist. (See the sidebar.)