What will the factories of tomorrow look like? It’s a question that has no simple answer as the Fourth Industrial Revolution continues apace and new technologies transform the manufacturing landscape.

As with any revolution, we are in an era of rapid change, as a wave of innovation washes away old systems, business models and whole industries to create new opportunities. While most organizations understand the need to embrace new technologies, breaking through the early stages of adoption often presents a serious challenge.

A new World Economic Forum white paper looks in more detail at the issues facing the manufacturing sector when adopting new technologies. And it has identified “lighthouses” as the companies which are showcasing what the future could look like.

“Lighthouse factories are found in companies large and small, in all industries and regions. Rather than replacing operators with machines, lighthouse factories are transforming work to make it less repetitive, more interesting, diversified and productive," explains Helena Leurent, Head of the Shaping the Future of Production System Initiative at the World Economic Forum.

The report also warns about the dangers of productivity stagnation and so-called “pilot purgatory” - where companies are unable to move beyond the trial stage of innovation.

 [Fourth Industrial Revolution Beacons of Technology and Innovation in Manufacturing report]
Image: World Economic Forum

The research was conducted in collaboration with McKinsey & Company and scanned more than 1,000 leading manufacturers. It also involved visiting the most advanced sites to see what lessons could be learned.

They found that lighthouses have managed to adapt their operations in three key areas:

1. Connectivity
2. Intelligence
3. Flexible automation

And these megatrends offer a blueprint for other manufacturers to follow.

The report provides a detailed analysis of two companies in particular. Firstly, Procter & Gamble's plant in Rakona in the Czech Republic which has historically produced about 4 million cases/day of dishwashing liquids, powder and fabric enhancers.

Faced with shifting customer demands and increasing market pressure, management at the plant decided to engage 100% of the organization in digital innovation. And all staff were given the necessary skills to embrace new technology such as analytics, smart robotics and additive manufacturing.

These new skills led to digital direction-setting, in-process quality control, a universal packing system and end-to-end supply chain synchronization.

The results were impressive. In just three years, productivity at the firm increased by 160% while customer satisfaction rose by 116%. At the same time, plant costs were reduced by 20%.

Secondly, Elettrotecnica Rold Srl is an Italian SME with just 250 employees, producing door locks for washing machines. But its size and limited funding didn't stop the firm from fully embracing a digital transformation.

It introduced digital dashboards to monitor overall equipment effectiveness, implemented real-time collection of production data, used granular data collection based on IoT devices for cost modeling and innovated through rapid design prototyping.

Once again, the results were impressive, with a 7-8% growth of total company revenue between 2016-17.

The power of AI

By interconnecting networks and systems with the various digitalized components of a production process, progressive manufacturers are able to use AI to schedule, monitor and continually improve output.

As big data and algorithms make manufacturing more efficient, early adoption of technology gives forward-thinking producers a powerful advantage over their competitors. Research shows that it doesn’t pay to sit and wait for cheaper or better technology to come along: McKinsey suggests that AI front-runners can expect a 122% cash-flow increase due to efficiency gains, compared to just 10% for followers.

Lighthouses connect with other members of the 4IR community, building networks with technological innovators, both within their industry and with external organizations like universities and research centers. Exploiting the external digital environment helps to fill the inevitable skills gap associated with moving to a more technical environment, such as analytical or programming skills.

In a constantly evolving production sector, manufacturers need to be agile and ensure enough flexibility in their operations to adapt quickly to changing market needs and technological developments.

Need for replacement of equipment for each industrial revolution

 [Fourth Industrial Revolution Beacons of Technology and Innovation in Manufacturing report]
Image: World Economic Forum

Unlike some previous periods of dramatic change in the manufacturing sector, many benefits of the Fourth Industrial Revolution can be harnessed with little need for new infrastructure.

Today’s situation is very different from the first industrial revolution, where mechanical equipment replaced individual looms, or during automation where tools were replaced with expensive machines.

Most of today’s lighthouse operations were created by transforming existing manufacturing infrastructure, with some select new machinery added. The result is high productivity gains for limited capital outlay, where efficiency gains far outweigh the capital costs of adopting new technologies.

The Fourth Industrial Revolution presents multifaceted opportunities to boost the global manufacturing sector, engaging and enhancing the skills and interest levels of workers. But the global wealth benefits of change rely on the combined efforts of organizations and governments to strengthen collaboration between stakeholders to manage the transition.

Learn more about the World Economic Forum’s project on Technology and Innovation for the Future of Production