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Getting Started on Industry 4.0 – Step 2:  Identify Organizational Constraints

Getting Started on Industry 4.0 – Step 2: Identify Organizational Constraints

By Scott Phillips

In the second post of this series focused on helping small and medium manufacturers (SMMs) get started on their Industry 4.0 journey, I will discuss the task of identifying organizational constraints. In the first post, I explained to conduct an Industry 4.0 self-assessment, and in the third post I will show you how to build your own Smart Manufacturing Roadmap.

First, I want to emphasize why it is so important that every manufacturer undertakes the task of building a “Smart Manufacturing Roadmap” (SMR) internally. Though you will need to request input from existing software or hardware vendors, system integrators, consultants, and other trusted advisors, it is critical that the manufacturer’s leadership team own the SMR.

Three reasons to develop a Smart Manufacturing Roadmap:

  1. Avoid being sold solutions: The lack of a long-term SMR creates the risk that the manufacturer will be sold fragmented solutions by specific solution providers, which will be difficult to integrate. The SMR provides your high-level requirements for each project along the way, which enables your team to make proactive decisions rather than being sold solutions.
  2. Future-proof your investments: Investments in people, processes, and technology to develop your Industry 4.0 capabilities are integrated by nature. For example, the return on investment (ROI) from a factory floor automation project will be largely a function of the workforce skill sets and lean process culture already in place. The SMR will help identify the interdependencies across these investments to ensure that they add value well into the future.
  3. Accountability: Developing the SMR internally will result in more ownership and accountability across the organization, aligning the management team with the workforce.

Identify your organizational constraints

In Step 1 of this series, I introduced an Industry 4.0 assessment too called the Smart Industry Readiness Index1 which can be used to generate discussion and organizational alignment around improvement priorities. I recommended choosing at least three people to independently score the assessment for your organization. Once your assessment is complete, you will have identified three or four critical dimensions of capability that require investment in order to improve your organization’s competitiveness.

The next step in the development of the SMR is to identify organizational constraints. These need to be understood and considered prior to the final creation of the roadmap solutions. There is no use planning to implement the latest and greatest state-of-the-art Industry 4.0 hardware and software solutions if the organization has constraints that will negatively impact their effectiveness.

Consider these five potential constraints:

  1. Internal capability and bandwidth
  2. Operating budget available for Industry 4.0 investments in people and processes
  3. Capital budget available for Industry 4.0 investments in hardware and software
  4. Payback expectations
  5. Training hours available per employee

A three-phase implementation time frame: crawl, walk, and run

Think about each of these constraints across a three-phase time frame that I call crawl, walk, and run. Each of these phases takes one to two years for implementation:

  • Crawl: For most organizations, the crawl period is the most difficult because they need to build internal capability for the future by paying outside solution providers to bring that knowledge. This “outsiders do it” time period will often require the most financial investment with the longest payback as the investments are often in Industry 4.0 infrastructure.
  • Walk: In this phase, the organization begins to build more capability in-house as it works with outside solution providers during this “do it with me” time period. Using factory floor automation or software system integration as an example, the organization becomes more self-sufficient. The result is less financial investment and quicker ROI when compared to the crawl phase.
  • Run: This is the payoff period. Many process improvement projects can now be planned and executed by in-house staff. Once a manufacturer has arrived at this “do it yourself” phase, they have likely increased their competitiveness and are well positioned for profitable growth.

Here is a recent example of the organizational constraints identified by a 50-person machine shop that produces parts in the automotive supply chain.

Organizational Constraints Example

ERP delivers the “Perfect Storm” of benefits

In the example of the machine shop, the original self-assessment identified automation and connectivity between the front office and factory floor as critical dimensions for short-term survival. Like many organizations of its size and maturity, the shop had to decide whether to piecemeal more fragmented software solutions together or consider an ERP system. The shop chose an ERP implementation driven by their organizational constraints, which they named the “Perfect Storm”:

  1. There was no need for a fully dedicated internal information/information systems technical resource.
  2. The cloud-based ERP system alternative required less financial investment than maintaining the individual front office and factory floor tools, which had grown over time.
  3. Training time across the organization was projected to be lowered with a single ERP system installation implemented in three phases over two years.

Coming in the next post

In the third post in this series, I will pull the outputs from the initial organizational self-assessment and organizational constraints analysis into the Smart Manufacturing Roadmap.

1The Singapore Smart Industry Readiness Index, March 22, 2018, www.edb.gov.sg. All trademarks and copyrights are the property of their respective owners.

Scott Phillips

About the author

Scott Phillips is the founder of Connected Factory Global (CFG), a research and consulting firm that helps manufacturers develop Smart Manufacturing Roadmaps to drive their future competitiveness. Scott is a veteran of product innovation, business development, marketing strategy and entrepreneurship. He has experience across many industries and has held leadership positions with Whirlpool Corporation, Fortune Brands and Burger King Corporation. Scott received his M.B.A. from Wayne State University and his B.A. from Michigan State University.

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