The fourth wave

We are all aware of the rapid pace of change across multiple industries as a result of significant technological advances and the reduced costs of using them. These trends are distinct from merely a greater level of process automation driven by developments in electronics and information technology since the 1970s. The greater adoption of industry 4.0 is now paving the way for disruptive approaches in a number of areas, including pharmaceutical manufacturing.

It’s important to note that these technologies are not new. “What’s changed is the cost and the fact that the connectivity and miniaturisation and computer speeds and the infrastructure has all changed to make it a reality to apply it at scale,” says Karen Taylor, director of the Centre for Health Solutions at Deloitte. These trends are in line with Moore’s Law, which predicts that the capacity of microchips, bandwidth and computers doubles every 18 months, representing exponential growth.

Between robots and humans

In light of the highly regulated nature of the pharmaceutical industry, it is imperative that a strategic approach to implementation is taken. However, there remains huge opportunity for industry 4.0 to enhance manufacturing processes. One such technology is factory automation, which makes production lines more efficient, enhances resource effectiveness and improves productivity. Although seemingly simple to integrate, they can be complex to manage on a daily basis. “Factory automation is probably the simplest application of robotic process automation,” says Taylor. “But these technologies, especially if they’re going to have connected sensors embedded in them, are very sensitive to change and need to be highly monitored.”

Cobots, or collaborative robots, are expected to be increasingly used within manufacturing. Recent research has predicted this market will grow from $710 million in 2018 to $12.3 billion by 2025. This is largely due to the technology being safer, more adaptable and compact than ever before. However, such technologies are not yet able to replace humans. “There is a need for human-in-the-loop, but you probably won’t need as many humans,” explains Taylor. “You are already seeing that in the car industry and in other industries where you’ve got highly automated processes.”

Such technologies might not result in an overall reduction of workers because of the increased demand in other aspects of manufacturing. “You will also need new types of staff to make sense of all the information that is being generated, so you'll need data scientists, and analytical skills and talent, which haven’t been something that has traditionally been needed,” explains Taylor.

A 2018 Deloitte report indicated that whilst companies are increasing their expenditure on their operational and IT budgets, they are reducing their R&D budgets. On average, they are spending 30% of their operational/IT budget on digital transformation but only 11% of their R&D budgets on this area.

One cost-effective solution to this issue might be to outsource, rather than recruiting or training in-house. “These individuals are in short supply and that's where maybe the best solution is to partner with people and companies who have those skills,” says Taylor.

This strategy is already being adopted within the industry. “If you look at some of the most effective supply chains, and some of the big tech companies that have made an art form out of the supply chain, there’s a lot that can be learned from when they partner together to obtain skills that are in short supply in the open market,” explains Taylor.

There are also a number of emerging technologies which are likely to become increasingly implemented, such as digital twins. These are exact virtual replicas of physical products or processes, which can be updated in real time. They could be used to run simulations and machine-learning technologies could be implemented to predict breakdowns and schedule maintenance.

Virtual, augmented, and mixed reality is another valuable tool for the industry. This can be integrated into manufacturing in a number of different ways. For example, this technology can be used to design a new product, which can be refined in the virtual world before developing a prototype to test further. It could also be used to get support from an engineer remotely who could use mixed reality to be able to see what the problem is in the manufacturing process and quickly rectify it.

In addition to new technologies, industry 4.0 also opens up the possibility of transforming the infrastructure of manufacturing. In the past, information technology (IT) and operational technology (IT) OT were typically separate in manufacturing businesses. IT was responsible for supporting management, sales, accounting and purchasing whereas OT was involved with monitoring and controlling equipment, tools and other assets on the factory floor. In addition, they were not only distinct but individual systems and equipment within the OT infrastructure also existed in their own silos.

The integration of new technologies provides the opportunity to integrate machines, platforms and systems across all units of the business. This drives efficiencies, enhances business oversight, improves product quality and increases productivity. Industry 4.0 also brings challenges, of course, including dealing with compatibility issues and ensuring systems are secure. Overcoming these challenges is possible, though, presenting considerable opportunities for manufacturers.

Alike the world over

Despite the opportunity for these technologies to improve manufacturing processes, they do raise new issues. “With all of these, you get new challenges, like data security, privacy, cyber, all of those are as a result of the innovation on the one hand, raising challenges on the other side,” says Taylor.

A 2015 Deloitte report found that the level of cybersecurity risk could increase strongly (35%) or very strongly (48%) among respondents across a number of industries as a result of industry 4.0. Both cyberattacks and viruses could be hugely problematic, causing networked and smart production systems to a halt, creating substantial costs. However, such difficulties are not insurmountable but they do require tailored risk management and security strategies to be put in place. It is also important to note that as technologies continue to develop, this will also bring an improvement in cybersecurity systems. The limiting factor will largely come down to implementation, rather than technological capability. When integrating these systems, it is important that they can both prevent and treat cyberattacks effectively. Although there is increasing discussion about both the challenges and opportunities for industry 4.0, implementation is still at an early stage. “There are a number of global surveys that my colleagues have done which show that in terms of digital maturity and the adoption of technology, life sciences are lagging behind some of the other industries,” says Taylor. “However, we cannot underestimate the impact that the regulatory environment has. It is an enabler for innovation but at the same time also stymies it because of concerns about meeting the requirements.”

Inertia creeps

In light of the increasing technologies available as well as both the opportunities and challenges they bring, many companies remain in inertia. A Deloitte report entitled ‘The industry 4.0 paradox’, highlights the discrepancy between the enthusiasm for these technologies and the implementation of them in a survey of 361 executives across 11 countries.

The first of these is the strategy paradox. Nearly 94% of respondents identified digital transformation as a top priority but this didn’t correspond with exploration within their organisation. Interestingly, only 68% believed industry 4.0 was an avenue for profitability, which likely is part responsible for this incongruity.

The supply chain paradox was also prevalent. Although this was an area indicated to be fruitful for both current and future investment by executives, those outside the C-suite who were more heavily involved with the daily management of the supply chain, did not have a voice in decisions about digital transformation investments.

Another paradox was present with regard to talent. Despite respondents asserting confidence that they had sufficient capabilities within their organisation for the implementation of industry 4.0, with only 15% admitting that any changes to skill sets of workers was necessary. However, they also acknowledged that obtaining, training and retaining the right people was an ongoing challenge.

Innovation was the subject of the fourth paradox identified. Executives reported that their strategies around industry 4.0 largely revolved around improving existing operations, rather than using them in a more transformative way. In light of the huge potential for innovation of manufacturing processes, such opportunities should not be overlooked.

Make the most of the opportunity

Although there is a tendency to want to make dramatic and rapid changes, it is better to start with smaller stakes, testing and refining, before scaling up where the consequences are more significant. This can help to gain confidence in the capabilities of these technologies, ultimately leading to greater innovation. Above all, it is important that companies do not expect perfection from industry 4.0. It is still evolving and it is important to learn from previous experiences to inform future initiatives.

Industry 4.0: a short history

Although the term ‘industry 4.0’ is widely used, it is rarely defined. Deloitte has described it as involving a move from traditional linear data and communication towards real-time access to data and intelligence. As part of this shift, there is a need for the integration of digital information from many different sources and locations can drive the physical act of doing business, in an ongoing cycle. Real-time access to data and intelligence is driven by the continuous and cyclical flow of information and actions between the physical and digital worlds, known as the physical-to-digital-to-physical (PDP) loop. This consists of three stages:

1. Physical to digital: information is used from the physical world to create a digital record.

2. Digital to digital: information is shared to create insights using advanced analytics, scenario analysis and artificial intelligence.

3. Digital to physical: algorithms are applied to translate digital-world decisions to effective data, to spur action and change in the physical world.

In order to achieve this, industry 4.0 combines a variety of technologies, including analytics, additive manufacturing, robotics, high-performance computing, natural language processing, artificial intelligence and cognitive technologies, advanced materials and augmented reality.

Source: Deloitte