The Fourth Industrial Revolution is set to bring unprecedented change to factories and the industrial landscape. From artificial intelligence, robotics, and blockchain to the Internet of Things and 3-D printing, every sector of production is set to be dramatically disrupted in the coming years. 

AI and machine learning have played a vital role in enhancing productivity levels, adding up to $3.7 trillion in value to global manufacturing. According to research experts, these returns are guaranteed for organizations that are well-prepared for the future. Companies that have already begun to adopt emerging technologies into their business models will pull further ahead. 

As we get closer to a point where assembly lines are being taken over by data-driven systems and AI, the factories of the future can expect to see greater efficiency and productivity. 

Challenges of today

Amid the recent COVID-19 pandemic, there is no doubt that supply chains across the globe have been majorly disrupted. With mandatory lockdowns and work-from-home restrictions,  the resulting global economic downturn has significantly affected many companies. A survey conducted by the Institute for Supply Chain Management has revealed that as transport and consumerism come to a halt, 75% of companies have been affected by supply chain disruption.

What has made this situation even more detrimental to several businesses is the large impact the virus has had on major industrial hubs such as China, the US, and Europe. In fact, China, famously known as the de-facto ‘factory of the world,’ has seen a 13.5% decrease in industrial production in the early months of 2020.

While the second quarter has held better than the first – as factories steadily return back to normal – performance is still far from 100%. COVID-19 has created holes in the supply chain, leaving it vulnerable. This has been a huge slap in the face for many factories, with many forced to reflect on how to navigate through the changing landscape and stabilize their position in a post-pandemic world.

Why Factories Need Data to Win

Moving forward into the future, factories will continue to make smaller minimum order quantities (MOQ) with production, quite possibly shifting onshore as well. With the wealth of data available online these days and with smaller MOQs that are based on the long tail of a customer, factories should expect to continue catering for niche communities, building personalized products at mass scale. The cycle of producing and collecting more data, thereby opens up opportunities to predict demand further up the supply chain.  

As companies learn to leverage the mountain of data in front of them, using predictive analytics can go up the value chain to predict supply. Models built strictly for capacity planning will help vendors learn which factories should produce what, all of which will be based on AI-driven data predictions.

Furthermore, with the recent outbreak disrupting the landscape dramatically, smart retailers will need to look beyond the data they have and use solutions that make use of data relevant to the pandemic. Tools like COVID-19 trackers can help businesses know when countries can expect to realistically recover and reopen fully. By knowing this, factories learn to plan better, knowing what to manufacture and what the expected lead times may be.

Ultimately, the sourcing industry will speed up in its shift towards a demand driven model, moving further away from the supply driven model – where products are made and sales are used to turn those products into revenue. While a demand driven model is by no means a new concept, previously value chains were never connected enough to make such a model be the majority. But with data technologies and AI, that has all changed. 

Too many sourcing companies have been burned badly by the pandemic, where hundreds of millions dollars’ worth of products are being cancelled or returned. For example, brands like Primark are recorded to have cancelled roughly $273 million USD in orders in just the last year, with other big names following. 

Whether it’s learning how stock prices have dropped or improving capacity planning for predicting demand and supply, how a factory or business chooses to use their data will be the biggest difference in navigating the disrupted landscape left by the pandemic.

Factories of the Future

With the recent social distancing rules and shifting consumer behaviors, many factories and retailers have had to reconsider their operation strategy moving forward. Many have begun to look to digital transformation and integrating the right technologies to gain more insights from data is helping them streamline the supply chain process.

Transparency in data collection will be key to clear development. Not only will this allow factories to work to identify errors quicker, but it will also help to minimize any opportunity for mistakes. 

In addition to data, AI and robotics are also playing a huge part. Collaborative robots known as ‘cobots’ will be an astonishing feature in the factories of the future. These innovations are designed to work alongside humans, understanding verbal instructions given for every task. The Robotics and Artificial Lab at the University of Rochester has tested the functionality of Baxter robots in a manufacturing environment. Not only was this robot able to remove the middle gear from a set of five upon instruction, but they were also able to complete mundane tasks like transferring goods from one department to another, packing to store them in warehouses, and dispatch for shipment. 

The increased reliance on automated machines will allow manufacturers to produce goods at a faster rate and further customize them according to consumer demands as identified through data analytics.

Rise of Smart Factories

One big change that has occurred across the supply chain is the rise of smart factories. As the name implies, these are the factories where AI, big data, machine learning, and other digital technologies are used to improve physical production processes. The following are five trends we can expect to see in the future of smart factories. 

  • AI and advanced analytics – Advanced analytics solutions such as Chain of Demand leverage big data and AI to improve inventory management. Decisions that are based on purely historical data are not enough to go by these days. By integrating a multitude of different data sources, companies can use AI-driven analytics to make smarter predictions of what will and won’t sell, but also to strengthen their position in the market by adapting to consumer demand quickly.  
  • Robotics as a service – This idea refers to businesses that will be renting out robots for manufacturers that rely heavily on machinery. The manufacturing and logistical sectors are actively adopting these services, as the company does not have to invest in buying the machinery. Not only does this help solve many liquidity issues, but it also reduces the time spent by the product in the manufacturing and assembly line by 30%.
  • Wearables and IoT – Wearables and IoT items that are connected to augmented reality can help transmit information much faster. Workers will develop a closer touchpoint with technology and this transmitted data can help serve as a useful overview for how to improve the production process.
  • Digital Twin simulation – Digital Twin simulation is a process where companies develop business models virtually and check the process for any problems that will affect production. This simulated trial-and-error can help increase the productivity of machines in real life by reducing predicted stoppages related to malfunctioning.

Challenges Moving Forward

Despite adoption of AI being at an all-time high, with several analysts forecasting global AI spending to hit US$79 billion by 2022, one of the biggest threats to implementing it is exactly that: integrating technologies into the company’s roles and functions. Whether it’s fear of being replaced or lack of expertise in managing technologies like AI, simply knowing they need to change and actually acting on it seems to be the major issue organizations are facing. 

While the factory of the future is in making everything more connected, integrated, and transparent with technology, it calls for a massive restructuring of existing infrastructure. Changing roles and functions within the workplace is never easy and is definitely not something that happens overnight. However, if the COVID-19 has reminded the world of anything, it is that disruption can happen in an instant, and time is simply not a luxury many organizations have these days. 

By closing the looming skill gap between workers and technology as fast as possible, companies can aim at not only surviving but thriving in the economy of the future. The only thing that remains is to be a bit more open and start transitioning into a more data-driven, digital approach. Once that move has been made, factories and retailers alike will stand a fighting chance to strengthen their position in a post-pandemic retail era.