The State Of Industry 4.0 In 2020: Smart Products

Robert Merlo

Part 3 in a series on the findings of an Industry 4.0 adoption study by The MPI Group

Here, we wrap up our brief series on a recent study by The MPI Group that surveyed hundreds of manufacturers on Industry 4.0 adoption. The first blog provided an overview. The second blog looked specifically at how Industry 4.0 is being adopted for plants and processes. Today, we look at adoption in terms of smart products.

Smart products are those with “intelligence” embedded. Typically, this means embedded sensors that monitor usage, product state, or operational performance while also providing interconnectivity that enables this information to be transmitted back to the manufacturer. Many manufacturers correctly see such capabilities as enhancing interaction with customers – thus giving them a new tool for customer engagement that previously did not exist.

Fostering adoption

So, what exactly are the adoption trends according to the survey we’ve been tracking? Clearly, adoption is strong. Approximately two-thirds of manufacturers surveyed are currently “embedding smart devices and/or intelligence into products, including finished goods, materials, and software.”

At the same time, 46% indicate that smart products are “a significant focus of production innovation plans,” while another 37% have “some plans” along the same lines. In other words, it is safe to say, 83% of manufacturers are looking at smart products with at least some degree of seriousness.

A look at investment level is even more encouraging. As the survey shows, “Roughly half have invested more than five percent of sales in embedding Industry 4.0 technologies into their products in the past year.” What’s more, “89% will increase that investment in the next two years.”

Boosting sales

Smart products are good for sales, too. Survey participants said that they generate 38% of their sales, on average, from smart products. Profit margins for these smart products, moreover, trend slightly higher than their non-smart counterparts (36% vs 33%). Clearly, customers are willing to pay for embedded intelligence.

Shifting manufacturing

What sort of obstacles do manufacturers face on the road toward making more smart products? Identifying the most appropriate opportunities for smart products is most often cited as the top challenge (53%) while accessing required technologies comes in second (45%).

It should be observed here that smart-product manufacturing – as well as the ability to take advantage of the connectivity enabled by them after the sale is made – requires a re-think on multiple levels. On the production side of the equation, manufacturers often need to either design new capabilities or partner with new vendors. This often leads to new manufacturing processes.

Post-sale, it requires new follow-through capabilities. In many cases, organizations will want to create service models where data from products in the field is brought in and analyzed to determine the correct response. Perhaps a software patch is required or a maintenance visit by a field technician. Or maybe the data indicates the need for an upgrade, redesign, or an entirely new sales opportunity. Whatever the case, manufacturers that understand the opportunities presented by the new smart products model will be those that seize the advantage most effectively.

Improving performance, too

Survey respondents also indicated a fair degree of performance improvements as a result of developing and delivering smart products. What exactly is improved? Respondents cite significant improvement in the areas of customer support and branding/market awareness.

This makes sense, as products with embedded intelligence that facilitate customer engagement give manufacturers the critical data they need to respond to customer needs while also providing an opportunity to reinforce the brand with superior levels of service.

Learn more

As the survey also shows, intelligent products have already increased revenues and profitability in the past year – a trend that is expected to continue over the next five years. With significant opportunity on the table, we can anticipate greater uptake in smart products moving forward.

The survey we’ve been looking into throughout this series is available here. Have a look and get a sense of where your own organization stands in comparison.

Robert Merlo

About Robert Merlo

Robert Merlo is Vice President of SAP Solution Marketing, responsible for Strategic Positioning of the Digital Supply Chain and Manufacturing Portfolio of SAP Solutions. Specifically focused on R&D and Manufacturing.