How to improve ROI for Industry 4.0 use cases

No factory can risk being left behind in the transition to smart manufacturing. If a factory fails to innovate its product and production process, it risks incurring a Cost of Inaction (COI), which is the cost of the lost opportunity. Deploying dedicated cellular-enabled industry 4.0 solutions can generate an operational cost savings ROI of 10x to 20x over 5 years. Learn from Industry 4.0 uses cases on how to move ahead wisely.

Industry manufacturing quality inspection using AR app

Head of Advanced Industries

Head of Advanced Industries

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A recent study from ABI Research outlines the “intelligence” in a smart factory and how it is underpinned by cellular connectivity, which plays a business-critical role. Applications of cellular technology are exemplified with concrete Industry 4.0 use cases, providing business justification and initial steps for how manufacturers can move their digital transformation forward.

Calculating Return on Investment (ROI) and Cost of Inaction (COI) by weighing operational costs and savings demonstrates the business impact of Industry 4.0 applications and solutions running on dedicated cellular networks.

According to the report, “Over 4.7 billion wireless modules will be deployed across smart manufacturing factory floors to enable over USD 1 trillion in production value by 2030.” Manufacturing executives need to understand why and how to develop the right connectivity strategies to unlock this value.

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Advantages and cost savings of cellular technology

In factories, today’s fixed connections are not optimal to modernize the factory floor. Hard-wired connections rely on fixed locations and equipment that require expensive cable installation to upgrade or meet factory extensions. While we expect that Wi-Fi and cellular will coexist for a while, Wi-Fi technology often falls short in reliability, security, and device density. Wi-Fi’s shortcomings do not meet the increasing connectivity needs of advanced industrial applications such as asset tracking or autonomous guided vehicles.

A viable alternative to fixed connections is cellular technology. The advantages of cellular networks are mitigation of bottlenecks, improved flexibility, and streamlined production. Cellular networks enable mobility, reliability, security, and a high device density, which refers to the number of connected devices per square meter. 4G, with a clear path to 5G, can yield significant operational cost savings for an upgraded smart factory.

Deploying Industry 4.0 solutions supported by a dedicated cellular network can generate an operational cost savings ROI of 10x to 20x over five years. In aggregate, these solutions can generate 8.5% in Operational Cost Savings, which equates to USD 200 to USD 600 per sqm per year for a factory or industrial site. ROI and COI depend on the use cases and type of manufacturing site. In the case of a Tier 1 electronics factory, the COI is USD 650 million over five years. For a Tier 1 automotive manufacturer, it is USD 500 million.

ROI and COI calculation logic

Figure 1: ROI and COI calculation logic

 

Industry 4.0 use cases

For this report, ABI Research analyzed and compared financial and operational results from the original factory (aka status quo factory) to a factory that has been upgraded to support dedicated cellular Industry 4.0 equipment. These use cases include asset tracking, condition-based monitoring (CBM), provisioning connected products, mobile robots, and augmented reality (AR). Each Industry 4.0 use case is outlined describing how it works, how to get started, and the operational cost savings.

Top 5 Industry 4.0 value driving use cases and others

Figure 2: Top 5 Industry 4.0 value driving use cases and others

 

1. ASSET TRACKING

Asset tracking refers to the ability to locate and track equipment, tools, and Work in Progress (WIP). Traditional solutions include the use of Quick Response (QR) codes, Radio Frequency Identification (RFID), Short-Range Wireless (SRW) (Bluetooth, Wi-Fi), and Ultra-Wideband (UWB).

ROI ANALYSIS

More reliable and efficient asset tracking leads to enhanced Overall Equipment Effectiveness (OEE) and, therefore, more effective deployment of equipment, personnel, and management of input components and output products. This leads to operational savings. In the example of the Tier One German automotive factory, these efficiencies generate USD 60.1 million in operational cost savings over the 5-year period, which is equivalent to 0.8% of factory TCO expenses, both CAPEX and OPEX.

2. AUGMENTED REALITY 

Augmented Reality (AR) can be deployed for troubleshooting and support, which is the case for several of Ericsson’s 5G manufacturing sites. In the case of troubleshooting, Ericsson found that the ability to remote-in an expert resulted in 50% less downtime, 50% fewer service trips, and an 85% reduction in training time.

ROI ANALYSIS

AR can enable hands-free access to information as well as improved productivity and better efficiency. New workers are quickly trained, which also increases productivity. The number of active users of AR in the manufacturing and logistics industries is forecast to reach 57.6 million by 2025, up from 4.8 million in 2019.

Based on ABI Research’s Industry 4.0 ROI analysis, a Tier One German automotive factory could generate USD 37 million in operational cost savings, which amounts to an operational cost savings ratio of 0.5%.

3. CONDITION-BASED MONITORING (CBM)

One of the main goals in manufacturing is to maximize production efficiency. It is not productive to send a technician to tend to a machine that does not require maintenance, nor is it efficient if a machine goes down because it has not received the attention it needs. To solve this, CBM and predictive maintenance applications remotely keep tabs on the status of connected assets (temperature, vibration, pressure, etc.), so that maintenance is performed proactively, on a just-in-time basis.

ROI ANALYSIS

CBM makes one of the most significant operational cost saving contributions for the smart factory, as it reduces operational downtime, streamlines Information Technology (IT) maintenance, and minimizes the amount of spare parts inventory that has to be carried by the factory. By using CBM to implement predictive maintenance, a Tier One German automotive factory can generate USD 90.5 million in operational cost savings, the equivalent of 1.2% TCO expenses. This is mainly attributed to reduced downtime and reduced IT personnel support.

4. MOBILE ROBOTS

Automated guided vehicles (AGVs) rely on pre-defined paths to navigate. They follow paths defined by fiducial markers, such as Two- Dimensional (2D) barcodes or magnetic tape on the ground, enabling movement on a virtual grid system. Unlike AGVs, autonomous mobile robots (AMRs) can navigate autonomously using technologies like Light Detection and Ranging (LiDAR), Simultaneous Localization and Mapping (SLAM), and computer vision to determine the optimal route, while avoiding collisions with objects, humans, and other robots.

ROI ANALYSIS

Within ABI Research’s ROI analysis, the operational cost savings for integrating more modular, more flexible AMRs, AGVs, and robotics support stood at 1.8% of overall TCO expenditure for a Tier One automotive factory in a German factory. This equates to USD 136 million.

5. PROVISIONING CONNECTED PRODUCTS

The products being assembled in factories are not only becoming more complicated but also software and firmware dependent. Consider the fact that more than 50% (48.7 million) of all new vehicles shipped in 2020 will come with embedded connectivity, and more than 70% (66.1 million) by 2024. All of these vehicles need to be provisioned with the initial software and tested at some point.

ROI ANALYSIS

Relying on a wireless install that is highly reliable and quick has been demonstrated to minimize stoppages and reinstalls. For an automotive plant, the assembly line needs to keep to a specific cadence; otherwise, it backs up production through the entire process. By mitigating stoppages and allowing for the assembly line to be sped up, according to ABI Research’s ROI analysis for a Tier One automotive factory, the operational cost savings are expected to be USD 33.6 million, or 0.4% of overall TCO over the 5-year period. The report also described that by provisioning connected products early on in the manufacturing process, the connectivity could be smartly and effectively used as a digital thread to track progress throughout the factory.

Operational Cost Savings ratio by dedicated cellular Industry 4.0 solution, average over 5 years, forecast: 2021 to 2025. 2 perspectives: German automotive and Japanese electronic factory.

Figure 3: Operational Cost Savings ratio by dedicated cellular Industry 4.0 solution, average over 5 years, forecast: 2021 to 2025. 2 perspectives: German automotive and Japanese electronic factory.

 

Optimizing the value of cellular connectivity

As illustrated with these Industry 4.0 use cases, dedicated cellular networks are better positioned than wired connections to provide reliable coverage, predictable connectivity, and mobility for enterprise Industrial Internet of Things (IIoT). Cellular connectivity is becoming the standard for that factory of the future due to predictable latency, reliability, and security.

Among manufacturers, there is an increasing trend to transition to 5G ready dedicated networks to enable intelligent manufacturing, and Ericsson provides the expertise required. Most recently, ABB Power Grids in Ludvika, Sweden, has also connected cordless screwdrivers in their manufacturing site. Scania, Europe’s largest manufacturer of trucks and buses, has piloted projects at their Smart Factory Lab to explore how 5G technology can be introduced in their production. Another example includes Atlas Copco Airpower, a world-leading manufacturer of compressors, vacuum solutions, generators, pumps, power tools, and assembly systems. As an innovative manufacturer, efficient operations are essential, and Atlas Copco collaborates with Ericsson and Orange Belgium to ensure intelligent manufacturing with 4G and 5G. These are innovating times for Industry 4.0, and Ericsson is there every step of the way.

To learn more about Industry 4.0 and how Ericsson is shaping the industrial landscape, download this ROI report and also join us for Hannover Messe Digital Days on July 14-15, 2020.

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