Knowledge is Profitable – Smart Factories Will Bring Big Changes

Knowledge is Profitable – Smart Factories Will Bring Big Changes

The state of Indiana is regarded as one of the top performers among all states in the U.S. automotive sector. A new trend of smarter factory designs, which some are referring to as the “fourth industrial revolution,” could very well position our state to go even further. Just what are these smart factories exactly, and how can they help the Hoosier automotive industry grow? Capitalizing on the successes we’ve already built and modernizing the automotive industry could be huge for our state’s future.

Currently, the Indiana auto manufacturing sector has the second-largest GDP of its kind in the U.S., over $15 billion annually. Over 500 automotive companies are actively operating within the state at the moment and five original equipment manufacturers (OEM), including Toyota, Subaru, Honda, General Motors, and AM General, are churning out vehicles every day.

More than 100,000 Hoosiers work in automotive manufacturing, which is a staggering 459 percent above the national average. We’re ranked third in the U.S. for car and truck production with 11% of all motor vehicles produced nationally made in Indiana.

With all of that as a foundation, the new push toward smarter factories carries a great deal of interesting potential for Indiana-based manufacturers. In its entirety, the smart factory trend is frequently referred to as “Industry 4.0” and is broadly described as essentially connecting the shop level of a manufacturing operation to the top management levels. More specifically, characteristics of the movement involve integrating all of the aspects of production with accurate reporting and monitoring technology that can self-optimize processes and streamline production.

For example, if a manufacturer equipped their assembly lines with data-collecting sensors in areas such as motors, hydraulics, and other systems, then details about specific processes could be monitored virtually at all times. So, in this case, perhaps mechanics could be warned about upcoming important maintenance or emerging problems that could bring production to a halt. What may seem subtle at first, like an unusual vibration or differentiation in a process, could be addressed before it becomes a million-dollar work stoppage.

In addition to monitoring and problem prevention, the use of technology to improve worker safety is also a big part of the smart factory trend. Putting robots to work with things like material handling and repetitive tasks are good examples of this.

Ultimately the goal is to use knowledge to reduce costs while improving reliability and quality. Among all of the different industries that have begun adopting this methodology, the automotive sector has been reportedly the most bullish. According to research from Capgemini, a global consulting and technology organization based in Paris, France that surveyed roughly 320 auto executives, the automotive industry is the most enthusiastic about smart factories and is making larger investments than any other sector.

And, truly, it’s because they have so much to gain. “Based on our survey, automotive industry executives expect average productivity growth in smart factories to average 30% by 2023,” researchers said. Take a look at how that would affect Indiana automakers:

It’s worth noting that Capgemini’s research focused on the automaking sector on a global scale and found that, worldwide, the implementation of smart factories would have an even more dramatic impact for the industry as a whole. They predict that productivity gains would reach $160 billion on that level.

Additionally, the table above describes a conservative estimate that only 24 percent of factories would be smart by 2023. In reality, Capgemini believes that as many as 50 percent of automotive factories have the potential to be smart factories by 2023. If that actually happens, then the productivity gains Indiana could expectedly see would reach approximately $2.25 billion, or about a 15 percent absolute gain on productivity.

Fifty percent of plants upgrading their facilities over the next five years might seem lofty, but it’s not outside the realm of possibility. The state has strong incentives in place to support companies that want to upgrade their facilities, in the form of things like tax abatements, training grants to educate workers about new equipment, and others.

In addition to incentives, researchers in the automotive executive survey found that “auto companies stand to make substantial productivity gains by 2023. This will help them break-even on smart factory costs within a year of those operations reaching full potential,” meaning that upgrades will essentially pay for themselves very quickly.

With such a rapid return on investment, combined with state support, it’s safe to say we’re going to be seeing manufacturing facilities throughout the state get a lot smarter over the next few years. It’s going to be a whole new era for local companies, perhaps even a revolution after all.


Full results of the survey are available here.