If you’re a manufacturing SME, you’ve got a lot to gain by taking the industry 4.0 shift … and a lot to lose if you don’t!
On the positive side, the technologies to initiate a digital shift are more accessible and numerous resources are available to help.
WHAT IS 4.0?
Considered the fourth industrial revolution, 4.0 is characterized by the integration of digital technologies into manufacturing processes. The transition to 4.0 can be undertaken in phases, in line with your needs. The benefits can be derived by approaching the shift one project at a time.
Our team recently reviewed Quebec and Canadian studies on the topic, which illustrate that innovation and industry 4.0 are more essential and profitable than ever.
According to entrepreneurs consulted in connection with SITQ’s Baromètre industriel québécois 2018, manufacturers that don’t embrace this shift run the risk of disappearing in a few years. They believe that businesses have to innovate to stay competitive and meet their customers’ requirements.
A global transformation movement
A smart factory calls on real-time communication to oversee activities and react.
The internet connects the entity’s entire ecosystem—employees, systems, machines, products, customers, suppliers, etc.—allowing manufacturers to increase their efficiency, offer more personalized products and react more quickly to customer needs.
The impact on manufacturing promises to be remarkable: highly automated and flexible factories can now compete against low-cost factories in Asia. Leading-edge plants are appearing around the world, to the point that the manufacturing sector is being transformed into a high-tech sector.
According to the Baromètre industriel 2018 mentioned above, in Quebec, three quarters of manufacturing SME have integrated digital technology or plan to, primarily in the following areas:
- Real-time monitoring and control (52%);
- Equipment interconnectivity (40%);
- Robotics (34%);
- Lights-out production (29%).
Multiple benefits for companies
There is no doubt that the 4.0 shift pays. Businesses that have integrated digital technologies or plan to, report better results than those that have not adopted them or do not plan to, according to the SITQ’s Baromètre industriel 2018 and a 2017 Business Development Bank of Canada (BDC) survey of some 1,000 Canadian entrepreneurs.
The main benefits include:
- Increased productivity in 60% of cases. The main driver of productivity growth is the capacity to predict and prevent downtime and optimize equipment effectiveness and maintenance;
- Stronger increase in sales and the number of employees. Businesses that have adopted these technologies are almost twice as likely to forecast annual revenue growth of 10% or more in the next three years;
- Higher customer renewal;
- Overall product quality improvement. For example, quality control in real time helps reduce and even eliminate customer returns for products that do not meet specifications;
- Higher probability of international sales and greater capacity to innovate.
Almost half of Canadian businesses that have adopted 4.0 say they achieve operating cost savings, thanks to:
- real-time production monitoring and quality control to reduce waste and rework;
- predictive maintenance to prevent costly repairs and unplanned downtime;
- higher automation to save labour costs and improve throughput;
- the use of 3-D printers to achieve faster prototyping, reducing the cost of engineering and accelerating time to market.
HEADING TOWARDS GROWTH: THE BASIC RULES OF A SUCCESSFUL 4.0
However, there are a few basic rules to ensure a successful 4.0 shift and truly reap the benefits. They are:
1. Prepare a strategic plan
This is probably the most significant tool to give the company a vision of its development in a highly competitive environment where innovation and the digital transformation will quickly become a necessity to maintain and develop new markets.
Developing a solid 4.0 strategy is as important as acquiring and integrating new digital technologies with significant investments—that generally represent 7%-9% of a manufacturing SMEs sales.
The digital plan must be embedded in the organization’s strategic planning. Its objective will be to optimize current tools, prepare a plan for future technology acquisitions and ensure consistency and integration based on the business model.
2. Call on specialists
Entrepreneurs who have already implemented a digital transformation will tell you: calling on specialized resources to support your process is key.
Our specialists can guide your strategic planning and help you benefit from R&D tax credits and financial and other support programs, such as Investissement Québec’s Innovative Manufacturer.
3. Engage management in the process
A successful industry 4.0 initiative and digital transformation must have management’s complete support. Management must first pinpoint opportunities for achieving gains and then mobilize employee know-how to efficiently deploy the 4.0 initiative.
In its study, Prendre part à la révolution manufacturière? Du rattrapage technologique à l’industrie 4.0 chez les PME, the CEFRIO explains that management must:
- Define the vision and principles underlying the initiatives;
- Encourage, simplify and regulate digital utilization within the organization;
- Adequately support the initiatives with investments that are commensurate with the objectives and by supporting the teams in charge;
- Convince, reassure and play the role of transformation ambassador;
- Provide for the means to support collaboration, experimentation and entrepreneurship in the teams;
- Identify what expertise needs to be acquired and forge partnerships that will complete the team’s strengths and bring the organization further;
- Reinforce collaboration with customers and suppliers to make inter-entity projects and direct customer contribution to the innovation process easier;
- Keep employees informed on an ongoing basis about the organization’s position on the transformation resulting from the initiatives.
Moreover, it’s important to make managers aware of the digital shift and train them in this area, as some may not be well equipped to successfully undertake the process. For example, you could present actual digital technology integration cases.
4. Skillfully manage the labour issue
Training and recruiting employees is a major challenge for organizations undergoing a 4.0 shift.
According to the BDC, the lack of qualified employees (42%) heads the list of the biggest challenges faced by Canadian entrepreneurs when implementing digital technologies. Next were excessive costs (38%), unclear return on investment (31%) and employees’ resistance to change (31%).
The SME must examine the new skills required and the qualified staff it needs. Competencies most in demand for industry 4.0 include:
- Data management;
- Data security;
- Human-machine interaction;
- User interface design;
- Software development;
- Programming;
- The science of data and analytics.
5. Pay special attention to cybersecurity
IT security is a critical consideration in the shift to industry 4.0 given the increase in data and systems—which are generally interconnected and decentralized.
Lessons learned
In closing, here are five major lessons learned in the aeronautics industry that has extensive innovation experience:
- Be prepared to change your business model and strategies;
- Think strategically and for the long term;
- Be aware that the business environment has new technological needs;
- Manage digital projects with the same discipline as any other project;
- Remember that the digital shift is, by far, not just a technology matter.
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To stand out in your industry, provide your customers with experiences that evoke positive and memorable emotions.
You don’t always need to invest in costly technological or operational projects to innovate in this field. Improving the client experience is primarily an everyday business challenge that must be placed at the heart of your SME’s culture and strategy.
With this in mind, it’s your role, as business leader, to clearly define the client experience you want to offer and make it a priority that engages all employees. Remember that today, above all else, clients (individuals or businesses) are looking for speed and simplicity in their interactions with suppliers as well as increasingly tailored service offerings.
Know your client well
Where can you find new ideas to enhance the client experience? Of course, you could get inspiration from the best of the best in the industry, but first and foremost, it’s all about being able to listen to your clients and knowing their expectations, what they want to live as a rational, emotional experience, and only then will you discover how to improve your delivery.
While some expectations are clearly defined by your clients, others are unclear or not defined at all, but they still exist and therefore can influence your clients’ behaviours.
You can use various methods for determining their expectations and actual needs.
Traditional methods
- Perceptual surveys;
- Mystery clients;
- Analysis of the records of complaints and comments;
- Operational follow-ups after a transaction, etc.
Social media
They allow you to maintain a constant dialogue with your clients.
New technological tools
You could gather continuous information about your clients using advanced analytical tools, for example. These will help you analyze your data, determine client trends and decode their behaviours.
Regardless of the method, it’s much more than just asking them for a list of desired improvements, hoping to foster their loyalty and inclination to recommend your products and services.
Make the most of new technologies
New analytical and artificial intelligence tools enable you to get to know your clients well by analyzing large quantities of data from a variety of sources: client databases, transaction history, email communications with clients, comments on social media, etc.
Fortunately, technological development in the past years have made these technological tools more and more affordable for SMEs. They can help you analyze the current client path accurately and detect what’s really important for clients and what can irritate them. This way, you can improve in the way they really want.
Think, for example, of automated management applications where suppliers can monitor their client’s inventories in real time (B2B) in order to always have sufficient quantities on hand. On the other end of the value chain, think about clients that can follow the progress of their order and be informed in real time of delivery time frames. Also, think about personalization tools on e-commerce websites where consumers have the possibility of configurating products based on their preferences.
Engage your employees
Lastly, in the same way you have a conversation with your clients, you should continuously maintain a client experience dialogue with your employees. It’s the best way to give this topic all of the importance due and mesh it with your business culture.
Furthermore, since the client experience is delivered on a daily basis, interaction by interaction, your employees are at the heart of this delivery experience and are also an invaluable source of improvement ideas.
In recent years, managers have tended to be very present in the field in order to supervise employees’ activities and coach them, for example. This helps gather comments to improve and discuss the client experience, while ensuring that the guidelines are followed by all staff.
As a result, you will improve the client experience, little by little, every day, by making small gestures that will add up and help keep you at the forefront of this game.
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The Grant Thornton International IFRS team has published Insights into IFRS 16 – Definition of a lease.
The Insights into IFRS 16 series provides insights on applying IFRS 16, Leases, in key areas. Each edition will focus on an area of IFRS 16 to assist you in preparing for the required changes on adoption of the standard.
The edition Insights into IFRS 16 – Definition of a lease provides guidance on the definition of a lease.
The issue
IFRS 16 changes the definition of a lease from the current evaluation in IFRIC 4, Determining whether an Arrangement Contains a Lease, and provides guidance on how to apply this new definition. As a result, some contracts that do not contain a lease today will meet the definition of a lease under IFRS 16, and vice versa.
The bulletin explains the new lease definition and the three key evaluations necessary to determine that the contract is or contains a lease.
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Cities are evolving demographically and their health and security needs have changed. How can cities address these new challenges?
If a serious incident or disaster occurs, emergency services are immediately in the limelight. More and more, citizens are informed in real time and they have increasingly greater expectations regarding police and fire interventions. In such a context, it’s natural to wonder if these services have adapted their traditional reactive approach and, most importantly, how they can be more proactive.
Main public security issues
Public security organizations are directly impacted by a number of socio-demographic factors. The most significant in Quebec are listed below.
Annual growth rate
This rate is declining, due in large part to the low birth rate.
Immigration
Immigration has been increasing constantly in the past 30 years and is offsetting the low birth rate while changing the socio-demographic profile of many localities.
Aging population
Since 2016, seniors outnumber younger people for the first time in Canadian census history.
Changing crime rates
Although a significant number of people mistakenly believe the crime rate is up, overall, it has in fact been dropping in recent years (37.9% decline from 2006 to 2015); however, some types of crime are on the rise (e.g., cyber-crime).
Mental health
Interventions with individuals with mental health issues are increasing each year. For example, the City of Québec Police Department reports that the number of calls in 2016 in this respect was 30% higher than in the previous year.
Fires
The total number of fires is down (down 25% between 2010 and 2014), but the rate of fatalities due to fires is increasing.
The impact of these socio-demographic changes on public security organizations can easily be imagined. Police and fire departments must therefore adapt their activities and service delivery to these realities. Can they anticipate trends and the resulting impacts to be more proactive both with citizens and in terms of their operating methods?
Changes initiated
Municipal budgets for public security organizations are constantly being reviewed and questioned. However, the expectations of elected officials and citizens for lower cost services are growing. This is why many organizations have already taken action:
- Combining some services or activities to deploy resources on a territorial basis;
- Entering into partnerships and intermunicipal agreements with community organizations, citizens groups and, sometimes, provincial and federal agencies to create a reinforced and integrated public security network.
Do the measures implemented adequately reflect the current challenges? How can organizations set their priorities to appropriately address rapidly evolving needs?
Tangible solutions
Despite the complexity of police and fire department activities, there are several options available to efficiently address the above-mentioned issues using recognized best practices. We have listed them by subject matter.
Sound governance
- Adopt a policy on the quality of services to be provided with clear, published standards, objectives and measurement mechanisms;
- Prepare a strategic plan and ensure strict priority management;
- Focus on preventive rather than corrective actions.
Human resources
- Diversify internal recruiting to be more representative of the population;
- Develop and introduce a human resources plan with a short-, medium- and long-term perspective;
- Provide tailored training to managers to bolster the development of management skills.
Client experience
- Establish a connection with citizens as security co-actors so that they can contribute to increasing their security and feeling of security.
Strategic collaboration
- Create and reinforce true partnerships (beyond consultation) with public security institutions and organizations to improve the prevention and public education service offering;
- Work together with various levels (municipal, regional, provincial and national) as well as with private security services, government agencies, local community organizations and citizen associations.
Exploit data
- Use new advanced analytics tools to improve the predictive ability:
- Detecting risks areas and determining areas at higher risk for disasters;
- Mapping risks to optimize resource planning and reducing the response time.
Communication
- Develop new multiplatform communication tools (automated text messages, social networks, etc.);
- Develop strategic communication plans taking the various partners and at-risk population segments into consideration.
In short, by identifying and implementing targeted, collaborative actions within a global management perspective, organizations would be able to anticipate the challenges they face.
Contact our experts. They can provide advice and support for your initiative to provide efficient public security services adapted to your citizens’ needs.
03 Dec 2018 | Written by :
Pierre Fortin is a partner at Raymond Chabot Grant Thornton. He is your expert in Management...
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