The revolution is coming: time to get on the journey to Industry 4.0

Manufacturing has a long history in Australia and is a vital part of our economy. However, we have seen a downturn in the manufacturing sector over recent years and we need to address this urgently. But why do we care and what can be done about it?

Industry gross domestic product (GDP) represents a significant portion of Australia’s GDP with mining being around 13.5%, construction around 9.5% and manufacturing around 11%. More importantly, industries such as manufacturing are really like the growth engine of the economy. And it’s important for Australia and Australian companies to realise that competition is global, not local.

In the US for instance, they see that for every dollar in manufacturing it adds US$1.48 to the economy, whereas retail adds only a little over US$0.50. President Obama last year announced a proposal to create a National Network for Manufacturing Innovation, with 15 research institutions located all over the country that will encourage industry innovation.

In the UK, in February this year, industrial output increased 0.9% from January, the highest increase in eight months. There were upward contributions from three of the main sectors, with manufacturing being the largest contributor increasing by 1.0%.

In India, the government has now understood that the service sector alone cannot help the country make broad economic progress so they developed the National Manufacturing Policy (NMP), a plan for industrial growth. The goal is for automation to increase productivity and improve quality, in small and medium-sized companies as well as large enterprises. This policy is projected to increase manufacturing’s share of GDP from its current level of 16% to 25% by 2025.

Germany, a country renowned for being a powerhouse in manufacturing, actually faces many similar challenges to Australia in that they have a high standard of living and highly valued currency in the Euro. However, their success is no accident and they are constantly looking to the future. A national working group - Industrie 4.0 - was set up to look at the future of advanced manufacturing and Siemens is a key member of this working group.

The focus of Industry 4.0 is the development of cyberphysical systems, which are aimed at further optimising production. Products, transport options and tools will communicate with each other and will be organised with the goal of improving the overall production even over the boundaries of individual companies. In this production environment, the product itself is an active part of the production process.

We’re at an exciting point in time. With the digitisation of the product development process, we are seeing design, production planning, engineering, manufacturing and services merging into one unit, instead of being sequential. Production operations will be more efficient and flexible with rapid innovation cycles.

Despite some current setbacks in manufacturing in Australia, we can and should have a successful and robust manufacturing sector. But we need to embrace Industry 4.0 and get on the journey as quickly as possible, find our place in the global supply chain and have the right mechanisms, policies and levers to help Australian companies and industries compete globally. We also need to encourage investment into advanced technologies which are available today, because we are at a critical fork in the road right now and we must make the right choices to become competitive.

Jeff Connolly is CEO and Chairman of Siemens Ltd and head of the Industrial sector. Jeff has extensive experience across Asia, Europe and Australia, including his position on the AiGroup Advanced Manufacturing Council, and is in a unique position to provide valuable insights into the future of manufacturing.