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McKinsey & Co. survey finds huge gap between piloting and deploying digital manufacturing; automotive no exception

Automakers and their suppliers, like manufacturers in many other industries, have been exploring the potential of digital manufacturing strategies to increase productivity, profitability and decision-making. Audi, for example, just last week announced plans with Ericsson to pilot the use of 5G as a future-proof enabling communication technology for such Industry 4.0 activities. (Earlier post.) Field testing will begin later this year at the Audi Production Lab in Gaimersheim, Germany.

However, a new McKinsey survey has found that a large confidence gap exists between the number of companies that try digital manufacturing strategies and those that successfully apply them. McKinsey’s 2018 Manufacturing Global Expert Survey comprised 700 companies in seven nations. Each company surveyed had at least 50 employees and $10 million in annual revenue.

The survey found that two-thirds rank digitizing the production value chain (Industry 4.0) as a top priority; 92% of respondents think they lead or are on par with competitors in Industry 4.0 manufacturing strategies. Automakers are even more bullish on their Industry 4.0 activities; as opposed to the 92% of all respondents saying they were ahead of or on par with their competition, 100% of automotive OEMs listed themselves that way.

Industry 4.0 pursuits fall in three areas:

  • Connectivity – Using digital performance management and augmented reality to move the right information to the right people in real time. These tactics help communicate interactive work instructions and standard operating procedures.

  • Intelligence – Advanced analytics and artificial intelligence are fostering better decision making.  Examples: Predictive maintenance; digital quality management and AI-driven demand forecasting.

  • Flexible Automation – New robotic technologies are safer and improve productivity. Human-machine interactive “cobots” and driverless guided vehicles are changing life on the factory floor.

Despite this focus and enthusiasm, companies are experiencing pilot purgatory. They have significant activities underway. But they are not seeing meaningful bottom-line results.

The challenge is to roll out successful pilot projects to the entire organization. That’s what makes transformation happen.

—Richard Kelly, a McKinsey partner

The study, which included 50 global automotive OEMs and suppliers in seven countries, found that for automotive the difference between piloting technologies and taking them to scale was large.

  • 92% of OEMs have or are trying analytics for quality management and root cause analytics, but only 31% have rolled it out widely.

  • 54% percent have 3D printing pilots but only 4% have been taken to scale. Adoption is higher among suppliers at 25%.

  • Use of augmented reality for operator guidance or training has been tried by 54% with just 15% taking it to scale. For suppliers, 63% had tried it with only 8% in full use.

A third of component suppliers said they think transitioning to fully digital manufacturing will require replacing more than half their equipment. This was the second-highest sector behind software at 37%.

Across industries, China, India and the United States think they lead their competition in digital manufacturing. Japan was an outlier. Its view for the potential of digital manufacturing dropped from more than 90% in 2017 to 75 percent. Japan’s loss of enthusiasm was far greater than declines in the other three countries.  Even so, the success in implementing Industry 4.0 solutions rose significantly in Japan, China and the US while stagnating in Germany, according to the findings.

Digital manufacturing topped the operations-strategy agenda at 68% of companies. India led China and Brazil in setting an Industry 4.0 agenda. At 63%, the US was 5 percentage points below the 68% average.

The survey found that companies are piloting an average of eight different Industry 4.0 solutions. India leads with 10.6 digital pilots. China had 10.2 and Brazil had 8.9. The US was fourth at 8.5.

Across business sectors, connectivity, intelligence and flexible automation solutions showed relevance. Pilots under way trailed that sentiment by 16 to 19 points.

A bigger drop off came when comparing pilot programs in the three areas with those that made it to scale. Only 30% rolled out companywide.  Industrial automation, software and semiconductors fared best. Healthcare, automotive components and paper and packaging trailed.

In Germany, the US, Japan and China, optimism toward digital manufacturing fell after an all-time high in 2017.

It is quite possible companies still believe in the potential of the various technologies of Industry 4.0. But pilot purgatory has been demoralizing. Many are less hopeful about their individual chances of reaping benefits at scale. But we’re seeing great success in the number pilot projects being launched, and the general attitude toward digital manufacturing is quite positive.

—Richard Kelly


Brian P

I wonder what they mean by "fully digital manufacturing". This isn't something that you can do on a computer. Someone or something needs to pick up this piece of steel, and pick up that other piece of steel and hold it in the right spot, while someone or something else takes a physical welding gun and welds them together. (I work in this business)

Fully digital inventory control and parts scheduling ... Certainly. It's already pretty much like that and has been for quite a while.

Network communication between devices (robots, pneumatic valve banks, weld units, etc)? It's getting there. Everyone is using ethernet or profinet communication these days. Not all the hardware is compatible yet but it's getting close.

Collaborative robots ... I've only seen one application; I've talked about 10 customers out of doing it this way because when the process was properly analysed, it didn't make any sense. (It didn't even make sense to do the one that was completed, but someone wanted to do it that way to experiment with it. Their money, not mine ...) I wouldn't exclude this completely, it just didn't make sense for the applications that have come across my own desk.

If someone wants to change the design of the car then someone still has to make all the molds, stamping dies, fixtures, and all the automation around them (this is the piece that I do).

You generally want robots (and AGVs) to do the same job over and over without "intelligently" deciding to do something else, if you want every car to come off the line the same way ... If the path of a weld is inconsistent then you had better find out why your parts or fixtures are inconsistent, and fix that ...


Translation of McKinsey's point:

We've written a paper that a couple of your company's Board members and without doubt some ambitious, scheming executives will bring to the fore in the next big Oparations review. You'll all be tasked to report on your progress in Digital Manufacturing. You can count on a shrill EA to one of the Group execs will be at the head of the DigiMan Initiative and yu'll have a whole NEW set of metrics to report.

Need help?

Well, not to toot our own horns but [HOOOOOONK] we here at McKinsey have the consulting staff to help for a few $M (to start). You'll see a partner 24 hrs from your first call (but never agin unti the next contract mod). We'll lay out a complex and plan to get you to an indeterminate milestone and immediately fly out a staff of new Junior folks (business class, of course) fresh out of B-school to begin billing right away.

The end.

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