Majority of Middle Market Manufacturers Recognize Industry 4.0 Opportunity

Ninety-nine percent of middle market manufacturing executives today are
at least moderately familiar with Industry 4.0, according to BDO’s Middle
Market Industry 4.0 Benchmarking Survey. But while more than
half (54 percent) of middle market manufacturing executives have either
developed or are in the process of developing an Industry 4.0 strategy,
only 5 percent are currently implementing one. Another 25 percent plan
to develop an Industry 4.0 strategy, but have yet to get started on it.

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In its inaugural year, BDO's Middle Market Industry 4.0 Benchmarking
Survey polls senior executives at U.S. manufacturing companies with
annual revenues between $200 million and $3 billion on their Industry
4.0 readiness and strategic goals. The survey finds that middle market
manufacturers have ambitious goals to transform their business models
and are tentatively taking steps to digitize their operations. However,
significant challenges lie ahead as they struggle to get major strategic
initiatives off the ground.

“Over time, Industry 4.0 will radically transform how manufacturers
derive and deliver value,” said Eskander
Yavar, Industry
4.0 co-leader and national leader of BDO’s Management
& Technology Advisory Services. “But the window of opportunity
is closing fast. Manufacturers who don’t invest in 2019 risk falling
behind the curve. The middle market is no exception.”

Additional top findings from BDO’s Middle
Market Industry 4.0 Benchmarking Survey include:

1. Business model diversification tops Industry 4.0 goals
Middle
market manufacturers know that Industry 4.0 has the potential to
transform their business. As they look beyond their immediate needs and
toward tomorrow’s digital future, most (71 percent) are prioritizing
business model diversification above all else; which suggests a
fundamental shift in customer demand that can’t be met by the
traditional manufacturing toolset. Improving operational efficiencies
and increasing market penetration tie as the second most-cited goals, at
67 percent each.

2. The biggest barrier to implementation is poor communication
Successful
Industry 4.0 adoption requires collaboration between functional areas of
the business that have historically operated in silos, like information
technology and operations technology. Two in three executives view poor
communication as the biggest barrier to successful Industry 4.0
implementation. Rounding out respondents’ top five implementation
barriers is interoperability with legacy technology (64 percent), lack
of skills or insufficient training (63 percent), lack of leadership and
vision (60 percent), and underinvestment (54 percent).

3. Industry outsiders pose the greatest threat
Even without
manufacturing roots, a technology upstart has the potential to disrupt
manufacturing, whether through hyper-customization or transforming the
economics of production. As a result, middle market manufacturers are
most (69 percent) concerned that failure to adequately invest in
Industry 4.0 will lead to encroachment from non-traditional competitors.

4. The digital thread is more theory than reality
In an
idealized Industry 4.0 world, supply chains become the digital
thread—integrated value chains with end-to-end traceability and
transparency, enabled by the constant, bi-directional flow of
information. Most middle market manufacturers, however, aren’t there
yet. While just 7 percent of respondents say their data is totally
siloed, pointing to increased information sharing internally, only 6
percent claim they have transparency across the entire value chain.

5. Industry 4.0 is creating jobs
While 63 percent of middle
market manufacturers plan to leverage third-party outsourcing solutions
to support Industry 4.0 enablement, more than half (57 percent) plan to
hire new talent. To close knowledge gaps within their existing talent
pools, 60 percent are implementing training to upskill current employees.

“Manufacturers must evolve their businesses to be successful in a
service economy,” said Rick
Schreiber, Industry
4.0 co-leader and national practice leader of BDO’s Manufacturing
& Distribution practice. “That evolution starts with small,
incremental investments in Industry 4.0 that deliver immediate ROI,
while building towards a more digital future.”

The Middle Market Industry 4.0 Benchmarking Survey offers
manufacturing executives a useful barometer to measure their Industry
4.0 maturity against their peers across six key dimensions, including:
organizational strategy, governance, technology, process, data and
security. To see the full survey results, click
here.

About the 2019 Middle Market Industry 4.0 Benchmarking Survey

The 2019 Middle Market Industry 4.0 Benchmarking Survey was conducted by
Market Measurement, Inc., an independent market research consulting
firm. The survey included 230 executives at U.S. manufacturing companies
with annual revenues between $200 million and $3 billion and was
conducted in November and December of 2018.

About BDO USA

BDO is the brand name for BDO USA, LLP, a U.S. professional services
firm providing assurance, tax, and advisory services to a wide range of
publicly traded and privately held companies. For more than 100 years,
BDO has provided quality service through the active involvement of
experienced and committed professionals. The firm serves clients through
more than 60 offices and over 650 independent alliance firm locations
nationwide. As an independent Member Firm of BDO International Limited,
BDO serves multi-national clients through a global network of over
80,000 people working out of 1,591 offices across 162 countries.

BDO USA, LLP, a Delaware limited liability partnership, is the U.S.
member of BDO International Limited, a UK company limited by guarantee,
and forms part of the international BDO network of independent member
firms. BDO is the brand name for the BDO network and for each of the BDO
Member Firms. For more information please visit: www.bdo.com.

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