The pandemic exacerbated the weakening of Indian manufacturing output since 2017-18 broadly owing to unpredictable market dynamics besides changing policy and regulatory trends. This catalysed digitalization in businesses and markets, and the current times are expected to usher in Industry 4.0 solutions faster whereby digital technologies become integrated in operational manufacturing processes. The resulting advanced digital production (ADP) solutions can mobilize the leapfrogging in operational technologies and thus productivity and competitiveness.
Large firms in India are largely competitive with modern production capabilities. The previous decade’s manufacturing advancements led by automation and robotics have been pivotal in enabling many large firms to participate in global value-chains. And keeping up with Industry 4.0 advancements, forerunner firms are now transitioning to vertically integrate their manufacturing systems and processes. ADP solutions and services are largely enabled by artificial intelligence, machine language, big data analytics, cloud computing, Internet of Things, and additive manufacturing, using real time data collected with widespread sensorization and improving use of automation and robotics, among others.
ADP allows firms to capture customer experiences and expectations rapidly, as decision-making becomes seamless from boardroom to shopfloor and vice versa. With real-time data firms are able to exceptionally optimize cost and manufacturing footprint. Such smart firms are not only leading with a purpose to achieve better market shares and diversify, quality, precision and resource efficiencies also allow them to align with global shifts in manufacturing for achieving overarching net-zero goals driven by international climate-change commitments.
Despite such promising opportunities, the ADP transformation equally raises scepticism given the stark technology adoption-gap particularly among the MSMEs. India’s lower manufacturing maturity is a legacy challenge and a critical lost opportunity in the economy. Yet in this post-peak pandemic era, as various reports share, the manufacturing sector is keen to benefit from accelerated leapfrogging to modern technologies and solutions. Yet the tendency among smaller firms to view ADP ‘as overhaul of existing equipment with complex technologies’ or ‘not applicable’ to their operations can be serious deterrents.
Such impediments can critically affect Government of India’s ambitions under Atmanirbhar Bharat, especially the Production-Linked Incentive (PLI) scheme to advance the country’s manufacturing sector. The scheme is aimed to reduce import-dependencies of the target 14 sectors and boost competitive export whilst generating employment. Not losing sight of the role of supply-chains with strong backward linkages, the PLI scheme has clear intentions to upgrade their capacities especially by incentivising high-tech production in the target sectors. Yet, the near-absent business support ecosystem for digital transitions and paucity of information for selection of viable technologies, reliable vendors, skilled personnel and appropriate financing present real time roadblocks for ADP uptake in supply-chains. Unfortunately, some smaller firms already got stranded with digital solution technologies that were not aligned to their operational needs. Such white-horses are deterring other firms to pro-actively deploy digital solutions for creating productive linkages with upstream and downstream suppliers or buyers in their supply-chains.
The automotive sector in India provides a case in point. Bellwether of the Indian manufacturing economy, automotive sectors is valued at more than $100 billion. Automotive industry stakeholders have expressed the need for stronger automation and technology leapfrogging in its supply-chains – despite having played crucial roles in making Original Equipment Manufacturers (OEMs) more productive and competent over the last six decades.
From designing major systems with high performance specifications while meeting emission standards and cost limits set by OEMs, reducing maintenance complexity and indigenously designing many components, the symbiotic relations within the tiered supply chain are well established. Yet, to bring Tier-2 and Tier-3 suppliers to adopt digitally-enabled manufacturing processes to support a uniform and sustained transition across the industry is neither seamless nor straightforward. A recent study conducted by the United Nations Industrial Development Organization (UNIDO) with the Automotive Components Manufacturers Association on “Assessment of application of I4.0 and digitalization in the context of automotive components manufacturing in India” found only a minority of firms using advanced manufacturing methods with digital capabilities. While one fourth of the firms surveyed reported using real-time data for evaluation and decision-making, close to 40% of firms reported absence of technologies to collect machine or operational data.
The digitalization ambition for manufacturing supply-chains needs clarity at three levels: how individual firms process data (prediction; inventory reduction and closing financial cycles); improving overall productivity of the supply-chain; and – thus dovetailing the broader Industry 4.0 ambitions of lead-firms or OEMs. The former requires clear demonstrations and support to supply-chain firms; how are they positioned to benefit from digitally controlled production activities and what are some of the low-hanging opportunities? This could be tracking resources, reusing components, reducing raw-materials or the waste generated (thus meeting regulatory requirements), and improving worker productivity and safety (automation to perform dangerous operations), for example.
What makes ADP exciting is the high-degree of flexibility and modularity that is possible, thus allowing solution providers to reduce complexities, while ensuring customization and cost-optimization to firms. Importantly, all these opportunities will rely on reliable and real-time data. The UNIDO study in the automotive sector observed that though various Tier-3 firms already use simple sensor-based solutions for collecting basic machine and operating data (e.g., temperature, vibrations), yet data is captured manually by unskilled labour and manually fed into
by semi-skilled workers (increasing the chances for errors). Though enterprise resource solutions have evolved over the last decade to meet diverse requirements of the industry and have become cost viable, yet its utility is typically not optimized at all levels. Thus, generating data with simple digital solutions in Tier-3 firms and forming baselines for broader goals of the supply-chain could be a viable beginning point. This also puts much onus on OEMs and lead-firms to set the ambitions right.
It is evident that Government of India’s objectives for Industry 4.0 promotion and support need clarity on how MSMEs can benefit and will be supported, including solutions for legacy equipment and technology not compatible with digitalization. This should be distinctly identified in the ambitions of various state policies for promoting and supporting Industry 4.0 – set for advanced centres of excellence, integrated industrial infrastructure facilities, common engineering facility centres, testing and certification centres, and technology acquisition fund schemes. These efforts would trigger the necessary ecosystem actors, policies and institutions to align to Central and State government objectives, signalling the necessary skills, resources, knowledge and enablers. More importantly, OEMs and Tier-1 firms, along with their industry bodies can spearhead the shift by leading the broader stakeholders. For instance, common facilities or tool-rooms equipped with shareable software and hardware can allow individual firms to use their real-time machine data to garner in-depth evidence for decision-making, trouble-shooting and predictive maintenance. This can also enable firms to make incremental innovations in their products and processes. Importantly, improved efficiency of supply-chains can play a key role in securing cash flows to suppliers. As one of the industry experts points out, … cost of delivering a product when there is no automation involved is high for the bank and there is little room for suppliers like us to negotiate frequently. Industry 4.0 solutions can thus enable firms to take end-to-end decisions using their own data and the opportunities for growth, productivity and competition are endless. The crux of the matter lies in defining the specific ADP strategy for change.
Dr Rene Van Berkel is Regional Representative and Head for UNIDO and Reshmi Vasudevan is National Project Coordinator, UNIDO.