The financial benefits of industry 4.0 – cost reductions and increased productivity (2023 UPDATED)

Industry 4.0 is no longer for early adopters, with most companies already several years down the line in their digital adoption journey. 


Originally characterised by the integration of manufacturing automation, IoT, and the digitalisation of business processes, Industry 4.0 is now experiencing significant growth thanks to cutting-edge technologies like AI and machine learning.


But what does all this progress mean for the productivity levels and balance sheet of an organisation?


The financial impact of Industry 4.0

Back in 2016, PwC published its Global Industry 4.0 Survey on building the digital enterprise. Key stats from within the report included the following:

  • The companies surveyed that successfully implemented Industry 4.0 expected to increase their annual revenues by an average of 2.9% p.a.

  • They also expected to reduce costs by an average of 3.6% p.a.


All in, totalling all the businesses surveyed, that amounts to a total of US $421bn in cost reductions and US $493bn in increased annual revenues in the five years following the report.


They were some big numbers.

Additionally, broken down by industry (according to the report), it expected to see the following growth and increased revenues by 2020:

  • Electronics: $62 billion
  • Industrial manufacturing: $52 billion
  • Automotive: $28 billion


Again, big numbers.


So, where were all these benefits expected to come from? And how can manufacturers still make the most of Industry 4.0 in 2023?


Where Industry 4.0 financial benefits come from

According to the MPI 2021 Industry 4.0 Study, over half of manufacturers listed improved quality and increased production capacity as benefits of digitisation. 49% specifically listed reduced operations costs, while 33% of manufacturers responded they had seen reduced supply chain costs since investing in digital transformation.


Key benefits include:

  • Real-time production monitoring and quality control to reduce waste and the need to rework
  • Predictive maintenance to prevent any costly repairs and reduce any unplanned downtime
  • Increased automation to assist with reducing labour costs
  • The use of 3D printers for faster prototyping, reducing the cost of engineering and speeding up time to market


By focusing on the latest technologies like AI, AR & VR, machine learning, and automated guided vehicles, any manufacturing business can reap the benefits of Industry 4.0 in 2023, even if you have already implemented some earlier technologies like 3D printing and automation.


Enhancing supply chain performance – on-demand suppliers

Embracing Industry 4.0 in your company isn’t the only way you can benefit from it. Looking at your supply chain and evaluating which suppliers have most effectively implemented digitisation, automation, AI, etc., will further enhance the benefit you see from 4.0. This is especially true in the case of on-demand suppliers.


Businesses that work with an on-demand supplier will often work with the same supplier from prototyping into low-volume production.

The key aspect is that the supplier has the ability to scale through advanced automation to ramp up production quickly and on-time, as demand requires. There’ll be little to no wastage, and the manufacturer will be responding direct to customer need.


Working in this lean way has the following benefits:

  • Companies can purchase the exact quantity of parts as and when they’re needed, reducing inventory costs


  • This can streamline production and simplify partner relationships creating a digital flow from initial design through to production


  • This digital flow will tie together each element of the supply chain and will also supply data at each stage of the process


  • Acting on this data can therefore speed up each element of the supply chain, increasing productivity


Industry 4.0 – where are we now?

Back in 2016, PwC’s survey was full of promise. Still, five years on from when we originally published this article, the landscape has shifted – in no small part due to the effect of the pandemic.


The 2023 Digitalise to Decarbonise report by NAAME (New Anglia Advanced Manufacturing & Engineering) and Sage found that 62% of companies surveyed have already adopted digital technologies into their production processes – with half of those businesses reporting savings of £10,000 – £100,000 in the past 12 months.


This is positive news, especially for those concerned about their corporate social responsibility or energy bills, as the savings came from using digital tools to decarbonise the business. The result of this was the impressive energy savings figures mentioned above. 


However, it’s not all positive news, and as many industry experts predicted, the human element remains the biggest obstacle to digital transformation. In 2020, Forbes was already asking whether Industry 4.0 could be rescued from failure. Elsewhere, industry reports talk about the percentage of digital transformation projects that fail – most often due to either resistance to change from employees or because the transformation has no clear plan or strategy.  


A lack of direction and employee buy-in is something many businesses struggle with. At J B Cole, we work with manufacturing and complex traditional organisations to understand operational inefficiencies and customer requirements to identify the right tech to respond to the individual challenges of the specific sector and client. With over a decade of experience in digital transformation projects and business automation, we are the digital partner of choice for any organisation looking to adopt Industry 4.0


Still unsure about how to implement Industry 4.0 in your business?

Speak to our digital transformation experts.