How fourth industrial revolution tech helped companies survive the COVID crisis

COVID-19 disrupted manufacturing and supply chains in an unprecedented way. However, this was on the horizon before the pandemic and was mainly driven by three wider trends: the fourth industrial revolution; climate change; and the reconfiguration of globalization. The combination of these issues was already forcing companies to rethink their global manufacturing and supply chain strategies and COVID-19 played a major accelerator role.

Manufacturing companies responded to these three trends by working on both short and medium-term measures. In the short term, they focused on ensuring business continuity, the protection of employees, and the minimization of disruption across their operations. For the mid-term, many companies started to move towards establishing new networks of local supply ecosystems and diversifying of their supplier base.

Fourth industrial revolution technologies emerged as a key driver of resilient supply chains. Companies who had started to adopt them were able to successfully navigate the crisis. Moreover, they had solid foundations in place to adopt both short- and medium-term measures aimed at building resilience.

In 2017, De’Longhi decided to invest in fourth industrial revolution technologies by adopting digital and analytics solutions to become more agile, more productive and achieve higher quality standards. By working in partnership with SAP, it was able to transform its major facility in Italy into a digital factory and achieved a solid financial return while improving quality and responsiveness.

Some of the achievements this brought about include: improvement of service level; reduction of the minimum order quantity down by 92 percent, from 200 to 16 pcs; reduction in lead time by 82 percent (from 28 days to five days); labor productivity and assets utilization up by 31 percent; scraps and waste reduction down by 60 percent; and warranty service call rate down by 33 percent.

The company found that the new technology proved to be one of the most reliable and responsive assets for its employees, allowing people to support manufacturing activities remotely. Its workforce was able to quickly adapt to a fast-changing environment, gaining new knowledge and upskilling in short learning cycles, all supported by digitalization.

However, even if benefits are clear, the adoption and deployment of this kind of technology at scale remains a challenge for most companies. The good news is that manufacturing companies can learn from frontrunners.

In 2018, the World Economic Forum launched the Global Lighthouse Network that brings together some of the most advanced companies in the world; those who have successfully adopted fourth industrial revolution technology to transform production and entire value chains. These Lighthouses are showing the way and setting new benchmarks for the global manufacturing community. Whether it’s on productivity, growth, cost reduction or sustainability, they have often achieved double digit impact figures and were able to successfully navigate the pandemic. De'Longhi recently became part of the Lighthouse Network.

On sustainability, companies are facing new concerns about the environment, with pressure coming from both consumers and regulatory bodies. Manufacturing companies now need to make the transition to net zero CO2 emissions. The good news is that fourth industrial revolution technologies are playing a major role when it comes to cutting emissions, water and materials consumption, and the optimization of waste management. Sustainability no longer has to come at the expense of efficiency.

De’Longhi’s sustainability journey started almost a decade ago, when the company began to reduce its dependence on energy from fossil sources. It has not only reduced CO2 emissions (7 percent lower per unit produced in 2020 than in 2019) and implemented the highest quality and environmental standards, but it also applies food industry standards (ISO 22000), with full digital traceability. For example, the company stopped using coffee beans for machines testing in the assembly phase. Instead, it now uses artificial intelligence and laser technology to set bean grinders and coffee brewers, saving 100+ tons of coffee beans per year.

If we look ahead to the evolution of the wider trends outlined above, it is fair to assume that crises are likely to intensify in scale and frequency. This means that some of the changes companies adopted in response to COVID-19 will probably become permanent. These include: better responsiveness to adapt to changing demand and preferences; a move from cost-competitiveness to resilience; a new balance between automation and worker augmentation; and a definitive move towards net-zero emissions.

Companies have no choice other than to rethink their strategies, and fourth industrial revolution technologies are a must to keep or gain a competitive edge. Here are three main lessons from the pandemic that companies can learn to successfully prepare for the future:

Fourth industrial revolution technologies are a key enabler of a digital supply chains. Companies are increasingly developing intelligent products and assets that can capture more information and integrate more deeply into horizontal business processes. The fourth industrial revolution has the potential to move from a factory-focused initiative to a company-wide business strategy.

The World Economic Forum is working closely with SAP and other companies to set the global agenda and build new partnerships for the future of production.