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Industry 4.0

October 10, 2018

What are the expectations facing manufacturers and retailers?

Industry 4.0 is a transformation in manufacturing, enabling faster, more flexible and more efficient processes to produce higher-quality goods at reduced costs.

A PWC Global survey predicts that by 2020, Industry 4.0 will bring an average cost reduction of 3.6% p.a. across process industries globally, totalling $421 billion.

We spoke to ASOS and Wiggle Chairman, Brian McBride, and prominent analyst, Dave Michels, to see what opportunities increased flexibility creates for retailers and what expectations this puts on the manufacturer.

McBride says that the first issue to acknowledge is that there is pressure in the system:

“In fashion retail, there’s a trend to what’s called fast-fashion. Traditional retail had 2 seasons, you had lots of time to plan for it, you were buying a year ahead. Nowadays, the fast fashion cycle is 6 weeks from design board to the warehouse. There’s a lot of pace involved there, and therefore you expect your entire supply chain to be able to work at that pace.”

So, how can manufacturers keep up with this pace and demand? At ASOS, for example, garments are being made all over the world and very often by relatively small enterprises, meaning there’s still a lot of manual labor involved. McBride suggests more automation is needed at both ends; first by having systems that allow you to place your orders automatically and then in the actual making of the item. He is quick to state that it is not just the retailers demanding this, but suppliers who are approaching them with these solutions.

With this increase in automation, collaboration and communication solutions will play an integral role to ensure systems run seamlessly and efficiently. At Unify, we provide solutions that enable every member of the team to communicate effectively wherever they are. For example, someone can raise an issue to the quality assurance team from their phone while observing operations on the manufacturing floor, which can save hours of inefficiency.

As communication solution providers, we are seeing that the relationship between manufacturer and retailer is closer than ever. 

With the ability for the retailer to be more involved with the design and realization of a product, and for a manufacturer to reach more into the retail process with e-commerce, will we see a fight between retailers and manufacturers in terms of who really owns the customer?

McBride doesn’t think so: “manufacturers are good at what they do, and if you’re manufacturing any product that’s going to go through some retail outlet or some business model, you’re making product for probably, 100, maybe 200 retailers, so you’re used to dealing with a small number of nodes, and you’ll know how to personalize yourselves for that node.  You’re not used to dealing with 15 million customers, and that’s what the online retailer does”.  Michels adds to that view: “everybody thinks they want to cut out the middle man and save some money, but the middle man actually adds a lot of value and they’re actually managing returns, managing inventory, and answering questions.  And so, when the manufacturers start having to do all that, then it becomes a different business model.”

Michels, however, does believe that one of the key changes in manufacturing is that mass customization is becoming more and more appropriate, particularly on bigger purchase items: “I think the MINI is a really good example, every vehicle has been personalized, nobody wants to order one off the lot.”

So, consumer demand continues to dictate many elements in retail and manufacturing, but what does a world leader in e-commerce expect from his manufacturers?  McBride points out that for the past 15-20 years we’ve lived in a deflationary world.

“You want two things from your manufacturer. You want quality, and you want it at a price that’s probably going to continue to go down. So, I think great manufacturers are going to be the ones that are able to deliver quickly, deliver to great quality, deliver to a reducing price and to deliver on time.  And I can’t see any way of doing that unless you’ve got lots of automation in the system.”

With these insights, it’s clear that taking teamwork and business responsiveness to the next level will be critical.  Customers and suppliers will expect 24/7 service when it comes to decisions, availability and customisation.

Do you think increasing consumer demand will boost manufacturing or break it?  Join the debate.

Watch the full conversation between former Amazon CEO, Brian McBride, Industry Analyst, Dave Michels, and Unify Head of Global Communications, Tim Bishop.

To find out more about Unify communication and collaboration solutions, contact us here.