Manufacturing is at a turning point as AI shapes Industrial 4.0: McKinsey

Lighthouses or tech adoption leaders have shown greater resilience during disruptive times.

The rise of artificial intelligence (AI) compels manufacturers to choose whether to innovate, accelerate, or follow fast to stay competitive in a fast-changing environment bolstered by the Fourth Industrial Revolution (4IR) technologies, according to McKinsey & Company.

In a note, experts at the consulting firm said AI is the highest form among all 4IR technologies, sitting at the top of the era’s tech pyramid and serving as the “conductor” orchestrating extremely complex technologies to deliver rapid solutions. 

Leading the adoption of 4IR tech are the 153 factory members of the Global Lighthouse Network, an initiative by McKinsey and the World Economic Forum, to boost factories, value chains and business models.

“AI is defining the Fourth Industrial Revolution, and Lighthouses are showing us that AI has myriad new use cases and possibilities for unimaginable performance improvements,” they said.

The so-called tech front-runners were found to be redefining how the manufacturing sector is advancing with the use of this technology, compelling the rest of the industry to take a strategic response to stay competitive.

McKinsey said manufacturers can either choose to innovate by piloting new technologies and proving their impact, or take the “accelerator” route, which adopts technologies with speed and scale. 

Many Lighthouses took the network-level digital innovator path, while choosing to become an accelerator can help change the tech landscape for a whole industry, they said.

A third option is becoming a “fast follower” or rapidly deploying off-the-shelf solutions that are already proven impactful, scalable, and cost-effective.

“This company embraces the playbook already written by the innovators and accelerators, capturing value while skipping the costs and tribulations of the learning curve altogether,” they said.

Companies that fail to keep up with the tech trends run the risk of falling behind and potentially, lose relevance as a competitive manufacturer, experts warned.

McKinsey’s findings showed Lighthouses have reacted faster to supply chain disruptions than their peers, in part thanks to their early adoption of AI. Faced with the same supply chain risks at the height of the COVID-19 pandemic, experts noted 65% of Lighthouses were already dual-sourcing and have raised their inventories by 2022, compared to just 24% of other companies.

“Although it may be some time before gen AI and other highly advanced emerging technologies see network-wide adoption in manufacturing, Lighthouses are already achieving factory-scale adoption,” the experts added.