In 2015, McKinsey Digital conducted a survey of manufacturing companies and shared the results in a report titled “Industry 4.0, How to navigate digitization of the manufacturing sector”. In this 62-page document, the authors describe how manufacturing companies will benefit from the value they create by implementing digitization methodologies throughout their enterprises.

To make sure we are all on the same page, as they say, here is the basic premise –

“McKinsey defines Industry 4.0 as digitization of the manufacturing sector, with embedded sensors in virtually all product components and manufacturing equipment, ubiquitous cyberphysical (physical-to-digital converted) systems, and analysis of all relevant data.”

This is what the Industrial Internet of Things is all about.

Here are the eight value drivers in a typical manufacturing company, including the McKinsey estimate of the improvements resulting from digitization and examples of specific changes that will yield these improvements.


As you can see, the benefits can easily become huge!

Why should a service executive care about Manufacturing improvements?

There are two reasons to care about manufacturing gains:

  1. You are both part of the same company and Manufacturing costs are a large part of your company’s Cost of Goods Sold (CGS).  Any gains help the company’s bottom line (and probably your bonus).
  2. Changes in manufacturing processes will not only directly effect your service business, but Service and Manufacturing share common processes, etc., so Service can learn from Manufacturing and enjoy some of the same gains.

Examples of where you can copy Manufacturing to improve your Service business:

  • If your company earns large savings from reducing equipment downtime by using remote monitoring and equipment maintenance, then you should be working very hard to be able to offer those same benefits to users of your products.  And for credibility, you will be able to share your company’s experiences as you roll out these new services.
  • If your company starts in-house manufacturing of mechanical parts using a 3-D printer, then you may be able to copy them and reduce your service inventory.  And remember that one of the short/medium term goals of some other businesses, like the UPS store, is to offer 3-D printing so you will not even have to own any printers.
  • As your company becomes better at using SQC techniques, you can implement similar techniques to reduce customer dis-satisfaction and improve your first-time-fix rate.
  • Staff levels can be predicted using techniques similar to the ones that will drive the gains in supply/demand matching.  Think about having a very good idea about how many technicians you will need to provide your committed level of call center service in sufficient time to schedule overtime, reschedule time off, or redirect calls to remote employees proactively.
  • Customers will quickly purchase new services because they, and other customers, played a major role in co-creating and testing them out.

The future

Either the Service Executive or a key senior member of her team should offer to help Manufacturing implement many of these improvements.  Not only will you learn on their projects but also you may create enough good will that you can get assistance when you are ready to move forward on your own improvement initiatives.

And it is the right thing to do!