Without transformed business models, suppliers will struggle to keep pace, reports Marcos Kauffman

Marcos Kauffman

Without transformed business models, suppliers will struggle to keep pace, reports Marcos Kauffman After a recent collaboration to adopt Industry 4.0 technologies with its partners, a Tier 1 supplier found its intellectual property 25 percent less strong and its products 50 percent more replicable. Such collaborations have the potential to transform manufacturing performance through the adoption of digital technologies in more open chains of value, says Marcos Kauffman at the Institute for Advanced Manufacturing and Engineering. However, he argues in a new book, Profiting from Industry 4.0, collaborations can have equally radical consequences for who ultimately prospers and grows. The collaboration in which this Tier 1 supplier participated made extensive use of digital technologies to simulate manufacturing by machine, by cell, by production line and by plant. The goal was to transform the productivity of an existing manufacturing process. Amongst the partners, including a research institution, a technology provider and a Tier 2 supplier, only the original equipment manufacturer found itself in a stronger competitive position. The strength of its IP improved by 36 percent and its risk of replication dropped by 20 percent. The upside for the Tier 1 supplier is that its contract has been extended by three years and another continent has been added to its territories. However, under its existing terms, it was required to assign all its IP to the OEM. Production data was also codified into a single system by the technology provider for the OEM. Although digitally transformed, the product remains generic in nature and the competencies to replicate it are widely available. The challenges for suppliers, says Professor Kauffman, is to switch their business models from those that are conventionally based on physical outputs to those that capture knowledge or intangibles. In that way, they can cross-license their ideas and data to their partners, putting themselves in a stronger position to create ongoing revenues at better margins and to open up the potential for further collaborations. • Details here of ‘Profiting from Industry 4.0: The road to future value in manufacturing’ by Marcos Kauffman, published by Novaro, September 2021.