Industry 4.0 Transformation of Biopharmaceuticals

by: Anastasia S. Malicka

Introduction:

Few months ago, I had a privilege to work with the top global, new and upcoming talent in Computer Science and Informatics, on evaluating the impact of Industry 4.0 on global manufacturing industry in Europe. Below, is the section dedicated to planning phase in preparation of implementing Industry 4.0 for a medium size manufacturing European facility. There are many opportunities to conduct extensive benchmark studies documenting key success factors and how this trend is transforming our global manufacturing capability and collaboration.

Background on Manufacturing Environment in Europe

The manufacturing industry is transformed by global economies, where most of the production operations are now relocating to Asia/Pacific Region due to lower wage rates, and by the introduction of more sophisticated technologies (C. Altomonte et al. 2017). With the emergence of Industry 4.0 concept that promises an increased automation and integration, the strategic leverage of technologies such as cyber-physical systems, Internet of Things and cloud computing to improve operational efficiencies is increasing across all markets (A. Kusiak 2018). The global manufactures are leveraging their Information System capability to establish competitive advantage, especially in Europe where there is an increase in competitive pressures (C. Altomonte et al. 2017) due to steady decline of manufacturing operations since 1970s. Therefore, a medium manufacturing organization entering European market needs to consider all of the above trends in planning phase of their Information Systems to secure their successful market entry strategy while minimizing risks.  

Organizational Values, Mission and Vision Statements Guiding Future Global Expansions.

Planning and developing the information systems for a new manufacturing sites in Europe requires development of strategic plans that needs involvement of management across different functions to secure alignment and organizational support. Therefore, successful planning process for a new information system (IS) begins with the cross-functional collaboration in creating the mission and vision statement which are based on the organizational values (L.R. Burns, et al. 2012). This becomes a foundation for developing strategic and operational plans to implement it, as outlined in the Figure 1.0 The Strategic Process.

Organizations can be effective with radically different strategies and there is not a one right, optimal, or “one-size-fits-all” strategy. They are unique in addressing the internal capabilities and external environment that meet the purpose for the firm's existence (L.R. Burns, et al. 2012). For example, a local manufacturing organization might seek to obtain high shares within a niche market addressing needs of a very small, special population, compare to a global organization that is focused on achieving economies of scale in manufacturing commodity products. The definition of success is based upon the values and mission of an organization.

Values are the expression of the ethics that guide employee’s actions how the mission and vision is accomplished. There are certain behaviors that are unacceptable in any business conduct. Even if unacceptable behaviors accomplish the mission but violate the values, the organization has failed at the end (L.R. Burns, et al. 2012). Strategies change over time to react to market and organizational changes, but the values should always remain the same. They provide guidance to the organization during times of stress, especially during times when achieving business goals is becoming challenging while trying to stay compliant with business ethics. 

For a medium manufacturing firm establishing their presence in a new market, they need to plan their market expansion in accordance to their own values, while considering the values of the European market. For example, some of the CRM programs might be acceptable in the United States, but restricted in EU due to privacy regulations. Also, the firms need to respect permissible maximum number of working hours allowed for EU employees, to stay complaint with the local labor regulations and health insurance mandates. A fully integrated IT system can be a great asset to provide the company with an ongoing monitoring of its employees’ compliance with their organizational values, and the regulations of the market where they are setting-up their manufacturing operation. One consideration of the organization values entering European market might include the following values statements:

1.    Respect for People and Their Communities: Complete compliance with the internationally agreed-upon Bill of Human Rights across all operations, including IT system. Namely, the right of each individual to: freedom; life; liberty; dignity; privacy; security; equality before law; nationality; selection of residence; religion; to marry of free will; found a family; property; freedom of speech, opinion and expression; freedom to work and choose their employment freely; right to take part in the government; equal access to public services and social security; fair compensation securing well-being and dignity; right to rest and leisure; education; right to participate in cultural life of the community; share in scientific advancement and its benefits; intolerance toward discrimination of any kind, torture, exploitation and slavery (the United Nations Assembly, 1948). 

2.    Equal Business Opportunity: We will conduct our business practices fairly, providing equal opportunities for businesses and individuals in the local EU market to engage in the mutually beneficial business conduct with our organization.

3.    Respect for Environment: We will not engage in any activity that could cause damage to the local environment and/or their ecosystem. 

This is the basis for establishing and evaluating the values that the new IS needs to deliver to the organization, and to its key shareholders when establishing their operation in Europe. It should be aligned with the expectations of key stakeholders for the organization. In addition, values should be visible and tangible to employees and it should be linked to measurable strategic outcomes, as reflected in satisfaction scores, error rates, availability of services, and other key strategic performance indicators.

A mission statement is a direct outgrowth of the organizational values, and it is the foundation of strategic direction. It focuses the management on their primary purpose and addresses the reason for being. A mission statement also contains the emotional aspect that stakeholders can recognize and endorse. Most successful statements are measurable, definable, and actionable. Key components should include the definition of the product/service, the standards employed, and the target audience/operations served. The mission should capture the essence of the organization’s competitive advantage. This is well illustrated by the FDA’s Office of Information Management and Technology (OIMT) Mission Statement:

“To provide high quality, secure, and efficient IT solutions that enable the FDA to promote and protect the public health”

 It is further elaborated by providing specific criteria for accomplishing their task that are actionable, definable and measurable:

“OIMT ensures that the Food and Drug Administration (FDA) has a robust IT foundation that enables interoperability across the agency and allows the development of enterprise wide systems necessary to meet the FDA's mission of promoting and protecting public health in an efficient, effective, productive and timely manner. OIMT strives to consistently meet the business needs of its customers, providing services that comply to Federal regulations and mandates, while adhering to the Agency's IT standards and policies”.

Their vision statement “to be the Federal model of a successful IT organization” is also effectively aligned with their strategic imperative. It is aspirational and places the focus more on the future, while helping the members of the organization to feel proud and excited to be part of something bigger than themselves.

In similar fashion, the company establishing their manufacturing site in Europe needs to define their mission statement, to align all of the other functional mission statements, including IT operations. Since the organizational goal is to grow their global business by expanding their manufacturing presence to Europe, IT system needs to help the company to accomplish it effectively and efficiently. Therefore, one consideration for the Information System’s Mission Statement is as follows:

To secure successful establishment of the firm’s global operation in Europe, by leveraging the latest technologies, to achieve competitive advantage that is sustainable over the next wave of industrial transformation triggered by the Industry 4.0 systems implementation.

This Mission Statement can be further expanded to include emerging technologies from different disciplines, as outlined below: 

“Using the latest trends of automation technologies in the manufacturing industry, that includes enabling technologies such as the Internet of Things (IoT), cyber security, and cloud computing, the Information System paves the way to establish the firm’s global position in achieving efficient and effective integrated manufacturing capability”.

Therefore, the Vision for the Information System is to be recognized as the foundation for the organizational success, securing global presence through application of innovative industrial technologies, achieving competitive advantage while minimizing uncertainties.   

Importance of Analysis Phase in Defining the Feasibility of Global Expansion.

The development of strategic goals and objectives for IT often involve redefining organizational processes and procedures. They can be triggered by changes in the competitive environment, economies, industry or internal focus (K.J. Sousa, E. Oz. 2015). By conducting analyses and workshops with non-IT professionals, including external industry experts, it can be an effective way to define the company’s goals for the new IS that can fulfill the requirements of both, the internal and external customers to achieve competitive advantage.

In case of the medium size U.S. manufacturing organization that is entering EU market without prior operational IT experience in Europe, it presents high risk. In addition, changing trends in EU manufacturing environment which is increasingly competitive due to implementation of innovative technologies, increases market entry barriers. Therefore, the analysis that includes economic, operational and technical feasibility assessment not only provides input into the system requirements, it also provides framework for its design to maximize the firm’s strategic objective.

The first phase analytical investigation, consisting of general, either syndicated or proprietary market research assessments, benchmark studies and competitive evaluations should provide the basis for formulating specific questions for further commercial feasibility assessment. This phase of analysis is generally followed by the in-depth interviews (semi-structured design) with the subject-matter-experts that can define the key success factors for establishing successful operation in Europe. This should be directed toward general commercial viability of establishing new manufacturing in Europe, and the necessary IS infrastructure to secure its commercial success.

In the last phase, the implementation of the quantitative study (structured design), designed to identify key success factors, forecast and major unmet needs, is the basis for development of Need/Gap and Strengths, Weaknesses, Opportunity and Threats (SWOT) and financial analyses leading to the “Go/No Go” Decision. This data mining process provides more structured and systematic approach, resulting in higher level of confidence with the final recommendations. The entire analytical process needs to include participation and input from both IT and non-IT personnel involved in the final decision-making process and implementation of the strategic goals. The final document, developed through cross-functional collaboration, needs to include road map that provides a clear direction for establishing new manufacturing and sales operation in Europe, if the company decision is to pursue this opportunity (“Go” decision). Some of the analytical outputs generated through this cross-functional collaboration may include the Need/Gap and Market Drivers.

This is foundation for defining technical, economic and operational feasibility, that can guide the organization through specific decision, relating to strategic goals as well as their tactical implementation. If this phase is well managed and executed, this will secure effective alignment across all levels of management and operational functions, preventing any future conflicts, lack of necessary resource support or dissatisfaction with the final outcome that can lead to project failure.

System Development

The new paradigm shift proposed by Industry 4.0 in response to the fast-growing global market, leverages new technologies such as Internet of Things (IoT), Cloud Computing, Cyber Security, Big data, Intelligent Robots, Simulation, System Vertical and Horizontal Integration, Additive manufacturing, and Augmented Reality. It proposes the design of the modular architecture of the industry and the development of international standards for interfaces between modules. Such a system, empowered by the advanced digitalization that combines internet and future technologies, could enable the product to control its own factory process, achieving mass customization production. Also, it could allow for humans and machines to work collaboratively, using speech recognition, computer vision and machine learning, leading to increased productivity, flexibility, greater customization and improved quality.

An important factor in implementing Industry 4.0 is the data collection and analysis for real-time decision making (R. Besutti, V. de Campos Machado e Ivandro Cecconello 2019). It enables the company to become more flexible and improves process based on evaluation of immediate data, therefore optimizing production. The manufacturing execution system (MES) helps to accomplish this task by bringing together the company’s planning and production, providing access to information displayed in graphics, enabling to monitor and analyze production, as well as products and equipment status.

Since this is relatively new concept, there are not many examples of manufacturing facilities that fully implemented Industry 4.0. Therefore, it requires more careful and staged approached. The development of such an innovative system would help the company to achieve competitive advantage. This could be accomplished though application of progressive elaboration and prototyping development approach, to continue gain the knowledge on how the final system might be integrated with the rest of the system and successfully implemented. In case of designing each module, it might be more appropriate to utilize prototyping approach leading to faster development of applications. The software development approach for module design can utilize agile methods. Whereas, the entire system development, that includes interfaces between modules, may benefit from taking advantage of progressive elaboration approach. It allows for a system design to evolve over time as more information and knowledge becomes available.

Information systems that include major cross-functional operation, such as SCM and CRM, usually leverages a framework called the System Development Life Cycle (SDLC). This approach is usually referred to as “waterfall” development, because it consists of several distinct phases that allow for sequential development. It is more appropriate for establishing new IS infrastructure, relative to Agile method that is more appropriate for development of smaller-scale systems (K.J. Sousa, E. Oz. 2015). It includes four major phases: analysis, design, implementation, and support. The system analysis aims to determine a real need for a system, and whether the proposed system is feasible technically, economically, and operationally. The economic feasibility generally includes cost/benefit and return on investment (ROI) analysis, whereas technical feasibility addresses the interoperability between existing and new technology. The operational feasibility study evaluates the system fit with the overall organizational culture (organizational values), and help them to achieve their mission. Lastly, the system requirement analysis needs to determine what the system needs to deliver to generate value to the organization.

Designing Options for Future Information System

The main goal of this phase is to meet the goals of all the business requirement, as outlined in the requirements report. The system design phase then consists of three steps:

1.    A description of the components and how they will work.

2.    Construction.

3.    Testing.

A description of the components and how they will work is best captured through graphical representation of data flow diagram. It captures the flow of data in a business operation, using four symbols for these elements, namely external entities, processes, data stores and data direction flow, as illustrated in Figure 1.4.

Figure 1.4. Industry 4.0 Data Flow Capture

Another way to communicate desired features in the design phase of software development project is by using Unified Modified Language (UML). It uses graphics to visualize and document software requirements. Even though it is independent of programming languages, it provides standard visual symbols and notation for specific object-oriented elements and used in developing websites (K.J. Sousa, E. Oz. 2015).

Construction of the system, which is primarily programming, begins once the tools for the software development tools are chosen. The timing can vary depending on the complexity of the software, and it is tested by either simulation or walk-through. Testing attempts from the system to fail to uncover any unforeseen problem before the system is implemented. It should include attempts to get the system to fail to pressure test the system. However, this phase is often hastened or omitted due to timing and delivery pressure. This can lead to many failures and delays in implementing the system.

The implementation of the new system is delivers in two steps; conversion and training. Conversion takes place when the new system replaces the old, and it can be accomplished using four basic strategies: parallel, phased, cut-over or pilot conversion. When implementing new system, that doesn’t require the replacement of old system, such as in building a new manufacturing facility site, pilot conversion strategy is generally recommended and used. 

Options for System Acquisition

During this phase, the organization also needs to decide whether to develop their own IS in-house or to outsource it using Software as a Service (SaaS), and having outside vendor develop the system on their behalf. If the system cannot be outsourced, then the next alternative is to obtain use of the system as a service from an Application Service Provider (ASP). The system is then immediately available for use and the organization does not have to commit a lot of resources to acquire it.

However, the cost and innovation benefit of the Application Service Provider (ASP) model is very limited.  The ASP model, more popular in the late 1990s, hosts commercial software applications in its secure centrally located servers. It licenses the application to multiple customers and offers no control over the features and development of commercial applications. Furthermore, there is no domain knowledge to effectively customize and support the applications to individual customer needs.

On the other hand, the SaaS model is considered more cost effective. It has a shorter implementation time, higher intuitive usability, multi-tenant scalability, and easy to use web-based programs. In addition, it offers regular enhancements and upgrades. A service of SaaS model is deployed from also centralized data center across a network. It provides use on a recurring fee basis where users normally rent the service from a central provider. The SaaS vendors are required to innovate and improve continuously their products and services through efficient software backups, updates, contingency plans, disaster recovery plans and security updates. Therefore, the SaaS model of service delivery is a strong option for another IT based system that can lead to co-creation of business value (R. Seethamraju 2015). 

References:

1.    L.R. Burns, E.H. Bradley, B.J. Weiner. (2012) Health Care Management Organization Design & Behavior, Sixth Edition. Delma, Cengage Learning.

2.    K.J. Sousa, E. Oz. (2015) Management Information Systems, Seventh Edition. Cengage Learning.

3.    R. Seethamraju. (2015) Adoption of Software as a Service (SaaS) Enterprise Resource Planning (ERP) Systems in Small and Medium Sized Enterprises (SMEs). Information System Front. Vol. 17. pp: 475-492.

4.    A. Kusiak (2018) Smart manufacturing, International Journal of Production Research, Vol 56:1-2, pp:508-517, DOI: 10.1080/00207543.2017.1351644

5.    L.D. Xu, E.L. Xu, L. Li (2018) Industry 4.0: state of the art and future trends, International Journal of Production Research, Vol 56:8, pp: 2941-2962, DOI: 10.1080/00207543.2018.1444806

6.    N. Fujino, Y. Kononno. (2016) Industry 4.0 and Significance for Japanese Manufacturing. Nomura Research Institute. 

7.    US. Food and Drug Administration. (2017) Office of Information Management and Technology Information Strategic Plan.

8.    C. Altomonte, U. Batsaikhan, F. Biondi, A. Bravo-Biosca, M. Bukowski, J. Feliu, R. Kalcik, J.S. Marcus, D. Marin, S. Merler, J. Morales, V. Negri, G. Petropoulos, A. Sniegocki, S. Tagliapietra, R. Veugelers, G. Zachmann. (2017) Remaking Europe: The New Manufacturing as an Engine for Growth. Bruegel Blueprint Series 26.

9.    R. Besutti, V. de Campos Machado e Ivandro Cecconello. (2019) Development of an open source-based manufacturing execution system (MES): industry 4.0 enabling technology for small and medium- sized enterprises. SCIENTIA CUM INDUSTRIA, Vol 7, Nu. 2, pp: 1-11.

10. P. Soto-Acosta, S. Popa, D. Palacios-Marques. (2016) E-Business, Organizational Innovation and Firm Performance in Manufacturing SMEs: An Empirical Study in Spain. Technological and Economic Development of Economy. Vol 22 (6). pp: 885-904.

11. The International Bill of Human Rights. United Nations General Assembly Resolution of 10 December 1948. United Nations Publication. Vol. 1, Part 1.