At the core of the next phase of digital transformation, IoT (or Industrial IoT) stands as an essential technology, utilizing devices like sensors, actuators, RFID and Bluetooth tags, vehicle and asset trackers, wearable devices, and more. These IoT devices serve to interconnect people, products, equipment, and processes to unlock previously unavailable business insights, fostering a paradigm shift in how companies optimize their manufacturing operations and associated supply chains.

This constant flow of data enables companies to monitor and analyze industrial operations with unprecedented granularity. Through IoT platforms with Big Data (Data Analytics) capabilities, companies gain the capability to process vast amounts of information efficiently. This, in turn, empowers them to make data-driven decisions, respond rapidly to changing conditions, and enact predictive maintenance measures.

IoT’s impact extends beyond providing detailed data insights within a company as it serves as the foundation for connectivity throughout the entire value chain. By interlinking key value chain components, IoT is a key enabler to the creation of smart factories and intelligent supply chains.

Examples of Industry 4.0 improvement areas enabled by IoT include:

• Supply Chain Optimization: IoT transforms logistics management by utilizing vehicle and asset trackers for end-to-end (E2E) visibility throughout the supply chain. With streamlined logistics, optimized inventory, and improved forecasting, manufacturers can increase operational efficiency, reduce costs, respond swiftly to any disruptions, and create more agile and resilient supply chains. As an example of the potential upside of using IoT to improve supply chain transparency, research from GEODIS indicated that 62% of companies have limited visibility of their supply chain and 15% only have visibility on production.

• Predictive Maintenance: IoT facilitates the transition from reactive to predictive maintenance by employing sensors, actuators, and tags to continuously monitor equipment. This real-time (or near real-time) data enables early identification of potential issues, allowing manufacturers to predict maintenance needs and optimize schedules. The result is reduced downtime, extended machinery lifespan, and lowered maintenance costs. SAP reports that by integrating IoT sensors and data analytics, manufacturers can reduce downtime by up to 50% and extend asset lifespan as much as 40%¹.

• Production Quality Control and Defect Detection: IoT plays a pivotal role in elevating production quality control and defect detection. Through strategically placed sensors, actuators, and computer vision systems in the production environment, real-time data is continuously collected and analyzed to proactively identify defects and deviations from quality standards. V-Soft Consulting implemented smart manufacturing technologies, integrating computer vision and IoT, at Penn State’s manufacturing department. This initiative improved defect detection accuracy by 17%, reduced repair downtime by 10%, leading to cost savings of $150K per production line.²

IoT’s role as a key driver of Industry 4.0 lies in its ability to transform traditional manufacturing and industrial processes into intelligent, adaptive, and interconnected systems. Through this transformation, companies can improve operational efficiencies, reduce costs, and enhance supply chain resilience amid a rapidly evolving industrial landscape.

Case Study: Global Lighthouse Network (GLN)

The World Economic Forum, in collaboration with McKinsey, launched the Global Lighthouse Network in 2018 to identify organizations and technologies at the forefront of Industry 4.0. The Lighthouses are categorized as:

• Factory: specific production site
• End-to-End (E2E): deploy technologies across their value chains
• Sustainability: demonstrate exemplary use of technology for emissions, waste, and water reduction

Each Lighthouse is recognized for its leadership in leveraging advanced technologies and strategies to drive growth, improve resilience, and deliver environmental sustainability.³ The Global Lighthouse Network has grown to 153 Lighthouses since its 2018 launch, split into the following categories: