Industry 4.0 - Driving the future in Latin America

Latin America is no stranger to the global manufacturing scene, supplying manufacturers across the world with its abundance of natural resources such as coal, petroleum, and iron. This is a trend that is likely to continue, with countries like Chile, Bolivia and Argentina sitting on vast reserves of lithium, a core component of Electric Vehicle (EV) batteries. However, the region has also shown its importance in a larger shift in the global manufacturing zeitgeist, becoming not just a supplier of resources but a burgeoning manufacturing giant.

Of course, there is still work to be done. Still, the path is being laid out, with the region becoming an increasingly attractive option for international manufacturers despite some challenges. As the sector continues to shift globally, it is also progressing into the next stage of its evolution, or perhaps more accurately, revolution. Industry 4.0, or the Fourth Industrial Revolution, is still in its early stages, but it describes the rapid progress in manufacturing technology and digital interconnectedness. Terms like the Internet of Things (IoT), cloud computing, smart factories, and advanced IT architectures all fall under Industry 4.0's expansive, tech-focused umbrella.

As Industry 4.0 looks to be increasingly critical to the future competitiveness of manufacturing organisations, how will Latin America fare with its adoption as it steps up to the plate on the global manufacturing stage? RSM’s experts in Latin America discuss the drivers and challenges of adopting Industry 4.0 in the region.

What is influencing the adoption of Industry 4.0?

Industry 4.0 comes with a slew of benefits, which are key to manufacturers' success in the future. According to Arturo Sanchez Cervantes, Director of Audit at RSM Mexico, "Some of the main factors influencing the adoption of advanced technology in manufacturing correspond to the improvement in manufacturing processes, the optimisation of resources, and the reduction of production costs, allowing them to be more competitive in the market."

And this is just the beginning, as Nahuel Beccaria, Partner at RSM Argentina, adds, "Smart technologies such as Artificial Intelligence (AI), automation, and IoT provide useful information for decision-making processes in real-time, as well as for long-term and short-term planning. Industry 4.0 can also efficiently integrate all participants in the value chain of the manufacturing process, from the inception of an idea to the end product. Collected data can be leveraged to improve the customer and manufacturer experience through creating new products based on the needs and challenges displayed by any collected information."

In countries like Brazil, the government is providing means to ignite innovative manufacturing and, as a result, Industry 4.0. "The 'New Industry Brazil: Action Plan' is an ambitious document launched by the Federal Government of Brazil in January 2024, with the aim of boosting the country's reindustrialisation," says Cláudio Silva Foch, Partner at RSM Brazil. "The plan foresees R$ 300 billion in investments by 2033, coming from various sources, such as the government, the private sector, and international organisations. The actions required include providing instruments such as financing, tax incentives, public procurement, professional qualification, and research and development. In addition, the midsize manufacturers are responding to the need to improve their IT architecture to support Industry 4.0 technologies, including adopting cloud solutions, investing in cybersecurity, partnering with technology companies, and training or upskilling employees."

Upgrading the process: Enhancing IT architecture

With Industry 4.0's reliance on digital transformation, advanced IT architectures are critical to a successful implementation. "Manufacturers in the middle market are continuously trying to improve their processes, eliminating those that do not generate any added value, thereby laying the foundations that pave the way for further technological advancements and efficiencies," says Cervantes. These improved processes largely focus on implementing an effective data strategy, the crucial first step in any organisation's digital transformation journey, and, of course, for bolstering their IT architecture.

"Implementing a robust data strategy to leverage industrial data generated by machines, assembly lines, and other connected devices is critical to accurate decision-making," says Foch. He continues: "Correctly collecting, storing, analysing, and using collected data for more informed decision-making allows organisations to be more competitive globally through targeted investments and actions." However, it is also important for enhancing safety on the production line. "These measures include condition monitoring, anomaly detection, failure prediction, and employee training on safety risks," Foch adds.

But there are growing pains. Gabriel Lupo, Partner at RSM Argentina, shares his observation, "Despite the benefits, the adoption of Industry 4.0 is still very limited in Argentina due to various barriers to entry." According to a survey conducted by a collaboration between Universidad del Salvador and Universidad de Buenos Aires for the Brazilian Journal of Education, Technology and Society (BRAJETS), “Complexity, lack of public policies, lack of top management support and lack of specialised human resources were the 4 most important barriers according to the respondents.”

Lupo adds, "It is widely accepted that developing countries start their Industry 4.0 journey far from the competitive threshold and without widespread use of cutting-edge technologies - largely due to a lack of capital that could fund their digital transformation. Also, only a limited number of companies offer specialised services for providing and maintaining 4.0 technological packages, which is certainly a limitation for adoption. Given this situation, the government has developed a series of public policies to support and encourage digital transformation (Plan de Desarrollo Productivo Argentina 4.0).”

The takeaway

Although Latin America is poised to have a more prominent role on the global manufacturing stage, there is still some way to go when it comes to integrating Industry 4.0 technologies. "A lack of financial resources, skilled labour, technical expertise, and the need for a cultural shift towards Industry 4.0 technologies," as Foch puts it, all hinder the digital transformation advancements for manufacturers in the region.

Many manufacturers understand the need to evolve to remain competitive. As more emphasis is placed on Latin America's importance for international manufacturing, more investments and initiatives may spark more widespread advancements for the region's manufacturing sector. However, as with most things, only time can tell how this exciting area will unfold - one thing we do know is that it is definitely an area to keep an eye on.

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