Economic Valuation Approach for Industry 4.0 Solutions

Within the framework of the preliminary study "Productivity increase through industry 4.0" of the Fraunhofer Institute for Material Flow and Logistics (IML), use cases of different companies were considered in the context of industry 4.0. According to the current state there is no evaluation approach with a holistic and justifiable effort to evaluate the effects of industry 4.0 solutions.

In the next step, a pragmatic approach for the economic evaluation of industry 4.0 solutions will be developed in a focus group together with companies. The Focus Group pursues a participative workshop concept. Participants and experts from practice and science develop new ideas and solutions in a creative a The 4th industrial revolution offers many potentials for your company. At least, this is suggested in journals, on fairs and conferences. Many qualitative benefits, such as flexibility, adaptability and complexity, are mentioned as significant advantages in the context of Industry 4.0. However, what are the real benefits of Industry 4.0 solutions and technologies? Which investments are the most successful? Which concrete factors are of outstanding importance in the specific application case?

Within the framework of the preliminary study "Productivity increase through industry 4.0" of the Fraunhofer Institute for Material Flow and Logistics (IML), use cases of different companies were considered in the context of industry 4.0. According to the current state there is no evaluation approach with a holistic and justifiable effort to evaluate the effects of industry 4.0 solutions. Without a valid evaluation concept for investments in the context of industry 4.0, there is a danger of falling into digital actionism instead of successful digital transformation.

To invest effectively and purposefully in digitization projects, quantitative evaluation approaches are necessary. Traditional methods such as the calculation of the Return on Investment (ROI) or the amortization calculation are primarily based on historical data.

Essential aspects of Industry 4.0, such as increasing transparency, flexibility or adaptability, are ignored in traditional approaches. However, more recent evaluation approaches taking these factors into account are often qualitative, i.e. they are based on subjective assessments. Consequently, there is no link between qualitative benefit factors and classical monetary indicators.

The guideline for the economic evaluation of industry 4.0 applications developed at the Fraunhofer Institute for Material Flow and Logistics IML was elaborated in a focus group together with companies. Participants and experts from practice and science develop new ideas and solutions in a creative atmosphere. The guideline for the economic evaluation of industry 4.0 applications allows for the first time a differentiated consideration of different starting points and the structured definition of a particular target state to derive concrete needs for action. Based on the predefined target state, a goal-oriented evaluation is aimed at, which reduces the effort of the evaluation procedure by selecting only relevant target values for the assessment. Starting from the relevant target variables, valid cause-and-effect relationships to the corresponding control variables are presented. Starting points might be technology-driven investments, strategic investment decisions or specific optimization projects.

The guideline will be published in the Harvard Business Manager in the near future. In addition, further R&D projects are in progress to further develop the guideline.