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The value of private cellular networks in smart factories/warehouses

Dec. 19, 2019
Industries must adopt private cellular networks to realize the full value Industry 4.0.

By Erik Josefsson, head of advanced industries at Ericsson

As the rollout of 5G networks continues, the manufacturing industry is entering a period in which high-speed, low-latency cellular connectivity has the potential to enable innovative IoT solutions that can drive significant growth.

In fact, according to our recent report produced in partnership with ABI Research, by 2030 the smart-manufacturing market will grow to $1 trillion with 4.3 billion wireless connections. Further, for factories and warehouses that transition to private cellular networks, an anticipated potential gross-margin boost of 5-13% offers a clear incentive for adoption.

In light of this, Ericsson and ABI Research assessed the smart-manufacturing and smart-warehousing sectors within several industries to quantify the return on investment as well as the cost of inaction for manufacturers who do not embrace this next-generation connectivity. This shift to Industry 4.0 generates strong business value with a foundation of reliable, secure connectivity of course, but there is a severe cost of inaction for manufacturers who don’t adopt or adapt to this ultra-connected world.

Automotive, electronic-goods, retail-distribution-hub and third-party logistics industries were evaluated during our research to better understand both the ROI and the cost of inaction related to cellular-enabled Industry 4.0 applications.

Ericsson's Erik Josefsson

The results? The cost of inaction will be in the billions of dollars. For example, a Tier 1 automotive factory in South Korea can decrease operational costs by approximately $245.5 million over a five-year period by adopting cellular-based Industry 4.0 applications. For US electronic-goods manufacturers that fail to adopt, the estimated cost of inaction is represented by 1.1 billion electronic products that could not be produced in that same time period.

Those are big figures.

This much is clear—industries must maximize their ROI and reduce their cost of inaction by adopting a private cellular network in order to realize the full value Industry 4.0. In turn, this can help companies lower costs, increase profitability, and distance themselves from competitors.

For factories and warehouses, wireless connectivity over a dedicated private cellular network is a smart and secure solution that drives profitability and growth, starting with 4G today and moving to 5G as it becomes available. This approach eliminates costly wiring and cabling and minimizes downtime during line changeovers, which boosts agility and allows companies to take new products to market faster.

For more information, read the full “Unlocking the Value of Industry 4.0” report here.