Saturday, April 28, 2018

Artificial Intelligence Promises EUR 60 bn in Incremental Value for German Industry

The application of artificial intelligence (AI) in manufacturing could create EUR 60 bn in additional value for German industry. That is the conclusion of the study “The Ghost in the Machine: Artificial Intelligence in the Factory of the Future”, for which the Boston Consulting Group (BCG) surveyed manufacturing and technology managers from about 1100 industrial companies worldwide about their applications of and willingness to invest in AI. Almost 90 percent of executives say they aim to integrate AI in their processes in the next three years. Nonetheless, so far only 28 percent have created a clear strategy for AI in manufacturing. In Germany only 23 percent, or one in four German industrial companies, have developed an AI strategy. 

“When it comes to AI, Germany only ranks around the middle of the pack internationally and is in danger of falling further behind. If German industrial companies want to maintain their leading international position, they must greatly increase the scale and speed of their commitment to new technologies and intelligent automation”, says Markus Lorenz, partner and head in machinery and automation at BCG.

While Germany is still planning, China is already optimizing
As the study shows, companies that already use AI in manufacturing, employ more agile working methods: they test prototypes at an earlier stage and are quicker to readjust their work processes.
The proportion of pioneers is highest in the USA (25 percent), China (23 percent) and India (19 percent). In Germany only about 15 percent of companies currently use AI to any significant extent in manufacturing.

“While most German executives are still wrestling with the basic question of whether and how to apply AI, businesses in China and India are already optimizing their smart factories”, observes the study's author Daniel Küpper, a BCG partner and global head of the firm’s Innovation Center for Operations (ICO). “Emerging market players show more courage when it comes to AI and they keep identifying opportunities to apply the new technologies and improve them on an ongoing basis.”

Ranking of the leading countries in terms of AI implementation
1.  USA 25;
2 China 23;
3. India 19;
4 Canada 17;
5 Poland 16;

AI as a lever to increase productivity
The global sector comparison shows that the automotive and technology industries are at the forefront in applying artificial intelligence. One company in five has already integrated AI in their business in those sectors. At the other end of the scale are the pharmaceutical, medical technology, machine construction and process industry sectors. There, only about one in seven companies uses intelligent manufacturing systems.

“German machine construction in particular stands to gain a lot from artificial intelligence. It enables companies to harness the enormous amounts of data generated by manufacturing machines. This lays the foundation for new business models, making use of predictive maintenance and optimized operations”, says Markus Lorenz, partner and global head of consulting in machinery and automation at BCG.

Almost 70 percent of executives surveyed admit that their company lacks the AI skills to speed up the introduction of new technologies. That applies particularly to data management, analytics and programming. “Companies can no longer advance purely on the basis of their engineering knowledge. Employees have to know how to use AI”, says BCG partner Küpper. All the more reason for industrial companies to upgrade their employees’ skills in the basics of AI in manufacturing systems. “The opportunity for companies now lies in training their employees and attracting AI experts, for example in the field of Deep Learning“, says the study's author Küpper. “You need both to successfully integrate AI in your company: experts who know artificial intelligence and experienced staff who can identify beneficial avenues for its application.”

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