Industry 4.0 | Why It Matters & How you apply R&D


Industry 4.0 | Why it matters and How you apply Research and Development (R&D)

Technology has transformed the day-to-day operations of society, from how we communicate to how we learn to even how we think. As a society, we are currently wading through the next wave of the Industrial Revolution which will have far reaching impacts to how businesses and society as a whole operate in the future.

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Over two hundred years ago, the first phase of the Industrial Revolution began with the introduction of mechanical production with steam-powered equipment. Approximately one hundred years ago, the second phase began with the introduction of electricity to facilitate mass production of specialised goods. In the 1970’s the third phase of the Industrial Revolution focused on integrating electronics and IT enabled production automation.

Today, we are in the middle of the next phase of industrial transformation, commonly referred to as Industry 4.0. Industry 4.0 includes a wide array of devices that we use in our everyday life, including things like smart sensors, wearables, authentication capabilities and fraud detection.

Industry 4.0 combines artificial intelligence, machine learning, cloud computing, advanced robotics, automation and more to further advance manufacturing and industrial practices with modern smart technology, machine-to-machine communication, and the Internet of Things (IoT). Advanced technologies facilitate increased automation, improved communication and self-monitoring while reducing the need for human intervention in production environments.

Industry 4.0 encompasses the:

  • Interconnection of machines, devices, sensors, and people to enable communication via the Internet of Things.
  • Information transparency to improve decision making abilities with the collection of information and data throughout the entire manufacturing process.
  • Technical assistance to improve decision-making, problem solving, and intervention on difficult or unsafe tasks.
  • Decentralized decisions that allow cyber-physical integrated systems to make decisions and perform tasks autonomously. Human intervention is only required when conflicting priorities are identified.

Industry 4.0 is driven by data, connectivity, and customers.

“Big data” is a term peppered through conversations today as the size and amount of available data sets have grown exponentially thanks to things like mobile phones, IoT devices, radio-frequency identification (RFID) readers, and wireless sensor networks to name a few.

Companies have collected a huge amount of data which can be combined with on-demand computing power and advanced analytics to glean useful information from data that historically has not existed. Companies can now make informed decisions based on data to reduce costs, increase quality, and improve efficiencies. Tools like machine self-diagnostics and precise preventative maintenance reduce production downtime when implemented properly.

COVID-19 has brought to light the inefficiencies that plague global supply chains. Improved connectivity between companies, customers, and suppliers will improve the efficiencies and user experience for all parties involved in the supply chain. Connectivity improvements have already been integrated into many supply chains with the increased use of RFID, smart sensors, and cameras.

The operational focus of businesses continues to be the needs of their end customers. Industry 4.0 has taken the needs and wants of the customers and enabled businesses to reach a whole new level of customer obsession. Modern design tools properly coupled with new manufacturing techniques, like rapid prototyping with 3-D printing, can transform and expand customized manufacturing if properly implemented.

There are challenges standing in the way of the next wave of industrial innovation. The adoption of new technologies and automated machinery is extremely costly to businesses while the end benefits can be unclear and there are long recoupment periods for the initial investment. Traditional business models are not designed to address the IT security issues, stability or reliability that is required to maintain operational production. A massive shift in organisational mindset is required to fully adopt Industry 4.0.

Additionally, society poses a significant resistance with privacy concerns and surveillance distrust. Economically, there is a significant loss of jobs when traditional factories are transformed into automated smart factories. Politically, there is a lack of regulations and standards and grey areas concerning legal issues and data security. Society as a whole will need to fully embrace the adoption of Industry 4.0 technologies, just as the steam engine was adopted over two hundred years ago.

Why should we care about this next round of industrial innovation?

It has been operating in the background of society for over a decade but is still a relatively unknown movement to so many. As the end consumer, Industry 4.0 is enabling the rapid production of higher quality products. For companies that are involved in any point of the supply chain – procurement, manufacturing, delivery – the tools and technologies associated with Industry 4.0 will improve efficiencies, reduce downtime, reduce waste, increase profit margins, and improve financial performance with proper technical adoption.

Like each phase of the Industrial Revolution, Industry 4.0 is not without its concerns and opponents, but it is here to stay and with proper adoption, long-term financial planning, and tax strategy, businesses that fully embrace the change will be leaps and bounds ahead of those who do not.

How R&D Tax Incentive helps in Industry 4.0?

While Industry 4.0 technologies will provide financial benefits in the long run, the initial investment outlay can be quite costly.  The Research & Development Tax Incentive (RDTI) can potentially alleviate some of the cost burdens in the short term.  Companies whose investments in Industry 4.0 technologies align with the eligibility criteria outlined by the RDTI can use the tax incentive to help with short term cash flow.

If your company is investing in Industry 4.0, it is important to determine if your investment in new technologies will qualify for the RDTI.  Azure Group’s Grant specialists are available to evaluate RDTI potential and guide your company through the application process while minimising business interruptions so you and your team can focus on what you do best. Get in touch.

download r&d tax incentive | summary

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Have you noticed our #FridayExpertTips... here's one that relates to #R&D
"Just because you don't wear a lab coat doesn't mean your innovative business isn't doing R&D experiments that can generate big cash incentives. Talk to our team to see if you might be eligible.”


Get ready for Fringe Benefits Tax (FBT) time
R&D Tax Incentive for Industry 4.0 | The state of advanced Manufacturing capabilities

About Author

Azure Group
Azure Group

Azure Group is the leading Chartered Accounting, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

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