Robert B. Cohen, Economic Strategy Institute, USA

When AI models and machine learning are fully interconnected in factories with cabling-free 5G wireless networks, firms become “fully digital”. This analysis argues that it is not the initial efficiencies gained by optimizing a plant’s operations but rather a firm’s ability to build a collection of knowledge about each step of its operations, what we call “knowledge synthesis”. This is information about how each product is produced, how the process to produce it is managed and optimized, and the software and systems required. This knowledge is important because it permits firms to exploit network effects based upon connecting plants together or sharing expertise with partners. This greatly expands the potential for economic benefits from the use of AI and 5G. This review explores cases from firms with smart factories that have adopted AI and 5G communications including Moderna, Sanofi, Mercedes, Ford, and VW. It examines how these firms have benefitted from the move to smart factories with 5G communications networks. It also explores how firms have improved their value chains by building smart factories that connect nearly all manufacturing processes to machine learning and AI models that analyze machine and process data rapidly. Next, they take advantage of network effects – due to “knowledge synthesis” that permits early smart factories with 5G networks --to derive even larger benefits inside their production operations and in their supply chains. In both phases, the adoption of 5th Generation wireless in plants ramps up firms’ abilities to interconnect their digital systems. Once the interconnected systems exist, firms exploit network effects to create “knowledge synthesis” or knowledge platforms to consolidate insights gained from optimizing many machines and processes. Using “knowledge synthesis”, firms can also transfer knowledge from one group of equipment to another that is not optimized even when the equipment is in different facilities. This makes firms far more flexible, interoperable, and scalable.

“Fully Digital”Firms, Smart Factories, Knowledge Synthesis, Manufacturing Processes, Value Chains.