by | Mohd Hasan Mohd Saaid | email@example.com
In 2011, Germany launched a project under the name Industrie 4.0 to digitalise manufacturing at the Hannover Messe. The government officials, industry leaders and academics who were involved probably had no idea that the project, later known as Industry 4.0, carries the concept of a fourth industrial revolution and would later become widely accepted.
This project predicted a confluence of advancements in technology that allows autonomous factories and machine learning to take over manufacturing process. The idea has since grown into many areas outside of manufacturing; it has become a bigger vision to digitise cross-industries and has extrapolated to smart transportation and logistics, smart buildings, oil and gas, smart healthcare as well as smart cities.
The revolution is far from surprising. Megatrends are shaping the future and as for the manufacturing field, Industry 4.0 will enable manufacturers to improve efficiencies whilst reducing costs. In today’s fast moving global markets, manufacturers need to respond quickly to changing demands and maximise new market opportunities. From all indications, we are in an era of significant convergence, where information technology, operational technology, and global megatrends are on a collision course. This will certainly drive changes in how we do business and how we interact with customers and suppliers.
Currently, there are ten identified global trends that are influencing Industry 4.0’s present activities. A closer look at each trend would provide a better understanding of the future impact each trend brings and how it shapes the vision of Industry 4.0.
Significant demographic shifts such as the increasing number of population growth in developing countries, a growing middle class, consumer market shifts and an ageing population are influencing future industrial activities.
For mature economies such as the US and Japan who are dealing with aging populations and baby boomer retirements, there will be a significant vacuum in the workforce. If manufacturers are to retain many valuable workplace skills and institutional knowledge, they will have to create a systematic way to ensure a smooth handoff from one generation to another. More importantly, it is imperative to ensure the sustainability of manufacturing activities to involve fewer humans.
Meanwhile, emerging economies with rapidly growing young populations, present different skill challenges for manufacturers. Many of these countries are still struggling with feeding and educating their people. These issues become magnified as rural populations move into cities in search of work. But since the digitalisation of manufacturing requires human resources with improved skills, it benefits the millennials as they are more digitally attuned. The developing technology continues to make it easier to collaborate and is helping to attract the discerning millennials generation, which is anticipated to account for 75 percent of the global workforce in 2025 and will play an important role in manufacturing as it continues to evolve.
Investing in Industry 4.0 technology that amplifies the current workforce is an important value-add for any factory.
Urbanisation is a megatrend that will significantly shape the economic, political and social transformation of societies and their spatial impacts. The current rising trend of urbanisation indicates that up to 70 percent of the global population will be living in cities by 2050. Future urban growth will thereby almost exclusively take place in developing countries.
Industry 4.0 facilitates more mixed urban development by bringing the factory back to town, even closer to housing areas. This promotes the realisation of the compact city and it is made possible because of two features of the Industry 4.0, diminishing lot sizes and environmentally friendly integrated
urban production. However, such positive consequences of Industry 4.0 for urban development do not come as an automatism. There are numerous bottlenecks and necessary urban‐regional framework conditions to be taken into consideration. Smart modern planning also plays an important role.
This proves that strategic planning; integrated policies and interventions are vital to meet the urban infrastructure needs. Growing demands for urban mobility, energy, housing and telecommunication solutions are becoming prominent drivers of new manufacturing requirements. Industry 4.0 is targeted to generate positive economic growth and to contribute to the sustainable development of cities in developing countries and emerging economies.
Addressing global challenges in a city context through Industry 4.0 is seen as a solution between economic development and urbanisation.
The talent gap in manufacturing is getting larger in part because of external forces that are creating a greater need for skilled labour. Advancements in technology not only require new employee skills, but they also shorten the shelf life of those skills and increase the need for continuous training. For example, robots have had a dramatic impact on the factory floor, and new, computer-based manufacturing techniques such as 3D printing are becoming less expensive and more adaptable to manufacturing uses.
To support new technologies and innovation, manufacturers must attract people with STEM (science, technology, engineering, and mathematics) skills. However, this talent pool is in demand in many other industries as well, and manufacturing is not top-of-mind for young people starting to build their careers.
Adding to this complexity is the reality that demographic changes across the globe make it more difficult to find and retain the workforce of the future. The rapid rise in urbanisation in relatively undeveloped countries often leads to increased poverty and high dropout rates, resulting in a scarcity of talent. This scarcity breeds competition among companies that must compete more aggressively for the talent that does exist, especially at the managerial level. As a result, companies are finding it difficult to attract and retain employees, often losing them to competitors that offer even small increases in pay or slightly more favourable working conditions. This high rate of mobility is likely to become a bigger problem over the next decade as competition for labor continues to increase.
Education providers must look at industry 4.0 transformational needs and how they can supply the required highly skilled talents.
Industrialisation is a word synonymous with development while deindustrialisation, a recently-coined term, involves a decrease in the relative size and importance of the industrial sector in an economy. It may involve curtailing the absolute size of industry or the manufacturing industry takes a smaller share of GDP and employs a smaller percentage of the workforce.
Deindustrialisation will invariably involve developed economies moving towards services-based economies. The loss of market share to newly emerging competitors create markets competitiveness as the outsourcing of activities such as logistics, facility management, maintenance and different types of professional services to the service industry. Figure 2 shows that the service industry’s share of GDP has accelerated as compared to the manufacturing industry in recent years.
Deindustrialisation is a worldwide trend with a significant impact on our economy and society. It has been driven by the fact that manufacturing output and employment saw a discernible shift towards Asia from Europe due to its lower cost base starting in the 1990s. In fact some countries, notably in the UK, France and Spain, have seen a huge drop in manufacturing activity. Overall, Western Europe’s contribution to the European economy has slumped by 10 percent, from around 35 percent of total industrial output in the early 1990s. In India, the manufacturing industry has experienced a decline for a number of years now, contributing around 16 percent only to India’s GDP each year and less than two percent of the overall global manufacturing output.
While some countries focus on cost leadership to counter this decline, there is a different and more attractive strategy through Industry 4.0 as the technologies could enable the manufacturing sector to create a sustainable competitive edge. This transformation has the potential to retool global industry and reorder the global economy. The German government has since promoted the concept vigorously as a means to new economic growth with good reasons. Countries that lead this new industrial charge stand to make significant gains in terms of economic productivity. For some, and for Western Europe as a whole, it presents an opportunity to reverse an epic decline that has lasted a generation.
Reviving the manufacturing industry in mature industrial countries, requires efforts be made to implement the innovation and technology advancements that Industry 4.0 brings to the table. Companies should begin by assessing the current status and evaluating readiness for the transformation.
Industry 4.0 will create digital networks and ecosystems that in many cases will span across the globe with both developed and developing markets standing to gain dramatically in the value chain across regions. Technology will continue to be a big enabler of globalisation, not only through eCommerce but more specifically the enterprise resource planning (ERP) system that is vital to support cross-border trading multi-country manufacturing processes.
Although most economies are more open to trade today, as countries seek to expand manufacturing employment, a surge in protectionism and the undoing of trade agreements will create an institutional environment less supportive to openness. The phenomenon of nationalism and protectionism is gradually spreading in many countries such as China, Russia, the Brexit in the UK, Duterte in the Philippines or Trump in the US. The double standards in globalisation are also evident through a variety of WTO agreements such as the General Agreement on Trade in Services (GATS), the Agreement on Agriculture (AoA), and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Industry 4.0 can potentially offer a better way to circumvent these protectionist actions by introducing smart factories concept to the fore, with worldwide connectivity. For instance, a local factory can be built to cater to trade regulations, but it can be connected to other worldwide factories for more efficient production. Therefore, it benefits all parties—companies ensuring legal compliance with lower headcount costs and local economies benefitting from the employment opportunities that open up.
From all indications, we are in an era of significant convergence, where information technology, operational technology, and global megatrends are on a collision course that demands business owners adopt new ways of thinking and execution. When you look closely at the rapid pace of digitisation in industry today, it is a signal of sweeping change that is constantly transforming many companies and will cause continued technology disruption.
Under Industry 4.0, product design and development take place in simulated laboratories and utilise digital fabrication models. Technology such as 3D printing enables manufacturers to produce a small batch of customised products. The main advantage of 3D printing methods is the opportunity to create prototypes of conceptual designs and individual components that reduce costs, increase time efficiency and bring more value to the customers.
This technological infrastructure is still in its early stages of development, but it is already transforming manufacturing. Companies that embrace Industry 4.0 are learning mass customisation—the ability to make products in batches of one as inexpensively as they could make a mass-produced product in the 20th century, while fully tailoring the product to the specifications of the purchaser. As the movement develops, these trends will accelerate.
Businesses and manufacturers need to understand the enabling technologies behind Industry 4.0 and revise their business plans to ensure business continuity and sustainability.
The manufacturing landscape has changed rapidly via mechanisation and digitalisation. However, through the convergence of computers and automation in Industry 4.0, we are witnessing a paradigm shift in global production at an unprecedented pace. These new technologies are also known as disruptive technologies that include the use of autonomous robots, Internet of Things (IoT), Big Data, augmented-reality-based systems, cyber security, cloud computing, additive manufacturing to horizontal and vertical system integration. The convergence of the identified nine pillars of enabling technologies for Industry 4.0 brings a new level of digital manufacturing.
However, many manufacturers are still struggling with how to unlock value from Industry 4.0. For example, traditional engineering companies find it hard to achieve digital transformation, as the main challenge is often the lack of a strong and integrated corporate management. These are critical challenges that must be tackled in order to gain the benefits of Industry 4.0.
Building a better manufacturing sector with augmented and virtual reality, robotics and data analysis using smart equipment naturally raises an important question. What will the Industry 4.0 workforce look like? Since the bulk of automation is used for works that are currently considered unsafe or impossible for humans, it makes robots a complement to human workers and this scenario will lead to increased productivity.
However, as the cost of robots and other automated technologies continues to decrease while their capabilities continue to expand, more elements of the workforce can be automated. Advancements in information technology (IT), robotics, drones, self-driving cars, machine learning and artificial intelligence (AI) are increasingly allowing machines to take over tasks once performed only by humans and in the process causing economic disruption that will irreversibly change the workforce.
Advances in industrialisation and automation, while reducing or eliminating the need for some workers, has also created new job opportunities that deal with managing and maintaining the machines. There is also the opportunity to design a more advanced and autonomous version of these robots.
Central to the Industry 4.0 concept is the free flow of information exchange within the value chain, which includes collecting all data generated for a product throughout its lifecycle phases from conceptualisation, design, ordering, customisation, manufacturing, operation, repair and to even recycling. All these data are stored in repositories for future use.
However, network vulnerabilities can lead to criminal hacking incidents which may cause serious breaches that extend beyond financial crime such as access to classified information that could compromise and cripple critical infrastructure. Rising connectivity and standardisation of production protocol increases the importance of protection processes from such cybernetic threats.
The advent of Industry 4.0 has brought along the need to secure these data repositories. Suitable security measures are critical to the Industry 4.0 infrastructure and must be given utmost priority.
The manufacturing industry has made some progress in recent years on materials, waste management, recycling and energy efficiency initiatives. However, it has not attained the same level of progress on product design and manufacturing processes which can help facilitate better use of materials. Industry 4.0 helps to address this challenge through the invention of new products and services, including innovative methods in tackling today’s most pressing issues such as climate change, pollution, energy demand, and urbanisation.
The rise of ethical consumption through Industry 4.0 could also potentially increase consumer awareness on product sustainability and concern on the impact of manufactured products on our environment. According to United Nations Industrial Development Organization (UNIDO), despite the countless opportunities for smarter cities through Industry 4.0 technologies, the goal should always be to improve the quality of life, rather than implement a purely technologically driven process.
The Sustainable Development Goals (SDGs), have set out a shared global agenda for human development based on prosperity, social inclusion and environmental sustainability. Industry 4.0 shared potential linkages
to SDG 9 that mention infrastructure-industry- innovation nexus, and further implication to the SDG 11 that underline the need to make cities and human settlements inclusive, safe, resilient and sustainable and the other SDGs in general.
The awareness in ethical consumption could potentially bring new market demands that would fuel further change. The technology advancement brought by Industry 4.0 can help to fill this demand and contribute to the betterment of the society as well as the environment.
Opportunities & Challenges
Industry 4.0 will see intelligent machines and smart factories usher in a new era of manufacturing that offers new opportunities in production methods. Undoubtedly, it is going to change the current manufacturing landscape, making factories more productive, more efficient and closer to their customers.
However, the evolving technology poses a few potential risks and challenges that have been identified to minimise unforeseeable impact. Nevertheless, we remain behind the starting blocks of this revolution that has the potential to retool global industry and reorder the global economy. These risks and challenges, and how they are managed, will fundamentally underpin market confidence in the technology. Therefore, these vulnerabilities must be carefully reviewed and addressed with the correct action to ensure it does not eclipse the potential gain brought about by the changes.
For the vision of Industry 4.0 to become a reality, manufacturers will need to evolve along with the technology it plans to leverage by understanding that the right Industry 4.0 solution empowers their current workforce and enables their factory to produce more with less. Major work has still to be done to standardise and apply these new technologies in myriad industrial settings.
Among the opportunities gained and challenges that may rise from Industry 4.0 are as follows:
Education to transform
Academicians must observe Industry 4.0 transformational needs which are knowledge-intensive and require highly skilled talent as part of the opportunity in job creation through re-skilling and up-skilling processes.
Talent as part of value creation
Talent may affect the supply of manufactured goods, especially regarding where production is likely to occur. In the coming years, much of the growth of the global labour supply will depend on low- and middle income economies. Also, to sustain growth and generate new value, it is important to develop creative human resources who contribute toward innovation.
Provide new jobs
Advances in industrialisation and automation while reducing or eliminating the need for some workers, creates new jobs in parallel. The proliferation of IoT and adoption of Industrial Internet projects has also significantly given security professionals the opportunity to evaluate new risks and vulnerabilities.
New market segment
The demographic change in many countries presents abundant opportunities to Industry 4.0. Developing products and services that appeal to this trend can provide attractive revenue potential. Manufacturers should focus on a limited number of Industry 4.0 applications, rather than trying to cover all age groups at once.
Transforming market dynamics
Industry 4.0 developments will fundamentally transform market dynamics across a whole range of industries all around the world, in developed as well as emerging countries. Digitalisation will result in more localised production points nearer to the consumer.
Global markets network with regional flavour
Due to protectionist leanings, many governments are not in favour of international trade, making it harder for populations and products to move across borders. Industry 4.0 can overcome such barriers by enabling companies to transfer their intellectual property while allowing each country to maintain its own manufacturing networks. In other words, Industry 4.0 is accelerating globalisation, but with a distinctly regional flavour.
New business models transforming industries
Manufacturers that want to not only reap the immediate rewards of Industry 4.0 but also prepare themselves for future market disruptions should start experimenting with new business models. Most Industry 4.0 quick wins will be found in improving operational effectiveness. Change management and cultural transformation hence become important drivers of digitalisation.
Industry 4.0 has a high potential to positively impact economic growth and to contribute to the sustainable development of cities in developing countries and emerging economies in line with the green economy agenda. Energy efficiency and energy transition toward renewable energy in the process can lead to favourable sustainability practices.
The digitalisation of the whole product lifecycle will allow companies to use data from production, service and even social media which will lead to faster product improvements. This will impact the producers’ entire value chain, from design to after sales service. The automation of manufacturing processes and better use of data to transform operations are all in line with the ambition to create a smart factory. Regardless of their size, companies have no choice but to embrace digitalisation and reduce labour dependency.
AI to add value to Industry 4.0
Factories are becoming smarter due to new digital production techniques. IDC, a market research company, predicts that 75 percent of all enterprises and independent software vendors will include Artificial Intelligence (AI) functionality in at least one application by 2018. AI will allow faster decision-making, productivity gains, pattern detection and increased data monetisation. The operating structures in the industries will change as machines start coordinating themselves to deliver work.
Leveraging on Cyber-physical System (CPS)
CPS is a machine that is controlled and monitored by computer softwares and connected to an external network such as the Internet. Interoperability allow sensors, devices, machines and people to talk to each other, while data transparency refers to the ability to create virtual copies of the physical world with digital plant models that are connected with IoT or sensor data.
Virtual factories for clients
The use of sensors enabled the development of cyberphysical systems, which in turn has led to the creation of the factory-as-a-service (FaaS) model, by which service providers can provide virtual factories for their clients. Products, production processes and production automation will be designed and commissioned virtually in one integrated process and through the collaboration of producers and suppliers.
Manufacturing processes will have an increase in flexibility and allow economic production of small lot sizes. Robots, smart machines, and smart products that communicate with one another and make certain autonomous decisions will provide this flexibility.
Leveraging from big data analytics
The information generated by the increase of connected devices and machines represents a significant opportunity for manufacturers to unlock big data potential. By determining how to best identify, capture and interpret this increased volume of data, it can help organisations understand their market and customers better, as well as gaining market share.
Shrinking of labour force
As the labour force shrinks dramatically, competition for labour, human capital, and talent will get much tougher. However talented young professionals and business people will increasingly have their pick of jobs in the job market.
Robots creating workforce displacement
Technological innovation will lead to technological unemployment with automation displacing or eliminating many manufacturing, agriculture, and service jobs currently held by human workers—initially low-skill and working-class jobs that involve routine and repetitive manual labour. The fast growth of labour intensive manufacturing industries is no longer viable in the developing world.
Most Gen-Y employees need their jobs to come with a sense of purpose. Connecting with the connected generation, most of whom are accustomed to instant answers and real-time replies online, should be facilitated through constant engagement and feedback that helps them learn and grow along the way. This would go a long way in attracting and retaining young talent. Constraint in finding the right talent and skills shortage could hamper the industry transition.
Income inequality may rise with the adaptation of Industry 4.0, especially in countries where the income gap and disparity in opportunities to access education have been persistent. This is due to the displacement of workers in more sophisticated manufacturing and production sectors, which results in a strong increase in demand for high-skilled engineers and specialists. Higher salaries and perks will be offered to talent and white-collar workers with sought-after intellectual qualities, compared to less educated and low-skilled labourers, intensifying the income gap.
It is vital for the education sector to catch up with technology advancements, as the skill-biased technological transformation will affect people with insufficient or unsuitable education, perpetuating the vicious circle of poverty and inequality.
Lack of standards implementation
Lack of standards and different solutions as well as devices means more development and work. This will involve higher costs to implement and scale Industry 4.0 solutions, which could hamper its development.
Lessons from past industrial revolutions have taught us that organisations that are not evolving in their operations or customer service eventually will be less competitive or even obsolete as they face disruptions. Industry 4.0 challenges the old school manufacturing concepts that at its very core is a risk averse sector with centralised and offline systems that are not inter-connected. By not embracing Industry 4.0, it is possible for the middle-income trap to become a declining income trap.
The lack of human touch
Wide-scale adoption of automation in any sector will sometimes push people away due to the missing human element. People expect and continue to want human contact and personal touch as an element in certain jobs.
Cybersecurity issues are one of the threats to Industry 4.0 as the key feature of the industry is the ability to interconnect across environments, making the supply chain more efficient. With digitally connected supply chains, traditional IT security will no longer be enough to protect businesses. Industry 4.0 gives the cybercriminal more opportunity to dig into the top of the supply chain, reaching into the Smart factory through its dependent actors. Only by utilising modern cyber security counter measures, like adaptive authentication and behavioural analysis can be hope to stem the flow of supply chain initiated Industry 4.0 hacks.
Greater distribution of decision making
Manufacturing-system suppliers will have to expand the role of IT in their products. Changes will likely include a greater modularisation of functionality with deployments in the cloud and on embedded devices. With increases in the overall functionality and complexity of systems comes the need for a greater distribution of decision-making.
Lack of awareness
The lack of awareness in developing countries can be considered one of the biggest challenges in facing only 30 percent of manufacturers are aware of this latest industrial revolution. As there is a new breed of consumers who are more technologically advanced and have concerns regarding the environmental impact of manufactured products, increased awareness of Industry 4.0 in the manufacturing industry is vital for inclusive and sustainable industrial development (ISID) as well as providing access to know-how, skills, education and technology.
There are developing countries that are already preparing for and adopting strategies regarding Industry 4.0, such as China and India. It is therefore important to take advantage of their experience in addition to government buy-in, both for financial and infrastructure support.