Industry 4.0
What is Industry 4.0, the Fourth Industrial Revolution, and 4IR?
Industry 4.0, the Fourth Industrial Revolution (4IR), and 4IR are terms that refer to the ongoing transformation of traditional manufacturing and industrial practices, driven by the adoption of digital technologies. These terms are often used interchangeably, but they essentially describe the same phenomenon. Here’s a brief explanation of each:
Industry 4.0: This term originated in Germany and is closely associated with the concept of the “smart factory.” Industry 4.0 represents the fourth phase in the evolution of manufacturing.
It is characterized by the integration of digital technologies, such as the Internet of Things (IoT), artificial intelligence (AI), big data, cloud computing, and advanced robotics, into the industrial processes. The goal is to create more efficient, flexible, and interconnected production systems.
Fourth Industrial Revolution (4IR): Coined by Klaus Schwab, the founder and executive chairman of the World Economic Forum, the Fourth Industrial Revolution refers to the latest major shift in the way we produce, distribute, and consume goods and services.
The first industrial revolution involved mechanization through water and steam power, the second brought about mass production through electricity, and the third introduced automation and computerization.
The Fourth Industrial Revolution builds on the third by integrating digital technologies to create a more interconnected and automated environment.
4IR: An abbreviation for the Fourth Industrial Revolution, “4IR” is often used as a shorthand term to refer to the ongoing transformation of industries through the adoption of advanced technologies.
Key features of Industry 4.0 and the Fourth Industrial Revolution include:
Interconnectivity: Machines, devices, and systems are connected and communicate with each other in real-time, creating a seamless and efficient workflow.
Data Analytics: The collection and analysis of large amounts of data enable businesses to make informed decisions, optimize processes, and predict maintenance needs.
Automation: Advanced robotics and artificial intelligence enable a higher degree of automation in manufacturing and other industrial processes.
Human-Machine Interaction: Enhanced human-machine interfaces and augmented reality technologies improve communication and collaboration between humans and machines.
Smart Factories: Manufacturing facilities are transformed into smart factories where production systems are highly flexible, adaptive, and responsive to changes in demand.
The Fourth Industrial Revolution represents a significant shift in how industries operate, with the potential for increased efficiency, productivity, and innovation. It also brings challenges related to workforce adaptation, cybersecurity, and ethical considerations surrounding the use of advanced technologies.
In simpler terms, Industry 4.0, also known as the Fourth Industrial Revolution or 4IR, marks the next step in making the manufacturing sector more digital. This change is fueled by new and impactful trends like increased data usage, better connectivity, advanced analytics, human-machine interaction, and enhancements in robotics.
The 21st-century industrial revolution is happening on digital grounds. Whether you call it Industry 4.0, the Fourth Industrial Revolution, or 4IR, it’s all about this current time of increased connections, smart analytics, automation, and advanced manufacturing technologies.
This transformation in how things are made started around the mid-2010s and brings a lot of possibilities for how businesses operate and the future of production.
Understanding the Fourth Industrial Revolution
The first Industrial Revolution used steam, the second used electricity, and the third used early automation and machinery. Now, the Fourth Industrial Revolution, often called 4IR, is shaped by smart computers.
Before 2014, not many people searched for “Industry 4.0” on Google, but by 2019, 68% of respondents in a McKinsey survey considered it a top priority. Seventy percent said their companies were testing or using new technology.
4IR builds on the inventions of the Third Industrial Revolution, which brought us computers, electronics, and the Internet. Industry 4.0 goes further with four types of technologies:
1. Connectivity, data, and computational power: Examples include cloud technology, the Internet, blockchain, and sensors.
2. Analytics and intelligence: This involves advanced analytics, machine learning, and artificial intelligence.
3. Human–machine interaction: This includes virtual reality, augmented reality, robotics, automation, and autonomous guided vehicles.
4. Advanced engineering: Examples are additive manufacturing (like 3-D printing), renewable energy, and nanoparticles.
But technology is only part of Industry 4.0. To succeed, companies must make sure their workers have the right skills. This involves upskilling (learning new skills for current jobs) and reskilling (retraining for different positions). As disruptive technologies change job requirements, companies need to invest in their workers.
In Europe, 94% of executives think there should be a balance or more focus on reskilling, compared to only 62% in the US. The process of transforming skills has three steps:
- Scout: Analyze the skills needed for a company’s goals.
- Shape: Identify talent gaps and design a program to address them.
- Shift: Develop and implement training at scale.
A conversation with industry leaders highlights the importance of building workforce capabilities and changing mindsets for successful digital transformations. Western Digital CEO David Goeckeler emphasizes the need to keep employees ready for the future, not just improving the company but ensuring all employees are excited and prepared for what lies ahead.
What is this Global Lighthouse Network.?
The Global Lighthouse Network refers to a program initiated by the World Economic Forum (WEF) that identifies and recognizes leading companies in the adoption and integration of advanced technologies in their manufacturing processes.
These companies are considered “lighthouses” because they serve as beacons, guiding others in the industry toward successful implementation of Industry 4.0 technologies.
The term “lighthouse” is used metaphorically to highlight these companies as examples of best practices and innovation in the Fourth Industrial Revolution.
These organizations showcase how the intelligent use of technologies such as artificial intelligence, the Internet of Things (IoT), data analytics, and automation can significantly enhance efficiency, productivity, and overall business performance.
The WEF selects companies to be part of the Global Lighthouse Network based on their successful implementation of advanced technologies, their impact on business operations, and their potential to serve as role models for others.
Being part of this network provides opportunities for knowledge sharing, collaboration, and learning from each other’s experiences in adopting Industry 4.0 practices.
In summary, the Global Lighthouse Network is a community of companies recognized for their leadership in embracing and successfully implementing advanced technologies to transform and optimize their manufacturing processes, ultimately contributing to the advancement of Industry 4.0 on a global scale.
The idea is for these lighthouses to show others how to use these technologies effectively, capturing more than 80% of the identified value from these technologies.
Think of them as examples or benchmarks for other places to follow. Digital factories are similar, but the GLN specifically looks for successful 4IR pioneers.
Right now, there are 103 lighthouses around the world, including Tata Steel’s plant in India and some Henkel Laundry & Home Care sites.
Lighthouses can be built anywhere, by big or small companies, in rich or developing countries, and in new or existing locations. They offer valuable lessons for others looking to shape the future of manufacturing.
While making big changes with 4IR technologies is challenging, it’s possible to do it responsibly by focusing on productivity, sustainability, and engaging the workforce.
To succeed in your company’s 4IR transformation, there are six key things that can help:
- An agile approach: This means being flexible, learning quickly from mistakes, and continuously improving. Teams work together on different projects in waves to drive innovation.
- Agile digital studios: Special places where team members from different parts of the company can work together effectively.
- The IIoT stack: This is like the backbone of technology that lets different systems work together smoothly. It can include both old and new tech, saving costs by using existing systems.
- An IIoT academy: This helps train the workforce in using these new technologies, with customized learning programs based on individual needs.
- Tech ecosystems: Partnerships with other companies, suppliers, customers, and related industries to share the latest capabilities and data, encouraging innovation.
- Transformation offices: These are like the central hub that manages and supports the launch and growth of a lighthouse. They keep things transparent, make sure the value keeps coming, and speed up the changes.
Out of these, having an agile approach and a transformation office are particularly important. Any company can start its 4IR journey at a small scale and then grow quickly.
The goal is to avoid “pilot purgatory,” where companies try new technologies but struggle to use them on a larger scale, which was the case for about 74% of surveyed companies as of late 2020.
What are the benefits of the Fourth Industrial Revolution?
The Fourth Industrial Revolution, or 4IR, can make products and services more accessible and efficient for businesses, customers, and everyone involved in the process. Early information shows that using 4IR technology effectively improves supply chains, makes work hours more productive, reduces waste in factories, and brings many benefits for employees, stakeholders, and consumers.
Using Industry 4.0 technology has become even more helpful during the challenges of the pandemic. COVID-19 made companies adapt quickly to new ways of working and changed what customers wanted. This sped up the adoption of digital and contactless operations.
Six months into the pandemic, 94% of the people surveyed by McKinsey said that Industry 4.0 helped keep their companies running. More than half (56%) believed these technologies were crucial for dealing with the crisis.
Before the pandemic, different industries had various reasons to digitize. But in 2020, all sectors and regions shared three main reasons: being agile, flexible, and making manufacturing more efficient. Companies that had already embraced Industry 4.0 technologies before COVID-19 were better prepared for the challenges.
Here are a few examples:
- A company in Asia, dealing with consumer-packaged goods, created a digital model of its supply chain to plan for different situations during the pandemic. This helped them get ready for sudden shutdowns or supply disruptions.
- In Treviso, Italy, a coffee machine plant transformed into a manufacturing leader. This change increased labor productivity by 33% and reduced lead times by 82%.
- Among companies that hadn’t started using Industry 4.0 technologies, 56% felt limited in how they could respond to the challenges brought by the pandemic.
How will the Fourth Industrial Revolution affect the future of manufacturing and the workforce involved?
Making sure employees are involved and motivated is crucial for a successful shift to the Fourth Industrial Revolution (4IR). Even if a company has the best tools, the latest technology, and lots of resources, it won’t successfully adopt 4IR if the workforce isn’t engaged.
Focusing on people helps companies become more resilient by enabling workers to learn new skills, making the business more adaptable to change. This might mean changing how training and skill development are approached and making long-term structural changes.
Here are five areas where manufacturers are already working to keep their workforce engaged:
- Learning and development: This involves expanding skills and knowledge, combining hard, soft, and digital skills, and providing apprenticeship opportunities.
- Empowerment and ownership: Giving workers more control by focusing on outcomes and results or encouraging them to make decisions on their own.
- Collaborations and connections: Working with diverse teams and building networks within and outside the organization.
- Impact and recognition: Holding people accountable for their achievements and celebrating successes.
- The voice of the worker: Using digital channels and data to gather input from workers or understanding their needs that might not be immediately apparent.
Will Industry 4.0 digitization brings for being more sustainable opportunities
The Fourth Industrial Revolution (4IR) brings chances to be more eco-friendly, and what’s even better is that these improvements are naturally better for the environment than how businesses currently operate.
Some people might think that being environmentally friendly is hard when trying to be productive, but sustainable lighthouses challenge this idea. 4IR changes support a kind of eco-friendliness that naturally combines sustainability with being excellent in competition.
Eco-friendliness with digital technology involves three things:
- Using data to make smart decisions in production and the whole value chain.
- Improving performance in various areas like cost, flexibility, convenience, and quality.
- Boosting sustainability by reducing consumption, waste, and emissions.
Let’s look at some examples of how Industry 4.0 technologies that make things more efficient also reduce waste:
- In Singapore, a smart factory using the Industrial Internet of Things (IIoT) lowered the amount of scrap from building semiconductors by 22%.
- Schneider Electric’s smart factory in Kentucky combined IoT connectivity and predictive analytics to cut energy use by 26%, CO2 emissions by 30%, and water use by 20%.
- Among the 103 lighthouses identified globally, 60% include sustainability as a top priority in their use of Fourth Industrial Revolution technologies.
On a broader scale, lighthouses show how 4IR technologies can support responsible growth in three big areas:
- Environmental: Taking care of the planet and the environment, focusing on energy, water, waste, greenhouse gas emissions, and a circular economy.
- Social: Building a stronger workforce and community, with a focus on human capital development, worker input, health and safety, and labor standards.
- Governance: Establishing rules, controls, and procedures to make decisions and meet the needs of everyone involved. This includes ownership, accountability, business ethics, and how decisions are made.
How does Industry 4.0 affect the economy?
Industry 4.0 will keep making a big impact on the economy, and the companies that act quickly will benefit the most.
A study by McKinsey in 2018 found that companies leading the way in adopting advanced technologies like AI by 2025 could see a positive change of 122% in their cash flow. Companies following them might see only a 10% change, while those not using AI at all could experience a 23% decrease.
Industry 4.0 is also going to change the skills that workers need. Over the next ten years, as more companies use robotics:
- Jobs that need physical and manual skills for repetitive tasks, like on assembly lines, might decrease by almost 30%.
- Jobs requiring basic reading and math skills might decrease by almost 20%.
- Jobs needing technological skills like coding could increase by more than 50%.
- Jobs that require advanced thinking skills might go up by about 33%.
- Jobs needing high-level social and emotional skills might go up by more than 30%.
By 2025, the potential value created by Industry 4.0 for manufacturers and suppliers is expected to be around $3.7 trillion.
Which industries will mostly be affected by Industry 4.0?
The Fourth Industrial Revolution will change every industry, but some more than others. How much it changes depends on the kind of technology used, the existing setup, and the skills of the companies.
Here are three ways industries might adapt to Industry 4.0:
- Accelerated: Some technologies, like digital tools, augmented reality, and automation, are easy to adopt quickly. It doesn’t matter if a company already has advanced technology or none at all; these solutions are affordable and can be quickly put into action.
- Differential: How fast a company adopts certain technologies depends on its existing tech setup. Companies with less advanced information technology, operations technology, and data systems will take longer to switch. Companies with better tech setups can implement changes more quickly.
- Slowed or deferred: Even companies with advanced tech may be slow to adopt the newest innovations, like full automation, because they require a lot of money, and the long-term benefits are not always clear.
Industries that rely a lot on operations, like manufacturing, transportation, and retail, will see the most changes. Many tasks in these sectors are suitable for automation or digitization, and they have 1.3 times more potential for automation than other industries.
For example, in operations-intensive sectors, up to 58% of work activities could be automated with current technology. On the other hand, education is expected to change the least during Industry 4.0, with only 25% of work in the sector being suitable for automation.
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