4IR: Industry 4.0 — Are you ready?
A journal synopsis from a study by Slusarczyk B. (Polish Journal of Management Studies, 2018)
The 4th Industrial Revolution
With rapidly increasing technological advancements, it gave rise to rapid expansion of industrial revolutions and innovations. Slusarczyk (2018) study provided a conceptual note of the 4th industrial revolution specifically on its differences from previous revolutions, presented the brief historical perspective of industrial revolutions, highlighted its key features, and discussed the attitude and readiness in adopting and implementing the elements. All these revolve around the concept of how enterprises from major world economies view the latest industry processes, their willingness and openness to adopt new investments following this new trend, and exploration of practical aspects of their perceptions and the possibilities on application in their respective enterprises. In Slusarczyk (2018) study, the 4th industrial revolution is coined as Industry 4.0 under the perspective of the framework of exchange of information between people, between people and objects, and between objects themselves. The research data used in the paper was based on secondary data from other professional reports and studies.
Literature reviews
Slusarczyk (2018) gathered a wide range of literatures and references defining Industry 4.0. The use of the term Industry 4.0 started during 2011 at Hanover Trade fair to promote the idea of German Industry`s competitiveness (Muller et al., 2018; Rao and Prasad, 2018). Later on, the concept was adopted by German government as an integral part of their strategy. The concept was then concurrently appearing throughout European countries, USA, and Far East Nations such as China and Japan.
There are different terminologies being used in the concept of this phenomenon such as, but not limited to:
Industrial Internet,
Smart Industry,
Smart Manufacturing,
Industry of the future,
4IR (Fourth Industrial Revolution),
Production of the Future,
and Intelligent Manufacturing
There are a number of definitions available across industries and are great references to understand how industries perceive the concept of Industry 4.0. One definition is from Lasi et al. (2014), which describes Industry 4.0 as:
“the increasing digitization and automation of the manufacturing environment, as well as the creation of digital value chains to enable communication between products, their environment and business partners.”
Apart from scholarly definitions, Slusarczyk (2018) study collected several practical descriptions depicting how manufacturers view the Industry 4.0 concept — in their own words. Some examples are:
· “Not just about tech but how you join up the tech to work better — more productive, efficient, more insights and information”
· “Real time data availability and information”
· “Connecting up buckets of work areas — information flow”
· “Managing data and systems to improve competitive edge”
· “Next step in optimization and efficiency”
Slusarczyk (2018) study also provided a clear contrast between the four industrial revolutions happened across centuries which brought technological breakthroughs. The first industrial revolution happened in England in 18th century through use of water and steam energy (Lu, 2017). The second industrial revolution took place in 19th century in Europe and USA and cited that the revolution was
“characterized by mass production and replacement of steam with chemical and energy and electricity.”
This revolution also saw the number of developments on management processes in manufacturing facilities as well as division of labor contributing to increased productivity (Zezulka et al., 2016). The third industrial revolution happened in 1960s when advances and electronics and computers created automation and programs to allow systems to function in greater efficiencies which eventually led to optimized production and processes (Muller et al., 2018).
Key Features of Industry 4.0
Slusarczyk (2018) cited several scholarly studies that highlights the key features and characteristics of Industry 4.0. Examples and among them are:
· “Digitization, optimization and personalization of production; automation and adaptation; human-machine interaction (HMI); Value added services as well as automated data exchange and communication” (Roblek et al., 2016; Posada et al., 2015; Kovcs and Kot, 2017; Veselovsky at al, 2018; Abbas, 2018)
· “Industry 4.0 makes use of technologies as the Internet of Things (IoT) and services (IoS), Cyber Physical Systems (CPS), industrial automation, continuous connectivity and information, cybersecurity, intelligent robotics, PLM, semantic technologies, industrial big data and computational vision to improve the productivity of manufacturing and industrial systems” (Baena at al., 2017; Posada et al., 2015; Dallasega et al., 2018; Rao and Prasad, 2018)
How companies view the importance of Industry 4.0?
Majority of the surveyed companies perceived the importance of Industry 4.0. 80% of the respondents expressed that the Industry 4.0 is important, while only 20% of the respondents viewed it as not as important and is not affecting their operations so far. (2017 Global Industrial Survey…,p.21).
Is Industry 4.0 an opportunity or a risk?
A study conducted by McKinsey Digital (2016) in enterprises in United States, Germany, and Japan shows high percentage of opinions treating Industry 4.0 as an opportunity. Over 90% of respondents in USA and Germany expressed that they see it as opportunity while only 78% of respondents in Japan see it as opportunity, too (but majority of them recognize positivity in this regard).
What is the level of preparation to apply Industry 4.0?
On the same study conducted by McKinsey Digital (2016) with enterprises in United States, Germany, and Japan shows that about 70% of companies in United States and Germany expressed high level of preparation — as well-prepared to implement the solutions of Industry 4.0. Whereas only 36% of respondents from Japan expressed high level of preparedness. The varied responses can also be attributed to the level of technological developments of each country.
What are the enterprise readiness and challenges in the implementation of Industry 4.0?
Slusarczyk (2018) study presented several data points outlining organizations readiness towards implementation. There are some countries who are already implementing and started incorporating Industry 4.0 in the system. Germany and Poland are leading in software integration and predictive maintenance. In the use of autonomous robots, Germany is leading with 50% implementation (planned implementation). United States, however, has been seen to incorporate the system implementation in various degrees in software, predictive maintenance, and robotics.
Slusarczyk (2018) added the level of readiness of the organizations by gaining benefits from Industry 4.0. Only 20% of the respondents expressed strong understanding how Industry 4.0 will change their workforce and organizational structure and a similar percentage of respondents showed strong understanding of how these technologies will change the system of delivering goods and services.
While the implementation of Industry 4.0 would apparently require capital expenditure, there are several issues influencing the organizations to invest. 36% of the organizations believed that the new technologies could serve as a foundation of their new business model. This has shown the largest impact to consider for investment while the least factor and determinant is that organizations see return of investments in a long-term.
Slusarczyk(2018) also cited several expectations by organizations on impact to cost reduction. It varies across industries but entities from Forest, Paper, & Packaging sectors have the highest expectation on cost reduction while Transport and Logistics gained the lowest one.
On competitiveness standpoint, more than 50% of the enterprises from Germany, USA, and Japan are optimistic that Industry 4.0 will improve their organization`s competitiveness. On same countries, more than 80% of the enterprises see that Industry 4.0 will positively impact their operational effectiveness and more than 70% of the respondents are positive that it will positively impact their business model.
In a global scale, 50% of the respondents foresee that the lack of digital culture and training will be the major challenge to face. Organizations also see lack of clear digital vision/support or drive from top management, unclear economic benefit from digital investments, and high requirement on financial investments as the next important challenges organizations will face which gained 36%-40% share in the survey.
Lastly, one of the most important barriers in the implementation of Industry 4.0 is the shortage of qualified staff in IT differently perceived by various entities with implementations on different stages. Among the industries which already had full Industry 4.0 implementation, 86% of them expressed shortage of staff especially in Sales and Marketing, while globally at 52%. Significant shortages are also reported from engineering, operations, general management and manufacturing.
Conclusions
Slusarczyk (2018) cited that even there is a huge technological advancement from Industry 4.0, the concept still poses a huge challenge for organizations in terms of implementations as it will apparently change the system design, processes, and operations. The concept will also require businesses to create new business models. However, majority of the respondents recognize that Industry 4.0 is a great opportunity and will impact to improvement of organizations competitiveness.
As recommendations, Slusarczyk (2018) proposed the need to conduct uniform research across entrepreneurs related to the implementation of Industry 4.0 across small and medium enterprises as it constitutes a fundamental part of the overall enterprise by assessing readiness related to availability of sufficient funds to invest in the new technologies.
References:
Slusarczyk, B., 2018. Industry 4.0 — Are we ready?, Polish Journal of Management Studies, 2018 Vol. 17 №1.
2017 Global Industrial Survey, Leadership in the Industrial Landscape, Stanton Chase, (available at: https://www.stantonchase.com/wp-content/uploads/2017/04/2017-Global-Industrial-Survey.pdf; Access on: 30 Jan 2021)
Industry 4.0 after the initial hype. Where manufacturers are finding value and how they can best capture it, 2016 Mckinsey Digital.
