Early 20th century industrialist Henry Ford’s famous quote “Any customer can have a car painted any colour he wants so long as it is black” would have put his automobile business in trouble today. Cars are now built in a staggering number of variations. You can pick any colour, gear box, motor or rims of your choosing, giving the customer millions of different combinations to choose from.
We are seeing the same move towards customisation in many different industries, all while demanding the same short delivery times and low prices as for mass-produced goods. This drives the vision behind a fourth industrial revolution. The vision is a decentralised, self organising network that makes it possible to adapt and optimise production for customer value and efficiency. Inexpensive sensors and internet connection facilitates remote sensing, data sharing and maintenance. Data transmitted back influence production levels to maintain efficiency. Once the customer wants a new car, it is not only in the favourite colour, it can also be optimised to the settings of how the previous car was driven.
The first industrial revolution was started by James Watt’s steam engine, enabling mass production. The second was electrification and division of labour in the late 19th century and third started in the late 20th century with the introduction of IT.
Capitalism is ever-changing. The fourth revolution is about integrating data from sensors and machines with the physical processes in production. It is the production counterpart of the consumer’s Internet of Things, where everything from cars to dishwashers are connected to the internet. The name Industry 4.0 was launched by a German industrial initiative in 2011, with the support of Chancellor Angela Merkel. Similar visions are becoming common, such as the American Industrial Internet Consortium.
Recently, many companies are considering re-shoring. Factories return to the countries they were outsourced from, as costs of labour, transports, and quality control are rising in newly industrialised countries.
The European Commission’s wants the share of manufacturing to rise from 15 to 20 per cent of GDP by 2020. It is a 500 billion euro challenge involving at least six million new jobs. In comparison, industry’s share of GDP in the UK is currently about 10 per cent compared to 30 per cent in China, the world’s manufacturing leader. The question is if other developing countries will be able to follow China’s example in the future, particularly if global energy costs keep falling. Demands for cost efficiency, market proximity and the need to focus on core competence might stop further offshoring.
Smart factories are technically feasible today with robots, RFID-tags, QR-codes and positioning systems. At present, communication protocols used by connected devices are to expensive and complicated. Neither is the reliability of the web stable enough for getting information through. Latency matters.
Establishing Industry 4.0 would require major investments. DFKI, the German Research Center for Artificial Intelligence, estimates that just five per cent of German industry currently has smart capabilities. A simpler way is to upgrade older plants, if enough mechatronics skills are available.
Machines, tools, systems and humans are increasingly more interconnected through the internet. Physical objects are connected to their data footprint through sensors, informing other machines and logistics when a particular unit is being assembled in the production chain.
Costly interruptions can be predicted and avoided by human workers, making production resilient. Not only do fewer errors occur, but production patterns can be autonomously altered in accordance to external inputs while still retaining a high degree of efficiency.
Manufacturing companies could download the software and parameters controlling their production process to a virtualised chain of production. The same machines would, with smaller alterations, be able to produce a variety of products regardless of physical location of a particular production phase. Staff could operate from anywhere, particularly the most highly skilled personnel. Real time data in combination with historic data would enable the construction of quick prototypes through digital modelling and simulation, bringing products swiftly to market.
Many industry consortiums presently interpret Industry 4.0 as a way to make current factory plants more efficient. Smart factories are also an opportunity for strengthening small scale manufacturing, using automation as much as for quality control as to decrease labour costs. The versatility of 3d-printers in additive manufacturing has a particularly important role to play in this respect.
Digitalisation of production also poses important questions of how data should be shared and accessed, gradually improving processes and component choices. The value of all data increases as more is shared, further strengthening collaborative efforts, such as open software. But the “deluge of data” could also place pressure on the capability of present measurements methods and algorithms.
The value chain of manufacturing could be up for radical changes when it moves to system design. Higher margins will be added to design, process management and data handling, rather than production machines and specialised tools.
Decentralised production makes local and regional conditions even more important, as small variations could have a big impact on business. Likewise, the increased mobility of industry could lead to a more severe local impact if businesses decides to move out. Local and regional governments will come under increased pressure to provide good fiscal, legal and regulatory conditions. Unfortunately, it is also possible that some industries will be able to pressure local governments for increased subsidies and protective regulations.
Will Industry 4.0 be the end of work? More efficient production and automation could well lead to some companies diminishing their workforce, but even the poster boy of smart factories, the Siemens plant in Amberg Germany, still employs 1,000 workers – mainly in quality control.
The idea that “machines will take our jobs” is perhaps more a notion from the third industrial revolution, when the adoption of IT actually removed a great deal of occupations in the offices. But those jobs disappeared because they were robot-like to begin with and therefore easy to replace.
The challenge posed by the fourth industrial revolution is about how to re-invent jobs. Smaller, more specialised, companies could make full use of the new production process versatility and draw better use of their localised knowledge. Being interconnected and mobile would be a possible way to tackle complexity in production, logistics and data handling. Work will come from a multitude of companies, rather than a few hyper-efficient plants. Our biggest fear should be about not being imaginative and inventive enough.