Industry 4.0 or the fourth industrial revolution mainly refers to the major changes impacting the manufacturing industry, supply chain and logistics. Many refer to Industry 4.0 as the evolution of a ‘smart factory’. However Industry 4.0 has far reaching impacts across many sectors from healthcare to retail. Industry 4.0 is driven by the convergence of cyber and physical, advanced robotics, big data and analytics, cloud, mobile devices, machine and deep learning, and most critically internet of things (IoT).
In this article we take a five year medium term view on how Industry 4.0 driven by IoT will impact businesses. These impacts matter because as competitors increasingly adopt these technologies and build competitive advantage, businesses need to consider these impacts and what they need to do to stay competitive.
Here we examine the 5 biggest impacts:
Decreased need for human labour but also a requirement for a different skill set Real time information and improved decision making Improved quality and increased innovation spending Ability to understand and deliver what customers actually want Customisation and on demand manufacturing
Decreased need for human labour but also a requirement for a different skill set
Manufacturing plants with processes that are mature, standardised and streamlined are able to codify the physical process and automate the majority of tasks with advanced data, analytics and connected devices.
Increasingly, people will not be required to perform most tasks. Boston Consulting Group predicts robotics will replace 25% of jobs in manufacturing by 2025.*
A workforce with vastly different set of skills is also required. We will move away from blue collar physical labour to increasingly people orientated and technical roles. The World Economic Forum lists the top ten skills required for Industry 4.0 in 2020 as: complex problem solving, critical thinking, creativity, people management, coordinating with others, emotional intelligence, judgement and decision making, service orientation, negotiation, and cognitive flexibility.*
Additionally, technical workers who understand how to design, imbed and program chips, and monitor and optimise connected machinery and parts will be sought after.
Real time information and improved decision making
Manufacturing companies are able to move beyond predicting to now being able to know exactly when stock levels are low, machinery is about to break down, or there is a change in demand. Production cycles can then be matched with real time information coming in. This would imply horizontal integration with customers and suppliers. If business were able to horizontally integrate they could optimise across the entire value chain from inbound logistics, warehousing, production, marketing, sales, and outbound logistics, which also presents opportunities for businesses to imbed themselves in customer’s operations such as supply chains and lock customers into their ecosystem.
Improved quality and increased innovation spending
Automation will increase standardisation in process and procedure and therefore reduce variability and faults in products. Businesses can focus on improving and innovating their products rather than setting aside significant budgets to repair faulty items. In the U.S. alone companies (automotive and aerospace making up the biggest proportion) spend in total more than $26 billion dollars on warranty claims each year.*
Ability to understand and deliver what customers actually want
Our ability to gather information about our customers improve. Manufacturing industries who work closely with their customers have the ability to gain real time behavioural insights, and tailor products and services in real time. Affordable and readily available technology such as GPS trackers and wearables can feed back data to manufacturers.
Customisation and on demand manufacturing
On-location mini factories are increasingly becoming a reality as 3D printing reaches a price inflection point. We have already seen what 3D printing can do for fashion retail and parts manufacture in space. Increasingly, 3D printers will be able to handle a wider range of raw material inputs, and be cheaper to acquire and operate, and faster to print. This will drive down logistics costs and time for products to reach customers. As more businesses turn to e-commerce models, a simple click and buy action performed on the businesses website can signal to the 3D printing pipeline to start making this product. This results in savings for business as there is no inventory of unsold products. The customer is also able to obtain their products faster compared to mass production models where factories are usually located very far from the customer base. The customer is also more likely to find a product that fits their needs compared to the mass production model.
It’s a good time to think about what these impacts mean for you and what you should be doing about it now.
Eitan Bienstock is an entrepreneur, an active voice in the innovation ecosystem and the founder & CEO of Everything IoT .