It has been almost a decade since the term “fourth industrial revolution” was coined[1]but many people do not hear it, or understand what it means.
Also known as industry 4.0, this is a way of describing how connecting together different advanced technologies can change the way we make things.
The fourth Industrial Revolution
An example of this might be putting artificial intelligence (AI) into factory robots.
Although there is no official agreement that we are living in this new era, it is a sign of the importance that many people consider this development and its potential.
previous revolution
The previous industrial revolutions were:
- The rise of steam power in the late 18th century,
- The use of electricity to power machines in the late 19th century
- The move to digital electronics began in the 1970s
It is defined by clear milestones. But many emerging technologies can claim to be part of industry 4.0.
Smart, ‘cyber-physical’
These include virtual reality (VR) to simulate what happens on an assembly line, and 3D printing.
There are also lesser-known developments such as digital twins – virtual models that accurately represent the behavior of physical objects such as wind turbines or aircraft engines.
Any technology that is “smart” or “cyber-physical” – where the line between the digital and physical worlds is blurred – can claim to be part of the fourth industrial revolution.
But many companies seem to be slow to take advantage of these developments.
Here, we’ll show you why it might and what changes are needed to ensure that transformative technologies live up to their potential.
A stalled revolution?
The supply chain describes the entire system for producing a product, from raw materials to delivering the finished article to the consumer.
So it is useful to see the impact of industry 4.0 technology on the chain.
It is difficult to measure how much effect a particular technology has on the economy.
However, the only thing that can be done is to see what effect it has on the decision makers in the company.
One of us (Ralf Seifert) recently published a survey[2] of the several hundred senior executives who do. The survey asked executives about managing supply chains.
Disappointing hugs from 4IR
There are no top priorities listed by executives related to industry 4.0.
Headline-grabbing technologies are strongly associated with the fourth industrial revolution, such as AI and machine learning, the internet of things, robotics and 3D printing are in the third lowest priority.
A look at online trends also shows that searches for “industry 4.0” peaked in 2019, but have since declined to a lower level.
There may be several potential reasons for the disappointment of this industry 4.0 by companies.
Lack of understanding and progress
In 2020, a survey by accounting giant KPMG[3] shows that, of all the industry 4.0 technologies, only cloud computing has reached the level of implementation – although it is still not complete.
For many businesses, the benefits of other important technologies remain unclear. Service pressures and day-to-day costs are taking precedent, so it requires efforts to move away from familiar solutions.
This is consistent with the search for industry 4.0 – although the global supply chain has been disrupted by the coronavirus pandemic, the blockade of the Suez Canal shipping lanes in 2021, floods blocking rail transport and container shortages.
A KPMG report from 2020 found that less than half of business leaders have a good understanding of the term “fourth industrial revolution”.
High risk, high scrutiny
Lack of awareness is one of the obstacles to the adoption of industry 4.0 technology. Another is the need to build a business case for spending on new technology solutions.
The more ambitious the technology, the higher the risk and scrutiny. Not every company has leaders who are ready to champion and sponsor innovation in the face of uncertain or less realistic outcomes.
Industry 4.0 initiatives can also lead to resistance to change among workers. IT departments, trained for years to look to large enterprise solution providers, are hesitant to recommend custom solutions from small companies – especially for unfamiliar technologies.
One way to address this is to create resources to build a separate team tasked with identifying and prioritizing industry 4.0 capabilities. But, even then, there should be alignment with the broader business strategy of the company.
From crisis to opportunity
Unprecedented supply chain disruptions in the past two years have prompted executives to consider reconfiguring supply chains. However, more often than not, they choose to do this in a conventional way.
Reshoring (returning manufacturing to a company’s home country) and nearshoring (moving manufacturing to a country closer, rather than further away) have become popular options for companies looking to build supply chain resilience.
Industry 4.0 technology has a role to play in this transition. For example, rethinking global supply chains because of the need to reduce labor costs.
Reduce labor costs
Driverless forklifts, or automated guided vehicles (AGVs), are one example of how robotics can reduce rising costs elsewhere.
Additive manufacturing – the industry name for 3D printing – can simplify and reduce the cost of production processes that involve two or more expensive steps.
For supply chains that cross international borders, there will be additional incentives to use digital platforms to improve their ability to track inventory – a term that covers everything from raw materials to finished products – and help transport goods.
This will help companies identify unplanned disruptions faster and react appropriately.
The supply chain dysfunction that is making headlines and possibly slowing the short-term progress of industry 4.0 may be the engine that finally promises.
This article was written by ichard Markoff and Ralf Seifert and first appeared on The Conversation. Read the original article here: Why the promised fourth industrial revolution hasn’t happened yet.
Richard Markoff, Supply Chain Researcher, Institute for International Management Development (IMD) and Ralf Seifert, Professor of Operations Management, Institute for International Management Development (IMD)
Reference:
[1] Into the fourth industrial age; Acatech, Academy of Science and Engineering; 2012
[2] The supply chain agenda is constantly evolving: how are you adapting?; Ralf W. Seifert, Katrin Siebenbürger Hacki; Management Development Institute; November 2, 2022
[3] Benchmarks of the Fourth Industrial Revolution 2020; by KPMG Digital Delta and Faetm; February 2020