Every January, the picturesque Swiss ski resort of Davos hosts the annual meeting of the World Economic Forum (WEF). The world’s great and good (and questionable) attend the five-day event to debate some of the most pressing issues facing humankind today.
It’s telling, then, that in each of the past two years, one of the key issues discussed was the so-called Fourth Industrial Revolution. Indeed, Klaus Schwab, chairman and founder of the WEF, told last year’s assembled masses that “of the myriad challenges the world faces today, perhaps the most overwhelming is how to shape the Fourth Industrial Revolution.”
The Fourth Industrial Revolution, also given the slightly catchier monikers of 4IR, Industry 4.0 and Digital Factory, has been touted as the ‘next big thing’ for some time now. “Its potential, plus the funky title, have made Industry 4.0 the most talked-about global programme in manufacturing for the past five years or so,” says Brian Holliday, managing director of digital factory at Siemens.
However, while the rest of the world – most notably Germany – have stopped talking and are getting on with it (see Bosch case study on page XX), poor old Blighty runs the real risk of being left behind. An EEF study (tinyurl.com/jdxq6sr) found that only 14% of manufacturers feel that the UK is in a position to lead the world when it comes to Industry 4.0, and even fewer – just 11% – think the sector is sufficiently geared up to take advantage of it. Maybe, then, it’s time to take heed of Mr Schwab’s advice and start looking at the benefits Industry 4.0 can bring.
So, what is Industry 4.0?
Different to the three industrial revolutions that came before it, which were based on advances in technology, Industry 4.0 connects people and machines. “It’s the concept of a fully connected network of products, machines, people, business systems, the supply chain and the customer to enable a more autonomous, flexible and local manufacturing environment, ultimately making industry more competitive and customers getting improved service,” says Steve Brambley, director of Gambica, the automation trade association.
If this all sounds daunting, says Dr Michael Ward, CTO of the University of Strathclyde’s Advanced Forming Research Centre (AFRC), think about Industry 4.0 as more of what you’re already doing: “There is no one thing in the industry 4.0 landscape that is new or unique,” he says. “Aspirations like batch size of one, flexibility and configurability, mass customisation, etc. have been around for a long time (and have in some cases come to fruition – for example car configurators). The thing that is interesting about Industry 4.0 is the coming-together of technologies such as digital communication, the IoT, additive manufacturing and advanced sensing technology. The potential in bringing these and other developing technologies is to create ways of running manufacturing businesses which could be radical and new. This coming-together of technology creates the potential to turn the aspiration into reality – not just for giant companies like automotive OEMs but on a broad scale.”
Will it benefit me?
First and foremost, Industry 4.0 will help grow manufacturers’ profits, says Peter Colman, a partner at pricing strategists Simon-Kucher & Co: “Many of the opportunities posed by Industry 4.0 have clear internal benefits, such as efficiencies and cost reduction. What is more interesting and often under-appreciated is that from a profit improvement perspective these dramatically change the value equation between a manufacturer and its customers. This opens up possibilities to create new and premium offerings with significantly higher prices, better margins and the potential to introduce innovative revenue models.
“It is vital to invest time, ideally early in the offer development process, to craft a robust pricing strategy that fully appreciates factors such as value delivered, customer willingness to pay, cost-to-serve and operational/contractual risks. In other words, most manufacturers don’t realise they should and could be charging considerably more for their innovations in this area.”
The benefits are wider than just economic, however. The stereotypical view of the ‘factory of the future’ is a high-tech one of virtual reality and digital precision. However, as the AFRC’s Ward says, Industry 4.0 still has a role to play in traditional manufacturing processes. “If you think about ‘traditional’ manufacturing, prior to any industrial revolution, whereby people actually crafted individual products and items, it required a very high level of skill and creativity,” he remarks. “As you go through the first three industrial revolutions, you get into much more of a system of standardised work – something that on the surface is more aligned to a large, modern factory. In a way, Industry 4.0 is allowing smaller manufacturers to go back to that pre-industrial time, where it was more of a craft, while using 21st century technology to back it up.” Textile manufacturer Carrington (see case study on page XXX) are one such company that have embraced Industry 4.0 to deliver a bespoke service to their customers.
“At a national level, Industry 4.0 implementation can bring growth, jobs and increased skills to a region,” adds Gambica’s Brambley. “A more autonomous and self-organising system allows for more flexibility in employee working patterns. With various societal shifts from an ageing population to childcare requirements and part-time working, this system could enable truly flexible working patterns to suit individuals and employers. Picture a system where employees plan their availability and the smart factory then schedules production, maintenance, logistics and ordering around that in real-time. Using modern devices, wearables and autonomous systems, production planning can be scheduled around the skills available, customer demand and component availability.”
Professor Birgit Vogel-Heuser of the Institute of Automation and Information Systems at the Technical University of Munich illustrates this point: “For example, a manufacturer and a construction contractor can share data about construction machinery, about how often a given piece of equipment is used, which routes it travels and so on. When I see a piece of equipment has failed, I can quickly find out where I can buy or borrow a replacement or a spare part. This may even be from a competitor, if I happen to know he doesn't need his bulldozer right now. I give him a little money for it, and then we both profit from the situation. This is what's really new: extending horizons beyond company boundaries.”
Implementation
For management, the benefits of Industry 4.0 are obvious. The challenge, however, is to find ways to implement it in the factory. Scott Sinclair, managing director of the Centre for Engineering Education & Development (CeeD), says that many of the techniques can be drawn from previous experience with lean manufacturing. “Similar to lean, Industry 4.0 is not simply for our operations functions, but rather has to be looked at as business process re-engineering,” he explains. “We must ensure that we do not lose sight of the goals of step-change improvement in our productivity and in our ease of doing business.”
Of course, says Neil Pickering, Industry and Insights Manager at Kronos, like any process change, having the rest of the team on board is vital. "It’s no use investing in technology if your workforce are not prepared to use it. The focus of such investment should be in technologies that support employee engagement and job satisfaction. By concentrating on this, manufacturers will be able to attract and retain skilled people that understand the new technology, and are able to pass on this knowledge. If manufacturers concentrate on their workforce, as much as they concentrate on automation, machines and technology, then they’re going to be at the top of their game."
Battling the skills shortage
It’s no secret that the UK, and the wider world, is facing a skills shortage, across all sectors. The rise of digital technologies is only adding to this skills pressure. Over 80% of UK CEOs are worried about how to get hold of key skills, according to a PwC report (tinyurl.com/zntok5w). On top of that, 83% of respondents said they valued digital skills (basic computer/internet literacy), above the 79% global average. However, two-thirds of CEO say it is tricky to recruit those skills. By contrast, Chinese CEOs find it much easier: under a quarter said the digital skill needed was hard to find. And this is only going to get worse.
“The real challenge will come with getting the necessary digital expertise into the factory,” warns the AFRC’s Ward. “The manufacturing industry as a whole will be competing for those skills with other industries. Digital skills are inherently transferrable. The challenge for manufacturers is to grasp those people early on and get them interested in applying their creativity to our sector.”
“The UK has a peculiar set of circumstances whereby it has chronically under-invested in industrial and digital technologies compared to some of our neighbours,” adds Siemens’ Holliday. “Productivity has long been a problem, as has a lack of investment in plant and equipment, but despite that we are still making great progress on innovation. The government may argue that they have stimulated that innovation through funding for universities and schemes like the Catapult sites. What comes next, however, is a collaboration between government and industry, learning from what we have already done and what others are doing in order to make the huge next step into the full Fourth Industrial Revolution.” Holliday and Juergen Maier, Siemens UK managing director, are collaborating with government on a review of the UK’s digitalisation capabilities, more about which will follow in these pages over the coming months. The fact that government have woken up to the fact that digitalisation is happening is vital in pushing it forward through manufacturing and beyond.
Time for revolution?
It has been easy to dismiss Industry 4.0 as an expensive, unnecessary irrelevance. However, Ward is adamant that it is a force for good, and can benefit the UK as a whole: “A revolution starts when the whole proposition of undertaking a task becomes simplified,” he says. “I’m not concerned about the fact that some of the software out there is inaccessible – the revolution won’t be built on that. It’ll be built on the solutions that are readily accessible to everyone. And it’s within those solutions that Industry 4.0 is particularly interesting on a UK level.
“When you start off as a budding engineer, you will have some basic ideas about what being an engineer entails. You’ll think they are always designing new things, and coming up with the next ground-breaking products. The reality, though, is that you spend so much time sorting out the ‘drudgery’ that there’s no time left for any innovation. I have an optimistic view for Industry 4.0’s impact on the industry – manufacturing can once more become the creative industry that it used to be. The UK is an ideas-driven, highly skilled nation of engineers and manufacturers, and the Fourth Industrial Revolution will help us find our roots again.”
The UK led the world with the first industrial revolution. With a bit of cooperation, and some clever thinking, we can position ourselves at the front of the fourth one.
