Saturday, May 26, 2018

Bilateral effect of "Industry 4.0" on low labor cost countries

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The Industrial Revolution was the transition from hand production methods to machines, chemical manufacturing, iron production processes, use of steam power, use of machine tools and modern factory system.

The first industrial revolution took place in 18th century (1760-1840) when our ancestors used steam in machines that mechanized some of the works. The second took place between 1870 and 1914 when industries expanded with the discovery of electricity, motor, manufacturing assembly line and the birth of mass production.

The third industrial revolution started in the 1980s after the discovery of computers and gradual automation, when machine learning programming started to integrate robots and machines began to replace human workers on those assembly lines.

Now Industry 4.0, in which robotics connected remotely to computer systems equipped with machine learning algorithms that can learn and control the robotics with very little input from human operators. This called Industrial revolution four or "Industry 4.0"or "smart factory" where cyber-physical systems monitor the physical processes of the factory. Industry 4.0 is based on internet of things (IoT) for an evolution in the supply chain and production line that brings a much higher level of both cost efficiencies and better quality goods or services.

These extremely flexible value networks will require new forms of collaboration between companies, both nationally and globally.


Security: Perhaps the most challenging of implementing Industry 4.0 techniques is the IT security risk. Capital: Such transformation will require a huge investment in a new technology that doesn't sound cheap. Such transformation will require a huge capital, which makes difficulties for smaller businesses to sustain in market.

Employment: It is safe to say that workers will need to acquire an all-new set of skills and different forms of education must be required; on the other hand less manpower is required to operate industries.

Privacy: This is a big concern for customers as well as producers. To the customer, this might look like a threat to his privacy. Small or large companies who haven't shared their data in the past will have to work their way to a more transparent environment.

The following are some of the important changes that will affect the demographics of employment:Data-driven quality control: Since Industry 4.0 will rely on big data for Quality Control, the need for quality control workers will decrease. On the other side, the demand for big data scientists will increase.

Robot-assisted production: The entire basis of the new industry relies of the smart devices being able to interact with the surrounding environment. This means that workers who assist in production will be laid off and be replaced with smart devices equipped with cameras, sensors, and actuators that are able to identify the product and then deliver the necessary changes for it. Consequently, the demand for such workers will drop and will be replaced with "robot coordinators".

Self-driving logistics: One of the most important focuses of optimization is transportation. However, with self-driven vehicles, and with the assistance of big data, so many drivers will be laid off. In addition, having self-driven vehicles allows for restriction-free working hours and higher utility.

Production line simulation: While the need for optimization for transportation declines, the need for industrial engineers to simulate productions lines will increase. Having the technology to simulate production lines before establishment will open up jobs for mechanical engineers specializing in the industrial field.

Predictive maintenance: Having smart devices will allow manufacturers to predict failures. Smart machines will be able to also independently maintain themselves which will replace more technically informed ones.Machines as a service: The new industry will also allow manufactures to sell a machine as a service such as a robot will serve food in state of waiters.

It's not worth billions... it's worth trillions!
Accenture released a report in January 2015 which concluded that an industrial-scale version of the Internet of Things, or Industry 4.0, could add $14.2 trillion to the world economy over the next 15 years and the UK alone could benefit by up to $531 billion.

Governments and private sectors of countries with high labor costs (e.g., EU countries and the U.S.) invest in Industry 4.0 to increase their industrial sector, which has been taken over by low labor cost countries; and on the other hand, low labor costs industries and their governments (e.g., China, India, Bangladesh and Cambodia) react to this trend by also investing in Industry 4.0.

HSRC forecasts that the market will undergo a major transformation in 2018-2023.Fast growing market, expected to reach $1 trillion by the early 2030s. Governments and the private sector of high labor costs economies invest in Industry 4.0 to increase their industrial base taken by low labor cost countries. With a highly fragmented Industry 4.0 market:

By industries: Aerospace I4.0 , Defense I4.0, Agriculture I4.0, Food I4.0, Automotive I4.0, Chemical I4.0, Electronic Hardware I4.0, Energy-Power I4.0, Oil & Gas I4.0, Machine Industry I4.0, Pharmaceutical I4.0, Biotechnology I4.0, Semiconductors I4.0,Garments I4.0 etc.

By revenue sources: Product Sales, System Installation, Integration & Commissioning, Aftersales Maintenance, Upgrades & Spare Parts, Consulting, Planning & Training.

By countries: U.S., Canada, Mexico, Brazil, Rest of LATAM, UK, Germany, France, Italy, Spain, Scandinavia, Rest of Europe, Turkey, Israel, GCC, South Africa, Rest of MEA, India, China, Japan, South Korea, Rest of APAC

Germany kicked things off: A German government memo released way back in 2013 was one of the first times that 'Industrie 4.0' was mentioned. The high-tech strategy document outlined a plan to almost fully computerize the manufacturing industry without the need for human involvement. Angela Merkel, German chancellor, spoke glowingly of the concept as recently as January 2015 at the World Economic Forum in Davos, and called 'Industrie 4.0' the way that we "deal quickly with the fusion of the online world and the world of industrial production."

In the United States there is the Smart Manufacturing Leadership Coalition (SMLC). It is a non-profit organization made up of manufacturers, suppliers, technology firms, government agencies, universities and laboratories that all have the common goal of advancing the way of thinking behind Industry 4.0.

The question, then, is not if Industry 4.0 is coming, but it is that how quickly it is taking place. As with big data and other business trends, I suspect that the early adopters will be rewarded for their courage jumping into this new technology, and those who avoid change risk becoming irrelevant and left behind. To maintain their industrial base and create new jobs, governments across the globe invest billions of dollars in Industry 4.0 projects and R&D, and provide subsidies and tax incentives for Industry 4.0 investors.

The writer - a M.Sc. in petroleum and B.Sc. mechanical engineering - is currently working as a Deputy General Manager at MJLBL

----Md Shahin Alom

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