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Industry 4.0

June 21, 2018

The Revolution Rolls On

What does the term “Industrial Revolution” bring to mind? To many of us, it is something from the distant past: water mills and mechanized looms of the 18th century or the steam engines and gritty factories of the 19th century. Though many people see the Industrial Revolution as a discrete event that took place a long time ago, it is anything but. The Industrial Revolution has continued over the centuries and accelerated with time. The major trends throughout have been adoption of technologies that increase human productivity (fewer people required to make a product) and reduce the cost of non-labor inputs (such as raw materials) and leveraging of low cost energy resources. In his book, “The Fourth Industrial Revolution,” Klaus Schwab divides the Industrial Revolution into four eras.

1. The first of these was mechanization in the 18th century, driven largely by renewable sources of energy such as hydro, wind, and biomass.

2. The second was mass production, which emerged in the late 19th century with the introduction of new methods of organizing workers and the emergence of interchangeable parts, oil, and electricity.

3. The third was the introduction of the computer and robotics to manufacturing in the 1960s, often referred to as the Digital Revolution.

4. The current fourth era is marked by the interconnection and automation of machines such that they can perform actions without the intervention of a person.[1] The fourth era was dubbed Industry 4.0 in 2011 by Henning Kagermann (CEO of SAP), Wolf-Dieter Lukas (German government official leading IT innovation efforts), and Wolfgang Wahlster (leading artificial intelligence researcher).[2]

Industry 4.0 affects all industrial activities that involve making physical products and monitoring supply chains, industrial supply chains, and infrastructure. It is a continuation of the Digital Revolution and relies on many of the advances of the last 50 years in networking and data digitization. At a high level, Industry 4.0 can be explained as the Internet of Things (IoT, which is networked devices) plus artificial intelligence (AI). However, IoT and AI independently are insufficient to improve industry. The major, interrelated trends driving Industry 4.0 and advances in industrial production include:

  • Physical — new materials (the development which increasingly leverages digital tools), improved ability to “program” organisms to produce materials and products (e.g., CRISPR), new methods of making physical objects like 3D printing, mobile phones driving better and cheaper electronics and sensors, and the emergence of embedded processors that can run AI in edge devices.
  • Digital — networking associated with IoT, advances in Deep Learning and other areas of AI, and the availability of cheap storage and processing power via the cloud.
  • Social — increasing acceptance of sensors and networked devices everywhere, changes to corporate management and operations to accommodate emerging technologies, governmental programs encouraging technologies which increase productivity and resource efficiency.

The trends above drive important changes to industrial operations and enable supply chains to emerge. These include improved data collection at all points in industrial supply chains, improved data analysis, automated decision-making, mass customization, automation of the machine shop and other areas historically run by craftspeople, an improved connection between a designer’s vision and a manufacturing output, decentralization of manufacturing, and improved resource efficiency. Essentially the “just in time” supply chains of the late 20th century are beginning to give way to automated supply chains and manufacturers that are increasingly “agile” and able to quickly change from production of one good to another in decentralized factories.

The Role of Agile Manufacturing in Industry 4.0

What generally happens when a new product becomes desirable is that a new factory is built to produce the new product. Why a new factory? This is because an older factory making an increasingly obsolete product generally cannot change to produce a new product without part or all of its manufacturing lines being torn out and rebuilt. There has historically been inherent risk in building a new manufacturing plant because consumers’ desire for a particular product can change with time. Manufacturers have sometimes experienced large losses after allocating significant capital to a new plant only to see consumers’ tastes change or consumer demand not meet expectations. Agile manufacturing, in IQT’s view, uses flexible, adaptable, and configurable methods of automated fabrication to bring products to market faster, cheaper, and more efficiently. Agile manufacturing technologies provide the ability to change production from one part or product to another in a matter of hours, days, or weeks without building a new production line or plant. Agile manufacturing reduces risk for manufacturers, reduces their capital expenditures to make a new product, and can increase their bottom line.

Technologies driving agile manufacturing include computer aided design (CAD), additive manufacturing (e.g., 3D Printing), automated subtractive manufacturing (e.g., CNC), low cost machine vision, robotics, and programmable molding/forming. These technologies enable designers to prototype a part or product and engineers to rapidly change what a particular manufacturing line makes. Prior to the industrial revolution, artisans could make a wide variety of products, though they were relatively slow and expensive because production could only scale with the number of skilled artisans available. Mass production provided low cost and scale, but flexibility was lost. Agile manufacturing should give us the best of both worlds: low cost production with a wide degree of flexibility in customizing and creating different products in one facility.

So What?

As with previous eras of the Industrial Revolution, there are likely to be significant impacts on society that are both positive and negative. Increased productivity can be valuable to all countries, particularly to those that have declining work forces such as Japan and Germany. Industry 4.0 should also improve resource efficiency and could improve overall quality of life through lower costs for goods and an improved environment.

There may be substantial impacts on the global labor force. While previous eras of the industrial revolution largely affected manual laborers in manufacturing and agriculture, the current era will impact a broader swath of the labor market. A couple of examples: automation in areas such as food preparation could reduce the need for unskilled service workers at restaurants, while the combination of the Internet of Things and artificial intelligence could reduce the need for skilled workers in jobs as diverse as maintenance, industrial inspection, and management. Experts remain divided as to whether labor markets will adapt to the changes in technology through creation of new jobs or if the emerging technologies will create structural unemployment. Regardless of which occurs, there is likely to be some backlash against rapid changes to labor markets. Historic examples of these include the Luddite rebellions focused on textile companies with mechanized looms in early-19th century England and the Swing Riots focused on agricultural threshing technology in mid-19th century England.

Continued increase in the networking of supply chains, industrial operations, and infrastructure will provide an ever growing attack surface for hackers. The 2016 distributed denial of service attack in the United States, which used large numbers of networked devices like cameras and DVRs, is an example of how the Internet of Things can be used for nefarious purposes. There is also potential for IoT to be exploited for industrial espionage and for increased monitoring and control of people by the state.

If history is any guide, the fourth wave of the Industrial Revolution will probably be a net positive. To date, the Industrial Revolution and related advances across other parts of the economy have resulted in the lowest poverty and highest standard of living in human history.[3] As long as markets and governments continue to adapt to technological change, there is a good chance of continued improvements in standards of living and quality of life.

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[1] Schwab, The Fourth Industrial Revolution, (Crown Business Publishing, New York), 2016, pp 1–8. Originally published by the World Economic Forum, Geneva, Switzerland in 2016.

[2] Kagermann, Lukas, and Walster, “Inustry 4.0: with the Internet of Things on the Way to the 4th Industrial Revolution,” VDI Nachrichten, April 1, 2011, Translated from German by Google.

[3] Fisher, “Why the present day could be the best time to be alive,” BBC Future, September 28, 2016,

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