Industrialization 4.0: A Disruption Like Never Before

The global business is sailing through the fourth wave of the industrial revolution, countries are aspiring to build resilient economies for industry 4.0.

New industries are increasingly striving to make smart production units and capitalize on digital transformation to deliver real-time decision-making. Manufacturers are seeking to integrate emerging technologies like the Internet of Things (IoT), Artificial Intelligence, cloud computing, and analytics throughout their production operations. The Previous Industrial revolution has been a phenomenal branch throughout the history of modernization and progress. Unsurprisingly, Europe has always successfully led the industrial revolution. In 2011, the term Industrie 4.0 was coined in Germany and continued to remain in almost every industry-related conference.

Is the change really revolutionary or is it just another hype?

Production is Always the Key

Although there is no exact date available, there is a consensus that the first wave of the industrial revolution commenced in Britain during the mid-eighteenth century. Stream engines were used in fabric looms- the output grew manifold to mark the initial traces of the industrial revolution. There was a conspicuous boom in domestic trade and exports bulged as Britain enjoyed the benefits of mechanized production. Dropping custom duties and integrating steam engines for transportation started to initiate global trade. 

As the mechanization of production spread across the world the second industrial revolution focused on mass production. Electrical energy used in assembly line production during the mid 1870s for a slaughterhouse in Ohio and Cincinnati marked the beginning of the second industrial revolution. 

Spitfire manufacture. WWII World War 2 Castle Bromwich Aeroplane Factory, Birmingham 1940-46. Manufacturers: Vickers Armstrong

Later in 1969, the first programmable logic controller was invented unleashing the development of Information Technology. The production process was automated to simplify the process and minimize errors through computer programs. 

Alvin Toffler, a futurist back in the 1970s  coined the term ‘Future Shock’ that describes the emerging technologies which could potentially change our lives, work, and business. Additionally, he believed that the 20th century’s technology development is changing faster than people. 

All three strains of the industrial revolution have production taking the center stage for development. From mechanization, mass production, and automation the fourth was not very different. The focus is on production technologies that have emerged to optimize the process through data and cloud computing. There is flexibility in the movement of goods connected via the internet or network application. Data serves as oil to enable business decision-making in production and leapfrog to become the industry leader. An integrated system as output creates a complete value chain that is more customer-driven is becoming more popular. For example, 3-D printed products offer wide customization that aggregates more value. Similarly, data and feedback from customers through cloud computing allow manufacturers to immediately alter products.

The advancement in sensor technology has accelerated the growth in manufacturing through vertical integration using cyber-physical production systems to respond to change in demand. 

Without overrating every technology emerging in the market, innovations that alter production are truly disruptive. Blending technology in the product life cycle from manufacturing to sales that engineers value chain is another important result of smart factories. 

Shifting away from mass production and digitization, the coming decades are focused on customized production with end-to-end solutions leveraging technology and data. 

India and Industries 4.0

Leveraging the technology to systematically enhance production has enabled the  growth of the IT sector in India. The shift to human-machine interaction for manufacturing products by integrating IoT to collect the required data is an ideal implication of industry 4.0.

Growing at 7 percent on a Year-on-Year basis the industry is set to reach 350 billion USD by 2025. Despite the digital India initiative, there are two important reasons to pay more attention to this era of cyber production. One, the exponential growth in technology has been observed. It took 200 years for the first three industrial revolutions but the fourth one took less than 50 years. The globalization factor triggered the process of innovation and countries with better strategies emerged as leaders. 

Second, for India setting global footprints in IT services and expanding the digital economy is a good piece of news. However, missing the third wave of the industrial revolution has put India in the backseat despite having abundant labourers. 

India is the sixth-largest manufacturing country, the government has envisioned increasing the growth in manufacturing to 25 percent from the current 17 percent. 

Technology infusion in manufacturing is the only way to expand production with minimum cost. Despite several initiatives to increase ease of doing business and other digitalization, the Return on Investment (ROI) for many companies has been low. According to a report by Mckinsey in 2018, 700 out of 1000 manufacturers were making returns less than the cost of capital. India’s top value chains have the potential of adding $300 billion by letting them scale up and provide access to capital. 

As an emerging economy with low-cost labour and a roadmap for building momentum for technology in the manufacturing sector, India has the onus to act fast and reassess the strategy. Although the robot density (robots per 10,000 employees) is low at 3 as compared to the global average of 74, the IoT market seems more promising. 

More than 7200 startups were founded in the last few years and most of them are working in the areas of deep tech and data analytics. The recent KPMG survey on industry innovation,2019 reported that even large companies are investing only $0-$9.9 billion. Smaller companies have multiple constraints on innovation investment thus are skeptical to adopt investment in technology. 

The five key technologies that will influence the business in the coming decade can be divided into Manufacturing process technology and manufacturing information technology. Under the former, additive manufacturing such as 3-D printing and robotics & automation that combine systems of machines and information technology are utilized to optimize production. Agile product development, digital manufacturing, and flexible automation are influential manufacturing process technology.  

A million-dollar question is if India is ready to capitalize on the technology revolution?

 India’s AI investment has the potential to add 15 percent of the current gross value by 2035. There is a common opinion that companies have to disrupt to not get disrupted.  Thus, a strategy should not be limited to building a resilient economy but move to spearhead innovation. Despite having a talented resource pool, investment in AI architecture, India is trailing behind among the G20 nations. 

The stakes are explicitly high for developing countries as compared to European economies that have succeeded in the past technology revolutions. Scalability,  skill development, and conducive policy seem to be the three pillars to building a technology-intensive ecosystem. 

COVID-19 managed to deplete the marginal growth trajectory of India’s manufacturing. India has around 6.3 crore Medium and Small Scale Enterprises that contribute to 45 percent of the manufacturing output and 40 percent of exports.  There are several bottlenecks for these manufacturing units to counter the technology disruption. Despite creating 70 million employment, this sector remained fragile during the times of lockdown.  30 percent of the MSMEs have ventured into e-commerce post the restriction of movement during COVID lockdown. 

Moving forward the focus has to be on providing affordable technology for small businesses, training, and development to transform the business to fully achieve digital manufacturing for production optimization. 

The disruptive technology is here to remain and the recent pandemic has only exacerbated the need for ‘smart production’ to sustain the global competition. 

Indian businesses adopting technology-based manufacturing are more likely to grow by providing immense value to the global business.

Manjari Balu
Economics enthusiast and a coffee lover aspiring to build a network of like minded thinkers across the world.