The world is on the cusp of another industrial revolution, and it’s about time.
The fourth industrial revolution (4IR) will combine technologies and techniques that will change the way products and services are produced, and according to a recent government commissioned review on industrial digitalisation, the UK may be able to create 175,000 new manufacturing jobs and generate an extra £455bn if the UK takes full advantage of 4IR.
Our global economy has been in decline for the past 50 years and, if it were to continue, within the next decade we would need to get used to a world with no growth.
Fortunately, history has a habit of repeating itself, and if we look back at times of substantial growth, it’s always been fuelled by manufacturing revolutions. This occurs around every 50-60 years, the first occasion being in the middle of the 19th century with the invention of the steam engine. With credit to Henry Ford, this was followed by the mass-production model at the beginning of the 20th century. We’re currently in the final phases of the third revolution that started in the 1970s and brought us automation.
What did each of these have in common? Well, to create this huge growth in our economies you need one of three things; more labour, more capital or more productivity. On each occasion it’s been productivity that has fuelled the growth, and 4IR is no different. To quote the well-used adage, 4IR will provide us with ways in which we “Work smarter, not Harder”.
But what will 4IR look like in real terms? 4IR isn’t a new distinct system or process, it brings together several existing digital industrial technologies that include:
The benefits of 4IR technology adoption for manufacturing will be widespread, with smarter supply chains, smarter production and smarter products. The merging of information technology (IT) with operational technology (OT) provides the potential for automation that could facilitate massive process improvements and productivity. The resulting innovation could eventually lead to the development of radical new business models and ultimately, alternative revenue sources, all of which have their foundations in information and services. Not only will manufacturing become more productive, it will also become more flexible.
Manufacturing is already using many of the 4IR building blocks, but these still require human intervention between the various stages. 4IR brings these blocks together and removes the human element.
Due to setup and changeover times, manufacturers typically build orders in batches.If these setup and changeover times could be removed, or greatly reduced, then orders can be manufactured on demand and in smaller quantities. 3D printing is one area where this is being adopted, but it is not just plastics that can use the concept, entire buildings can now be manufactured using this technique.
The online supermarket Ocado has developed a fully automated warehouse where hundreds of robots move around picking groceries for its customers. It takes the robots five minutes to pick an average 50-item order. Currently the orders are delivered to the customers by van but imagine if they could be delivered by a driverless van or drone!
The 4IR journey should start with optimising existing business processes. Manufacturers need to prioritise smarter supply chains and embedding smarter production processes into the business. Blockchain technology will securely and transparently track all types of transactions. Every time a product changes hands, the transaction is documented, creating a permanent history of a product, from manufacture to sale. This could dramatically reduce time delays, costs and human error that plague transactions today.
But there are some larger implications. It could create a huge macroeconomic shift. Factories will be smaller, more agile and relocated into our home markets. Scale won’t matter anymore, flexibility will be the key. Factories will be operating on a multi-product, made-to-order basis. In the world of scale customisation, consumer proximity will be the new norm.
This won’t be just a UK phenomenon, it’s a global shift, which offers opportunities for UK manufacturers as global supply chains become joined up more effectively. But this global shift also presents a risk if UK manufacturers fail to keep pace. Manufacturers currently feel UK industry isn’t geared up for the change. Some businesses will need to completely rethink their manufacturing processes and possibly their target markets.
Globalisation will enter a new era. The East-to-West trade flows will be replaced by regional trade flows. East for East, West for West. The new model, producing right next to the consumer market, will be much cleaner and better for our environment. In mature economies, manufacturing will return home, creating more employment, productivity and growth.
There are also steps manufacturers must take to prepare their business to ensure any transition towards 4IR is a success. This goes beyond the technology and requires visionary thinking. There’ll be less certainty on the return on any investment, and it will require changing the internal innovation culture of the business and boosting the role of IT and technology in decision making. It could however, serve as an antidote to some of the tough challenges and higher costs facing the manufacturing sector as a result of the Brexit vote.
By Gavin Davis, partner, MHA MacIntyre Hudson.