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Investments and Opportunities for Industry 4.0

About this sample

About this sample

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Words: 2782 |

Pages: 6|

14 min read

Published: May 19, 2020

Words: 2782|Pages: 6|14 min read

Published: May 19, 2020

Table of contents

  1. European investments in Industry 4.0
  2. Industry 4.0 investments in different parts of the value chain
    Key factor of success in industry 4.0
    Improving resource efficiency
    Employment and future changes in works skills

During this paragraph we are going to analyze Industry 4.0 from a different point of view, we will leave space to number and graph through a study conducted by the consultancy firm PWC. In order to give a comprehensive view about the level of investments in European countries and the benefits that firms expect from the adoption of industry 4.0. This analysis want to be just a start point for a deepen discussion about challenges and future perspectives for the adoption of Industry 4.0 and into specific Cyber Physical Systems in production.

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The study as we have said was conducted by PWC in 2014 with the help of other companies specialized on market surveys. It is based on a cluster of two hundred firms with the specific aim of identifying which are the opportunities and challenges that firms think to face adopting this kind of technology. Regarding the method of the interviews has be done through telephone call and face to face, but what is most important is the fact that the aim was to give a comprehensive overview, in terms of sales and revenue dimension. In fact, the sample is composed of big company with huge level of sales and revenues and at the same time firms considered of medium or small size in order to give a totally view of the German market and repeat it on a European scale. Therefore, this is not the only principle through which the survey was conducted, in fact companies belong to different industry sectors as the chart below displays. Finally, people interviewed belong to different functions inside each company in order to understand if there are different views inside each firm and function respect to Industry 4.0 and what it needs to become a success and which are the benefits that can be reached in a near future. Another important thing to take under control is the seniority of people interviewed and even in this case the sample is a balanced mix of CEO, managers, and operations.

European investments in Industry 4.0

Companies surveyed foresee that up to 2020 and over will invest a huge amount of money in Industry 4.0. Into specific around 3,3% of revenues each year that is equal to the half of the expected investments in new capital considered essential for each industry sector. Translating these percentages in number, we can see that we are talking about 140 billion euro in the entire European Union. Therefore, 25% of the firms surveyed do not consider a priority to channel significant investments into industry 4.0. By contrast, one third of the respondents see this as an important investment challenge because this revolution give the opportunity to increase efficiency and ensure competitiveness. Companies that we are talking about consider the fourth industrial revolution one of the main opportunities that they can face. In fact, they present a level of investment per year over the average, exactly it is over four percent of annual revenues. In fact, 65% percent of companies interviews do not surpass the 3% because they do not believe enough in the fourth industrial revolution. The aim of Industry 4.0 are mainly two, namely improve the efficiency not only of the production process and improve the productivity in order to increase the volume of affairs for all the stakeholders involved along the supply-chain. As we can see from the chart below participants know that if they want to benefits from Industry 4.0, they have to put their effort in all functions of their company. In addition, they have to pull their supplier at the start and at the end of the value chain to follow the revolution, because a producer alone cannot deploy all the benefits that Industry 4.0 can give. Therefore, looking to the chart we can see that companies are investing more money in all regard the production process implementing the technology of Cyber Physical System in production in order to be flexible and more efficiency, while for all regard the supply chain they are investing in Internet of Things in order to track all parts and products.

Industry 4.0 investments in different parts of the value chain

The study take in consideration different industry sectors, those that are considered of primary importance for the future development of the European Union. For each industry sector has been calculated the level of investments in percentage of the revenues reached each year.

From a first look, it is easy to understand that Manufacturing and Information technologies companies are those that invest more in Industry 4.0. But how much? Information and communication companies invest around the 3.9 percent, while manufacturing companies in average spend 3.5 percent per year. Those are incredible numbers, but into specific each industry sector differentiate the type of investment. In fact IT companies are looking for smart products and services embedded of computational power from the manufacture to logistic sector.

Manufacturing firms are focused on physical production of products are interested in developing the automation equipment to an higher level of independence and flexibility. This is possible with a specific focus on real time data acquisition and data analysis for predictive maintenance along the entire supply chain. However, the process Industry sector can be considered as the tail end in planned investments in Industry 4.0, in fact it is the last one compared to the. Therefore, enterprises all over the European Union have understood that through Industry 4.0 investments they can elevate their business thanks to new solutions and improve customer satisfaction. According to the different needs that each company has, anyway we can synthetize Industry 4.0 as a recipe for a long success and firms are going to understand it seeing the level of investments and efforts that they are putting to make possible it.

Key factor of success in industry 4.0

As I am noticed, the main focus of my thesis in the second chapter will be on Cyber Physical Production Systems CPPSs and thus, the main abilities that a firm has develop is to acquire, manage and communicate information and data inside and outside. For this reason in this section we are going to focus on the awareness that firms have about data. Data will be the future for any company in the future, Industry 4.0 help to manage it. In fact, through the application of Internet of Things, sensors and RFID companies will acquire an huge amount of data from the production process and the environment that surround them, such as suppliers, customers and whatever stakeholder. Therefore, often firms do not use and exploit them in a structured and efficient manner. Turning to the study it is possible to see that for half of all companies surveyed be able to use and exploit data is considered a priority. Sectors more involved in this capability are surely electronics and IT companies. This is due by the huge amount of data that these sectors produce for the nature of products and services that they produce. However, it is widely shared the idea that the ability of storage, analyze and use data will be a key factor of success for the future, in fact 90% of companies interviewed think that it is a most important thing even those sectors where is surely that not the main priority.

Until now we are focused on the importance of data but we have not consider how company use it. Through the analysis of processes analysts are able to collect information on how the process is going on, after that data will be elaborated and solutions to adjust the process will be taken. Take in consideration the case of an automotive supplier that will be studied in deep in the third chapter. The company is able to monitor completely the production process through sensors, and RFID. The main aim of data collection and data processing is to improve the quality and reliability of the final product. Doing so, faults products or workpieces will be detected at early stage, reducing the case of delivering faults products, thus reducing claims and costs.

Furthermore, the use of data increases transparency and put companies in the position to make the right decision at the right time without doubts along the entire value-chain from suppliers to customers. This is the basis for improve resource efficiency in terms of money and materials, in addition it is possible to increase the productivity and finally customer satisfaction shipping the right product to the right customer without faults. Industry 4.0 and specially IOT and Big Data are able to change the business model of companies, in fact al lot of process firms through these technologies today are able to solve important optimization’s issues. IOT provide a lot of information about market demand, load capacity of the plant, and the level of material resources. In this way the factory is able to determine which product has to be produced and in which quantity according to the priority of customers orders.

The final aim is to create a system able to simulate the reality in few seconds in order to give the better solution to each problem, this is the task of Cyber physical System and data processing, while IOT through sensors and specially RFID provide real-time data in order to monitor the entire process of value creation.

However, from the graph below we can a clear vision of the state in which companies are with data analysis capabilities. A lot of firms are able to track things through RFID but after that a lot lack the capability of analyze and use information in real-time, unfortunately this is the key for the success. In addition some do not have the access at intra-company level.

Improving resource efficiency

From the birth of industry the aim is to produce even larger quantities of products or services with less and less resources in terms of energy and materials. Industry 4.0 goes through this direction ensuring process efficiency.

Up to 2020, companies surveyed expect an incredible quantitative and qualitative benefits from the planned investment. The study asked to companies interviewed which are their expectations about that in the future, they foresee an improvement in resource efficiency about 18 percent at the end of 2020 in each industry sector analyzed that can be translated in 3.6% per year. Therefore, companies were accurate during the interview, saying that digitization will be the main pillar of the revolution and that they expect savings from dynamic and flexible production process, reduction of faults products and thus streamlining of the entire value chain. In practical terms, technologies permit transparency in processes in order to improve the utilization of machines and systems, for instance by optimizing lot sizes. Greater connectivity with all the components of the organization permit to structure and rationalize areas of work producing gains in productivity. The final aim is an intelligent use of data analysis for an integrated control purposes in order to reduce the rejection rate in production processes.

Finally, we can conclude that in average there will be from 2015 to 2020 an increase in efficiency equally to 17.9% and a cost reduction nearly to 14%.During the survey, benefits are divided into cost reduction and increased efficiency. For the first one firms are positively optimistic, announcing that Smart Factories will lead savings over the normal effort of an amount equally to 2.6%. Therefore, as I have disclosed cost savings do not derive only from the effort of a company alone, rather it comes from the cooperation and exchange of data and information among companies.

In fact, annual cost savings of 2.6% are possible only if each partner of the value chain do its part in reducing cost inside its company and if it collaborate with the interested parties. Thus, we can conclude that quantitative benefits are viewed as the milestone in order to start a glorious future characterized by sustainable competitiveness.

From the chart above we can see that firms present enormous expectation on qualitative benefits that Industry 4.0 is able to give. The most important aspect is better planning and controlling in production process and all regard exchanges of data and material long the supply chain. In addition, they put focus on flexibility and higher customer satisfaction considered of main importance.

Planning and control can be viewed from two different points of view. The first one, focus on the integration of all partners long the entire value chain, while vertical integration as a starting point for more flexibility and a reduced lead to market. Vertical and horizontal optimization lead to a better product quality and customer satisfaction, because clients have products in faster time, with improved computational power and traceability of the root. However a lot of firms expect a medium or low improvement in terms of quality. This can be considered wrong because for instance companies of automotive and electronic industry sectors are moving their quality control at the beginning of the production process, their suppliers. They take all data upstream in order to take control of all the value chain reducing at the minimum faults or case of reduced quality.

In this way companies take traceability of all through data storage, while through data processing raises the level of the manufacturing process, increasing productivity and consequently profitability.

Employment and future changes in works skills

Common thought and practical experience have demonstrated that automation and more in general computerization of the production process come together with a loss of the employment rate. Therefore, Industry 4.0 is a revolution even in this. Because only a small part of companies interviewed the 9 percent that is going to introduce Industry 4.0 is thinking to downsize his work-force. Companies in this small percentage are mostly large firms, the reason of this result is easily to find. Large companies with their financial power are able to replace easy and repeated jobs with automated robots, which are acquiring increasingly intelligence. The same cannot be said for small companies that pose their basis on human capital.

However, the survey give us an important and impressive result. Which is that more than half of the company surveyed foresee a rise on the level of the employment with the entire realization of Industry 4.0. This is improvement is justified by a foresee rise of productivity and thus profitability that will be re-invested in skilled human capital.

The equation is just simple as we can think, new revenues streams correspond new jobs. Therefore, new revenues streams can be created only realizing new business models. Industry 4.0 is able to realize this shift through impressive technologies such a 3-D printers, virtual reality and so on. The aim is to reach markets never explored before such as selling services invoice than products. In order to reach those high levels companies need skilled labor force. For instance Virtual reality can be tool to foster not the production process but the after sales service. Thus, around Industry 4.0 there are a lot of expectation in terms of benefits, from the companies and social point view. The world cannot get away this opportunity.

The perspective increase in labor demand is an important starting point to analyze which kind of attributes and skills will be required by companies in the next decade. As we have seen, easy and repeated jobs will be done by automated machines, while sophisticated and skilled jobs will rise labor demand. In the survey, 35% of the respondents foresee that they will ask to labor supply less and less workers in handmade works. Therefore, over 50% of companies interviewed will search working figures, with an academic background into specific engineers, mathematicians, physicists and so on. The final aim is to elaborate new way of working into specific new production processes based on automation and computational power based on Artificial intelligence, Big Data and Cyber Physical System.

The speech above underlines the fact that there will be a mismatch between labor demand and supply, if the job offer does not comply with the specific skills request of companies. There is a large consensus on the latter point: there will be an undersupply of engineers and scientists by 2025. In order to give a practical example, IDA, the Danish society of engineers foresee a lack of thousands of IT specialists in the next decades in Denmark.

The example mentioned above is a typical problems that companies are facing during this time, lack of technical figures able to implement Industry 4.0. Countries can think to stem the problem taking skilled workers from foreign and under developed countries but the race for knowledge is going to become hard.

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So, as we can see there is a desperate need of skilled workers, playing in a market labor at the moment poor of technical figure. This problem will be study in deep in the next paragraph in order to give an overview of the current situation and future perspectives.

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Cite this Essay

Investments and Opportunities for Industry 4.0. (2020, May 19). GradesFixer. Retrieved March 28, 2024, from https://gradesfixer.com/free-essay-examples/investments-and-opportunities-for-industry-4-0/
“Investments and Opportunities for Industry 4.0.” GradesFixer, 19 May 2020, gradesfixer.com/free-essay-examples/investments-and-opportunities-for-industry-4-0/
Investments and Opportunities for Industry 4.0. [online]. Available at: <https://gradesfixer.com/free-essay-examples/investments-and-opportunities-for-industry-4-0/> [Accessed 28 Mar. 2024].
Investments and Opportunities for Industry 4.0 [Internet]. GradesFixer. 2020 May 19 [cited 2024 Mar 28]. Available from: https://gradesfixer.com/free-essay-examples/investments-and-opportunities-for-industry-4-0/
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