Foreword
New and emerging technologies and processes are changing economic norms; reshaping the ways in which firms manufacture products, the business models they adopt and how they continue to innovate going forward. Digital technologies are increasingly applied to, and integrated with, industrial manufacturing. This all changes the nature industry and challenges our traditional interpretation of what constitutes industrial development.
Collectively, we call these changes “Manufacturing 4.0” and, for countries across the Commonwealth, the adoption of Manufacturing 4.0 opens new opportunities to address developmental challenges in several areas. This includes skills development and employment, innovation, competitiveness, and inclusivity.
New technologies mean many new products, processes and solutions are becoming cheaper and more accessible for businesses across the Commonwealth, including in Least Developed Countries (LDCs) and Small Island Developing States (SIDS).
These advances create fresh opportunities to develop new and improved products, implement more efficient processes, and achieve more agile and resilient supply chains. They also highlight the need to address barriers and challenges which may hinder the effective adoption and use of these innovations, to ensure businesses across the Commonwealth remain competitive and private sectors are able to drive long-term, sustainable economic growth.
The Commonwealth Connectivity Agenda has developed this Guide to assist Commonwealth policymakers – especially those in LDCs and SIDS – in understanding the impact of Manufacturing 4.0; enabling them to develop policy environments to take advantage of new and emerging opportunities, and address potential barriers and challenges along the way.
It is my hope that policymakers across the Commonwealth find this Guide informative and useful in understanding and harnessing these new technologies and innovations to advance their digital industrial development.
Through our Connectivity Agenda, the Commonwealth Secretariat stands ready to help member countries further develop their knowledge of Manufacturing 4.0 and assist them in implementing digital industrial policies.
The Rt Hon Patricia Scotland KC, Commonwealth Secretary-General
Executive Summary
What is Industry 4.0?
- Industry 4.0 refers to the widespread integration of digital technologies in industrial manufacturing.
- The term “Industry 4.0” (or “Industrie 4.0”) was introduced in 2011 as part of the German government’s High-Tech Strategy.
- Since then, Industry 4.0 has become popular around the world in government, industry and academia because of its potential to make existingmanufacturing industries more efficient; enable the development of new products, services and industries; and reshape the sources of competitiveadvantage.
- A key characteristic of Industry 4.0 is that it involves the integration of cyber (e.g. software) and physical (e.g. machines) systems that could lead toautonomisation (i.e. automation without human intervention).
- Example Industry 4.0 technologies include: sensors and actuators; Internet of things; big data; artificial intelligence; 3D printing; advanced robotics;cloud computing; and augmented and virtual reality.
- The adoption of Industry 4.0 technologies can be understood as a phased process in which most firms require a gradual build-up of managerial,technical and innovation capabilities to understand the business value and opportunities from digitalisation.
Relevance to Development
- Investing in production, managerial and innovation capabilities to harness Industry 4.0 can boost industrial development in LDCs and SIDS.
- Globally, manufacturing is the largest traded sector and contributes to 13% of all jobs. Additionally, it plays a key role in socioeconomic resilience, as itprovides goods that are critical to life and national security.
- While the relevance of manufacturing and innovation have been recognised in the Sustainable Development Goals (SDGs), particularly SDG 9 (buildresilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation), LDCs are lagging behind in terms of achieving thetargets set by 2030.
- Technology upgrading through the adoption of Industry 4.0 technologies is particularly relevant to LDCs, as factors such as social responsibility,supply chain transparency and agility, and environmental sustainability are becoming more important to participation in global value chains.
- Industrial digitalisation may also offer jobs for the growing economically active population in LDCs, which is expected to increase by 13.2 million workers per year in the next decade.
Opportunities
- The integration of cyber and physical systems in manufacturing is leading to new sources of value added across three main types of innovation: smart products, smart processes and smart supply chains.
- These innovation trends are changing the drivers of industrial competitiveness, including: efficiency, quality, price, flexibility, agility, speed of response, reduction in downtime and speed of new product development.
- Widespread adoption of Industry 4.0 applications translates into concrete opportunities and benefits.
These benefits include:
- For employees and households, benefits include: improved working conditions, and better, more affordable and more resource-efficient products.
- For firms, benefits include: increased profits and resilience derived from business diversification and improved efficiency, productivity and agility.
- For countries, benefits from I4.0 technologies include: improved productivity and competitiveness; economic diversification; and sustainable and inclusive industrialisation.
Challenges
- While participation in the development and manufacturing of Industry 4.0 technologies may be particularly challenging in contexts where domestic knowledge generation is still scarce, more immediate opportunities can be identified from the adaptation and adoption of I4.0 technologies.
- However, firms face technical, economic and organisational barriers that hinder their ability to adapt and adopt I4.0 technologies within their operations. These include: technical and managerial skills’ gaps; a lack of awareness of Industry 4.0 applications and their benefits; financial constraints; and resistance to change.
- Barriers at firm level are generally linked to gaps in contextual enablers. These may include: a mismatch between graduates’ skills and the skills demanded by the industry; absent or insufficient entrepreneurial and innovation systems; inadequate institutional frameworks; and limited physical and digital infrastructure.
- Concerns have also emerged about the risks involved in the widespread deployment of Industry 4.0 technologies, mainly grouped into four topics: (i) jobs; (ii) drivers of competitiveness; (iii) broad economic and social inequality; and (iv) gender inequality.