Section 7
Designing M4.0 Policy
Designing Manufacturing 4.0 Policy
How can policymakers design and implement Manufacturing 4.0? What sort of blueprint and approaches are available?
This section addresses these questions and covers the following topics:
- Implementing Manufacturing 4.0: A blueprint
- Implementation approaches
- Connection National Visions and industrial policymaking
- Evaluating the progress of industrialisation
- Policy development recommendations
“Policy responses in the short, medium and long term have the potential to overcome the barriers that prevent firms from adopting Manufacturing 4.0 technologies.”
“The selection of an effective policy mix for a country depends on the particular context and the specific position of the country in the industrial digitalisation journey.”
How can policymakers implement Manufacturing 4.0?
Policy responses in the short, medium and long term have the potential to overcome the barriers that prevent firms from adopting Manufacturing 4.0 technologies.
The selection of an effective policy mix for a country depends on the particular context and the specific position of the country in the industrial digitalisation journey.
Here we present insights from a review of 15 policy case studies across developed and developing Commonwealth countries demonstrating effective industrial innovation strategy.
This review led to the identification of five priority areas to guide Manufacturing 4.0 policy implementation: awareness raising, training and education, business extension services, technology financing and regulation and governance improvements.
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An implementation blueprint
Policy responses in the short, medium and long term have the potential to overcome the barriers that prevent firms from adopting Manufacturing 4.0 technologies.
While profound transformations of entrepreneurial and innovation systems will require coordinated efforts and investments over several decades, policy responses in the short and medium term can ease access to technologies and contribute to the development of managerial and technical capabilities among firms.
This section presents insights from the review of industrial innovation effective policy practices across developed and developing countries, including 15 national policy case studies.
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Five priority areas in the short and medium terms
The selection of an effective policy mix for a country depends on the particular context and the specific position of the country in the industrial digitalisation journey. Nonetheless, based on the review of industrial innovation strategies and programmes across developed and developing countries, we can identify five priority areas:
- Awareness. Activities and programmes aimed at raising awareness of the benefits of M4.0 technologies and cyber-security threats.
- Training and education. Programmes aimed at narrowing skills’ shortages.
- Extension services. Advisory services aimed at developing firms’ technical and organisational capabilities.
- Technology financing. Programmes aimed at financing the adoption of technology.
- Regulation and policy governance. Developments in national strategies, coordination across actors and regulations that improve the institutional framework for the development and adoption of M4.0 technologies.
What (definition and target population)
Definition: Activities and programmes aimed at raising awareness of the benefits of Manufacturing 4.0 technologies and cyber-security threats.
Target population: focus on SMEs but open to all size firms.
Why? (Rationale)
While Manufacturing 4.0 technologies are becoming cheaper and more accessible, firms (particularly smaller ones) may not be aware of the benefits of these technologies, where to acquire them or the security and safety precautions they should follow when adopting them. Awareness activities and programmes can help to ease the access to information on new technologies and realise the potential benefits of their adoption.
How? (Implementation approaches)
Workshops, demonstrators, readiness assessment tools, “smart factory” demonstrators for different firms’ needs (including mobile “smart” production lines) and websites with relevant information on cyber-security threats.
Who? (Institutions involved)
Management and coordination: ministries of industry, innovation agencies, research and technology institutes.
Other stakeholders involved in design and delivery: industry associations, consultancy firms, technology providers, cyber-security agencies and response teams.
How much? (Budget and key performance indicators)
Budget: awareness activities are usually part of larger programmes, making it difficult to track the specific budgets. However, depending on the scale and time frame of the activities, annual budgets tend to range from less than US$1 million to US$20 million. For example, New Zealand’s Industry 4.0 Demonstration Network involves an annual budget of approximately US$870,000.
Key performance indicators: number of awareness events, number of firms participating in awareness events (outputs); number of firms that adopt new technologies (outcomes).
What (definition and target population)
Definition: training and education programmes aimed at narrowing skills’ shortages.
Target population: employees at different career stages and skill levels.
Why? (Rationale)
Firms facing resource constraints, usually SMEs, tend to under-invest in training and skills. As a result, they often face difficulties selecting, integrating and operating new technologies. Training and education programmes targeted at identified skills’ shortages can contribute to overcoming these capability gaps.
How? (Implementation approaches)
Targeting disadvantaged groups and strategic industries; leveraging private training providers, local higher education and research institutes capacity; and international partnerships with development actors, companies and research institutes; and following a lifelong learning approach.
Who? (Institutions involved)
Management and coordination: ministries of education, ministries of industry, higher education institutions, international development agencies.
Other stakeholders involved in design and delivery: industry associations, private training providers.
How much? (Budget and key performance indicators)
Budget: financial resources allocated for the delivery of training and education programmes tend to range from less than US$1 million to US$50 million. International development actors and development banks are common sources of funding of this type of programme. For example, Bangladesh’s Sudokkhoprogramme involved an annual budget of approximately US$4.2 million.
Key performance indicators: number of people enrolled and graduated, number of firms participating (outputs); additional income and investment attributed to new skills (outcomes).
What (definition and target population)
Definition: advisory services aimed at developing firms’ technical and organisational capabilities.
Target population: focus on SMEs but open to all size firms.
Why? (Rationale)
SMEs tend to face managerial and technical skills’ gaps and financial constraints that hinder their capacity to adopt new technologies. In addition, accessing expertise from external sources, such as universities or private consultants, may be complicated and expensive. Extension services programmes can facilitate these processes, since these involve the provision of specialised advise at affordable rates.
How? (Implementation approaches)
Access to extension services is usually conditional upon business assessments that allow advisors to gain a better understanding of firms’ needs. From the cases reviewed, implementation approaches include: programmes leveraging third-party specialists; following a value chain approach; advice adapted to the different (basic vs advanced) needs of firms; sector-specific digital plans; and readiness assessments. Extension services tend to be linked to other types of support, such as funding, as SMEs may not be able to take advantage of these services without financial support.
Who? (Institutions involved)
Management and coordination: ministries of education, ministries of industry, higher education institutions, international development agencies.
Other stakeholders involved in design and delivery: industry associations, private training providers.
How much? (Budget and key performance indicators)
Budget: financial resources allocated for the delivery of extension services tend to range from less than US$1 million to US$50 million. International development actors and development banks are common sources of funding of this type of programme.
Key performance indicators: number of firms participating (outputs); number of firms that adopt new technologies, improved quality, increased sales (outcomes).
What (definition and target population)
Definition: programmes aimed at financing the acquisition and development of technology.
Target population: focus on SMEs but open to all size firms.
Why? (Rationale)
The risks and uncertainty involved in the adoption and development of technologies, and a lack of information about the benefits of new technologies, may inhibit innovation among firms, especially SMEs. Funding programmes involving grants and loans, as well as information on pre-scoped technologies, can facilitate both the adoption and development of Manufacturing 4.0 technologies.
How? (Implementation approaches)
Grants covering up to 80% of the costs of adopting pre-scoped technology solutions and grants covering up to 85% of the costs involved in the development of innovations.
Who? (Institutions involved)
Management and coordination: ministries of industry, ministries of telecommunication and innovation agencies.
Other stakeholders involved in design and delivery: industry associations, consultancy firms and research and innovation institutes.
How much? (Budget and key performance indicators)
Budget: financial resources allocated for technology financing tend to range from US$1 million to US$100 million. For example, South Africa’s Product Process Development and Matching Schemes represent a joint budget of approximately US$23 million.
Key performance indicators: number of firms that acquire new technologies, investment in the development of new technologies (outputs), number of new or upgraded production lines, number of new products or services, number of new jobs, increased productivity, increased sales (outcomes).
What (definition and target population)
Definition: developments in national strategies, coordination across actors and regulations that improve the institutional framework for the development and adoption of M4.0 technologies.
Target population: government departments and industry associations.
Why? (Rationale)
Industrial digitalisation involves, as a prerequisite, addressing gaps in contextual enablers, such as inadequate infrastructure and outdated regulation. In particular, Manufacturing 4.0 policy frameworks can contribute to the coordination of disperse efforts across different ministries, and to developing an inclusive Manufacturing 4.0 vision and blueprint.
How? (Implementation approaches)
Manufacturing 4.0 specific policy frameworks; establishment of implementation frameworks that define the key functions and responsibilities of the actors involved and identify a coordinator within the government; public–private partnerships (B1.1, B1.2, B2.1, B2.3, and B3.1); and strengthening national cyber-security frameworks.
Who? (Institutions involved)
Management and coordination: ministries of industry, ministries and councils of science, innovation agencies, ministries of education, ministries of communications.
Finance: ministries of finance, central banks, development banks.
Other stakeholders involved in design and delivery: industry associations, research and innovation institutes.
How much? (Budget and key performance indicators)
Budget: political will and time, rather than finance, are key resources for conducting improvements to the institutional framework. This explains why annual budgets allocated to policy coordination usually range from less than US$1 million to US$5 million.
Key performance indicators: tend to be high-level (impact) and related to specific policy instruments involved in the broader policy frameworks.
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Connecting National Visions and industrial policymaking
To maximise effectiveness, Manufacturing 4.0-related policymaking must become an organic part of National Visions/Plans.
This figure presents an example of the organic interaction between Manufacturing 4.0 policymaking and National Visions/Plans for “Smart Nations”.
The left hand side illustrates the fact that Manufacturing 4.0 policymaking combines people, process and technology as its main addressable areas.
The right hand side describes a conceptual framework of a “Smart Nation”. A “National Vision and Mission” supports a foundation consisting of a country’s physical infrastructure, regulations and policies and national talent pool.
On top of this foundation, the “Smart Nation” is pillared by verticals the collectively function to support its operation: national capabilities in terms of industry, government, services, logistics, education and security.
Manufacturing 4.0 naturally integrates with the Industries pilar, and ideally becomes an integrated part of a country’s “Smart Nation” strategy.
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Evaluating the progress of industrialisation
It is important for policymakers to understand the current stage and level of maturity of businesses in their country to ensures policies are crafted appropriately. Digital technologies support businesses and manufacturing processes at different levels of maturity.
For example, a textile mill in a developing country may be using web portals and digital marketing in their businesses processes but still be at the Manufacturing 1.0 phase in their manufacturing operations. Similarly, a defence organisation in a developed country may heavily utilise M4.0 on the factory floor to build advanced products but may still use legacy systems in their business operations.
A simple framework can map the evolution of businesses as they mature, from Stage 0 to Stage 4 - seen here. The X axis represents the use of digital technologies for business operations across these stages, while the Y axis represents the use of digital technologies for manufacturing operations.
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Policy development recommendations
Manufacturing 4.0 policy development occurs within a broad ecosystem encompassing firms, governments, and societies at large with multiple considerations and cross-cutting issues to be addressed.
It can be useful to situate these issues within a broader ecosystem framework, shown here. This framework illustrates the role of productive inputs - such as M4.0 technologies - filtered through three layers of strategies needed to address micro-,meso- and macro-level issues to reach an ultimate output of expanded trade in goods and services by harnessed M4.0 technologies.
This is all underpinned by various cross-cutting issues that must be addressed, from skills gaps to investment attraction and ICT infrastructure.
