Avainsana-arkisto: Industry 4.0

Bridging Industry 4.0 and Circular Economy: A new research agenda for Finland?

Mikkel Stein Knudsen and Jari Kaivo-oja:

Emerging academic research concerns how the principles, practices, and enabling technologies of Industry 4.0 might unlock the potentials of Circular Economy (CE) and sustainable manufacturing (Jabbour et al., 2018; Stock et al., 2018). Digitalisation (Ellen Macarthur Foundation, 2016;  Antikainen et al., 2018) and the use of Big Data (Hazen et al., 2016; Nobre & Tavares, 2017; Jabbour et al., 2017) are seen as key enablers for increased sustainability and for the implementation of a circular economy. Technology is also a necessary enabler of a move towards Product-Service Systems (Tukker, 2015; Antikainen et al., 2018). As Moreno & Charnley (2016) notes the fundamental drivers behind Circular Economy and Industry 4.0 overlap. It is an obvious fact that the combination of Circular Economy and Industry 4.0 leads us towards the Green Economy vision.

However, research output integrating the two important fields is still very scarce and plenty of unexplored research areas remain. Tseng et al. (2018)  deliver a telling example of the hitherto missing research: While separate queries in Scopus using “Industry 4.0” and “Circular Economy” yields 4060 and 2452 results respectively, a combined search using both “Industry 4.0” and “Circular Economy” as keywords provide only three results (all published in 2017). Combined searches for “Circular Economy” and ´digit*´ (i.e. digital, digitalisation etc.) provide similarly limited results (Antikainen et al., 2018). Stock et al. (2018) make the point even broader, as they conclude, there are rarely any sustainability assessments for Industry 4.0 available”. All transition paths are not automatically leading us to sustainable development and greener infrastructures, which typically mean sustainable land use, widely adopted green consumption lifestyles and broad industrial use of nature saving technologies.

If we – ‘we’ as researchers, as Finland, as the international society – should harness the potential synergies of these two emerging business systems, and strive for a transition to a greener economy, there is therefore plenty of work ahead. It seems likely though that solving this integration puzzle, however, will also bring major (business) opportunities and a competitive advantage for the future.

Industry 4.0 and a new sustainability optimism?

Stock et al. (2018) note that most literature linking sustainability and Industry 4.0 do so with a basic tenor of optimism. Opportunities for increased sustainability by using novel technological opportunities in combinations with new business models take centre stage. Improved traceability of smart products through the entire supply chain and during the products’ use phase allow manufacturers continuously to optimize the performance of both product and production, which may deliver a more efficient use of resources. For industrial practitioners sustainability, environmental, and social opportunities is also a noted driver for implementation of Industry 4.0 (Müller et al., 2018). Highlighting what is at stake for a green economy transition, Erol (2016) even asks thought-provokingly if Industry 4.0 is the very last chance for a truly sustainable production?

Notably, the United Nations also talks of ‘Big Data for Sustainable Development’, and how “new sources of data, new technologies, and new analytical approaches, if applied responsively, can enable more agile, efficient and evidence-based decision-making and can better measure progress on the Sustainable Development Goals (SDGs) in a way that is both inclusive and fair”.

Source: United Nations

While this ‘optimistic’ strand of research is obviously both highly relevant and highly inspiring, increased technology uptake could also happen unsustainably. Rise of enabling technologies behind Industry 4.0 is mirrored by rising demands for scarce resources such as (certain) metals and also highly dependent on increasing consumption of energy.  We can probably sum things up this way, “Industry 4.0 and its related technologies may facilitate more sustainable production, but sustainability is not an endogenous feature of Industry 4.0.”

Industry 4.0 and its related technologies may facilitate more sustainable production, but sustainability is not an endogenous feature of Industry 4.0.

Dual challenges: A sustainable Industry 4.0 and Industry 4.0 for sustainability

In the context of sustainability, new technologies might indeed come Janus-faced. Additive manufacturing and 3D printing disrupts supply chains and reduces the need for large inventories, such as in the aero-industry (cf. Khajarvi et al., 2014). Instead, parts are manufactured (printed) at the time of actual demand, increasing efficiency and reducing waste. On the other hand, beyond specific supply chains, when every part and product can be produced anywhere and at any given time, it takes little fantasy to imagine marked reductions of product lifecycles and overall increases in consumption. Additive manufacturing is therefore not a guarantee for more sustainable production and consumption (cf. review by Kellens et al., 2017 & Holmström & Gutowski, 2017).  On average, production processes using additive manufacturing even results in a higher environmental impact than conventional production processes, although this could be compensated by functional improvements during the use stage of AM manufactured parts (Kellens et al., 2017). In her highly cited literature review, Aalto University’s Cindy Kohtala (2015) concluded “Distributed production holds promise of greater environmental sustainability, but it is not a given that it will be a new, clearly cleaner production paradigm.”

Figure 1. Environmental threats and benefits of distributed production (e.g. decentralized 3D-printing). Source: Kohtala, 2015.

Interconnectivity and continuous massive amounts of data also come with an environmental price: In Denmark for example, the government expects that international data centres will take up 20% of the current national electricity consumption by 2030. The global electricity consumption for mining cryptocurrency using Blockchain-technology already today exceeds the current national electricity consumption of Finland significantly, according to consumption estimates in a recent issue of The Economist (2018).

The challenge then is (simultaneously!) to build a sustainable Industry 4.0 and to use Industry 4.0 to build sustainability. In other words, society must: (1) Ensure to the widest extent possible sustainability and circular economy as a feature in the ecosystem of Industry 4.0-enabling technologies, (2) Explore and exploit the enabling potential of Industry 4.0 for building more sustainable business models and production systems. These challenges are illustrated in figure 2.


Figure 2. Circular Economy for Industry 4.0 and Industry 4.0 for Circular Economy.

A new research agenda for Finland?

Finland is well poised to be an international leader in the bridging of Industry 4.0 and Circular Economy. Finland is already among the global drivers of Circular Economy. It is a stated objective of the current government to make Finland a “forerunner in the circular economy by 2025”. In addition, Finland is one of the most digitalised countries of the world, and a world-leader in many areas related to Industry 4.0. Our current project – Manufacturing 4.0 – aims at translating this into a success story for the general manufacturing industry of Finland.

It would seem natural then that Finland should also take the lead in bridging Industry 4.0 with Circular Economy. This could secure long-term competitive advantages for Finnish industry and simultaneously improve the local and global environment.

This new research agenda of bridging Industry 4.0 with Circular Economy would not start from scratch, but as the recent literature shows, there are still many research areas to explore. For us, a new research agenda could for example further address some of these key questions:

The countries, which are able to integrate Industry 4.0 approach to the principles of the Circular Economy, are the probably forerunners of Industry 4.0 revolution. However, as we can see above, the list of challenges in Industry 4.0 transformation is not short.  We know also that many economic activities in many countries are stuck in Industry 1.0-3.0 phases. This means that the Industry 4.0 approach with the Circular Economy approach does not solve all the sustainability problems of globalized world economy. However, remaining to Industry 1.0-3.0 models can also be a highly risky “project” for the long-run sustainability of world economy. Greener economic structures can be developed with Industry 4.0 technologies. We know that Industry 1.0-3.0 stages of development have not yet led us to needed sustainability levels, because climate change and other environmental problems are still far from solved.

In Fig 3 we present a scenario roadmap of Industry 4.0 and circular economy development. This scenario roadmap shows that in the process of Industry 4.0 development, it is not enough to change Industry 4.0 structures to meet the deep requirements of circular economy.

Figure 3. Scenario roadmap of Industry 4.0 and the Circular Economy.

Previous old phases of Industry 1.0, Industry 2.0 and Industry 3.0 require attention concerning the adoption of environmental principles of the Circular Economy. We underline that preconditions of Industry 1.0-3.0 are really pre-conditions for Industry 4.0, but also that the simultaneous transformation towards Industry 4.0 and Circular Economy requires both attention and multiple testing phases. From this perspective we can say: “Let´s try it – let´s pilot it”.

References

Mikkel Stein Knudsen
Project Researcher, Finland Futures Research Centre, Turku School of Economics, University of Turku

Jari Kaivo-oja
Research Director, Adjunct Professor, Dr, Finland Futures Research Centre, Turku School of Economics, University of Turku

Note: Authors thank for Try Out! and Manufacturing 4.0 projects for financial support.

 

Picture: pixabay.com

 

Are we in the midst of a fourth industrial revolution? New Industry 4.0 insights from future technology analysis professionals

Mikkel Stein Knudsen and Jari Kaivo-oja:

The recent July 2018-issue of the highly influential futures studies journal Technological Forecasting & Social Change contained a special section dedicated to Industry 4.0. The issue is relevant to an increased understanding of the current trends and transformations of the manufacturing sector. Finland Futures Research Centre works with this theme in the project Manufacturing 4.0 supported by Academy of Finland’s Strategic Research Council. Discussion about Industry 4.0 is part of larger technological transformation process (Kaivo-oja et al. 2017). “Industry 4.0” was first coined at the Hannover Fair in 2011, seven years ago. All over the world, the term “Industry 4.0” has drawn great public attention from practitioners, academics, government officials and politicians. Some scientist as Reischauer (2018) see Industry 4.0 as policy-driven discourse to institutionalise particular innovation systems in manufacturing.

For use in the MFG4.0-project, and due to its general relevance, this blog post contains a summarizing review of the TFSC-special issue combined with other recent research on Industry 4.0. We hope this blog will be informative both to those already working with these themes and to those curious about the field. Awareness about Industry 4.0-strategy is an important development driver for both progressive SMEs and large corporations. Discussion in the TFSC Special Issues of Industry 4.0 underlines the idea that Industry 4.0 challenges do not hit only large corporations, and that the role of progressive SMEs and start-ups needs more scientific attention in the global Industry 4.0-process. Orchestration of innovation eco-systems requires broad networks and new dynamic capabilities in organizations.

Compared to previous Industry 1.0-3.0 revolutions Industry 4.0 revolution will include a novel and global dynamic element: The BRICS-countries will be now more active players in Industry 4.0 transformations than these countries were in previous industrial transformations. Especially the role of China in Industry 4.0-era will be a big political and economic issue (see Kaivo-oja & Lauraeus 2017a, 2017b). Industry 1.0 phase was founded on mechanisation, Industry 2.0 phase was based on electricity and Industry 3.0 phase was founded on information technology (IT) to human manufacturing. New Industry 4.0 era is expected to be founded on Cyber-Physical Systems (CPS) and the Internet of Things (IOT). Other key technologies are Cloud computing, Big Data analytics and Extended ICT.

The expected changes will lead to new integrated systems, where sensors, actuators, machines, robots, conveyors, etc. are connected to and exchange information automatically. Factories are expected to become conscious and intelligent enough to predict and maintain the machines and control the production process. Business models of Industry 4.0 imply complete communication network(s) between various companies, factories, suppliers, logistics, resources and customers. This kind of highly integrated and transparent industrial approach probably allows more efficient circular economy in the future (see de Sousa Jabbor 2018).

Both smart production and smart consumption are key benefits of Industry 4.0 approach. Industry 4.0 includes a new research agenda for sustainable business models, business model innovation and re-organization process of old supply chains of companies. Lean Industry 4.0 is expected to be a key challenge for SMEs and corporations. From this technology foresight analysis perspective, the reported technology roadmap in the computer and electronic product manufacturing industry is highly relevant reading for Industry 4.0 policy discussion (Lu & Weng 2018).

The difficult task of defining Industry 4.0

As noted, the term Industry 4.0 was coined in Germany by a government advisory council at the beginning of this decade. This origin does not seem disputed, but otherwise the definition of Industry 4.0 remains up for debate. It is notable, for example, that all articles in the TFSC-special section provide their own slightly different explanations of the term. One article (Sung, 2018) even argues that the inclusion of “4.0” in the umbrella-term refers to the fourth industrial upheaval post-WW2, while others follow the more widely used definition of 4.0 being the fourth industrial age after the age of steam, the age of electricity and the information age (Müller et al., 2018).

While exact definitions differ, common themes in the understanding of Industry 4.0 are easily distinguished. It revolves about new technologies, new digital possibilities, new modes of inter-connectivity etc. Jabbour et al. (2018) captures this by denoting four significant components of Industry 4.0: i. cyber-physical systems, ii. the internet of things, iii. cloud manufacturing, and iv. additive manufacturing. This is very similar to what Xu et al. (2018) recently described as enabling technologies in a comprehensive assessment of Industry 4.0: State of the art and future trends.

Figure 1: ‘Components’ and ‘enabling technologies’ in Industry 4.0.

Adding to the broader understanding of the concept of Industry 4.0, Müller et al. (2018) provide a qualitatively based examination of how key practitioners, representatives of manufacturing SMEs, perceive the term. This pragmatically highlights those elements of particular interest to manufacturing practitioners, and the empirical results reveal three main dimensions of Industry 4.0: (1) High-grade digitization of processes, most notably manufacturing processes, (2) Smart manufacturing through cyber-physical systems resulting in self-controlled production systems, (3) Inter-company connectivity between suppliers and customers within the value chain.

Figure 2: 3 dimensions of Industry 4.0 (adapted from Müller at al., 2018).

We believe these three dimensions would be interesting starting points for creating a refined Maturity Model of organizational Industry 4.0-readiness. This has already been attempted, see e.g. Schumacher et al., 2016, but a new model based on these three empirically backed dimensions might be both simpler and more precise. Müller et al. (2018) do not formalize a new maturity model in their article, but they do provide a four-stage model of manufacturing SMEs ranging from those deliberately not engaged (“we’ve always done things like this”) to full-scale adopters of Industry 4.0 (“we want to be the leader in our industry and can only achieve this through Industry 4.0”). Other identified firm categories were preliminary stage planners (“for us Industry 4.0 us imaginable in the next five to ten years”) and Industry 4.0 users (“more efficient usage of machines while achieving more with less employers”). Motivation level and strategic maturity level to be engaged in Industry 4.0 revolution vary much among German SMEs. Probably, in Finland we could get similar results.

Organizational responses to Industry 4.0

Through their qualitative interviews (with 68 high-level representatives of manufacturing SMEs) Müller et al. (2018) also importantly provides outlines for various strategies for adopting or not adopting elements of Industry 4.0 within business practices. We expect that this theme – identifying and exemplifying organizational Industry 4.0-strategies – will be a key future research topic for business, innovation and organizational research. Finally, the article illustrates dilemmas of smaller suppliers when the value chain become increasingly inter-connected. Increased transparency is not always in the interest of the minor companies, as pointed out by several informants in the study. This view is supported in a recent survey of UK-manufacturers, where, even if 80% of manufacturers believe that new digital technologies will improve the supply chain relationships up and down, several negative responses with fear of “supply chain bullying” can be found (PwC, 2018).

How Industry 4.0-developments affect supply chain relationships and especially affect suppliers might be a particularly pertinent research question in a Finnish context. Three-fourths of Finnish exports are intermediate goods (Ali-Yrkkö, 2017) – a share significantly higher than the EU-average – and changes (positive or negative) to the role of manufacturing supply companies can therefore have effects not only on the individual companies, but perhaps also on the national economy.

Linking Industry 4.0 with the sustainability agenda

Jabbour et al. (2018) examine links between Industry 4.0 and environmentally-sustainable manufacturing. Industry 4.0 and sustainability are argued to be two major trends of, and while they individually cannot be considered revolutionary, together then may “change worldwide production systems forever”. The technological possibilities of Industry 4.0 may help unlock the full potential of environmentally-sustainable manufacturing practices. Whether this will happen, the authors note, depend on eleven distinct critical success factors (CSF) further explained in the article. The CSF’s here are not studied empirically, but they provide research propositions for – as explicitly urged by the authors here – further examination in the synergies between two key societal and manufacturing megatrends. How to best harness these synergies should be of utmost importance to academics, policymakers and practitioners working with sustainable manufacturing and sustainable development, and we will likewise hope that the question of integrating sustainability-dimensions will occupy an important part of the Industry 4.0 research- and implementation agenda. This article together with the highly-cited contribution of Stock & Seliger (2016) provide important background material for this work.

Talkin’ Bout a Revolution?

Like Jabbour et al., Reischauer (2018) and Kim (2018) argue that “Industry 4.0” is not really an industrial revolution. Reischauer argues that, as much as signalling future changes, the particular discourse of “Industry 4.0” serves a policy-driven discourse to institutionalize a distinct now-almost hegemonic idea of innovation systems. Thus, the term itself was developed in the context of a “fluid entanglement of academia, business, and politics”, and the discourse further underpins this entanglement. The discourse hereby both exemplifies and underlines the further need for Triple-Helix Innovation modes (see e.g. Kaivo-oja, 2001, Santonen et al., 2011, Santonen et. al., 2014). It might be illuminating also to see our own MFG4.0 through this critical lens and to remind ourselves that the discourse is neither value- or policy-free.

Kim (2018) puts another critical spin on Industry 4.0. Industry 4.0 is a meso revolution needed by capitalism, because capitalism always needs ever-growing markets, and technology is just one arena for the ever-needed expansion of capitalism. Jumping from this critical view, he goes on to analyse the readiness for this particular meso revolution in South Korea, a topic also explored by Sung (2018). Perhaps surprisingly, both authors conclude that South Korea is a bad position to utilise potential opportunities provided by Industry 4.0. Finland, on the other hand, ranks second only to Singapore in a global competitiveness ranking for the fourth industrial revolution (Sung, 2018). This of course provides some ground for optimism regarding the MFG4.0-project and the general ability of Finland to capture new opportunities and benefits.

Morphological analysis for the future Industry 4.0 transformations

The Special Issue of TFSC also includes also an important methodological paper of Kwon et al. (2018). As we know the generation of new and creative ideas is vital to stimulating innovation, and morphological analysis is one appropriate innovation management method given its objective, impersonal, and systematic nature. In the Big Data-era, we can develop Industry 4.0 strategy on the basis of Big Data files, and the systematic structuring of data becomes vital for success. This methodological case study in the TFSC Special Issue focuses on Wikipedia’s case-specific characteristics using the online database for the development of morphological matrix, which incorporates the data on table of contents, hyperlinks, and categories. This provides interesting results. The feasibility is demonstrated through a case study of drone technology, and the validity and effectiveness was shown based on a comparative analysis with a conventional discussion-based approach. This methodological paper is a milestone study and requires our full scientific attention.

Japanese Industry 4.0 strategy?

Also in the Special Issue, Luo and Triulzi (2018) provide interesting insights about Japanese approach to Industry 4.0. They point out that the architecture of a firm’s network of transactions in its surrounding business ecosystem may affect its innovation performance.  A business ecosystem as a transaction network among firms has been a key issue for successful industrial cooperation in Japan.

The empirical results of Japanese study indicate that a firm’s participation in inter-firm transaction cycles, instead of sequential transactional relationships, is positively and significantly associated with its innovation performance for vertically integrated firms. Within cycles, vertically integrated firms have better innovation performances than vertically specialized firms. Vertically integrated firms that participate in cycles have the best innovation performances in the Japanese electronics sector. This empirical finding can be very relevant also for European firms and companies. The authors also underline that the organizations focusing on quality improvements and production efficiency improvements can be different organizations. Specialization in these fields may be a critical success factor in a national Industry 4.0 strategy. Only in few special cases, organizations are able to integrate these critical industrial functions in one unified organization. We can conclude that Industry 4.0 transformations need more discussions about Japanese historical Industry 1.0-4.0 know-how.

Industry 4.0 in Finland

Discussion about Industry 4.0 will surely continue. Manufacturing 4.0 consortium will contribute to this discussion in various ways and via various channels.

In April 2018, the Manufacturing 4.0 consortium provided the first ‘situation report’ for the Strategic Research Council. The report is (in Finnish).

Link to references

Mikkel Stein Knudsen
Project Researcher, Finland Futures Research Centre, Turku School of Economics, University of Turku

Jari Kaivo-oja
Research Director, Adjunct Professor, Dr, Finland Futures Research Centre, Turku School of Economics, University of Turku

 

Photo: pixabay.com