Saket Mehra
Industrialisation has been evolving ever since its discovery and we are expected to enter a new world of Industry 4.0, a technological revolution in which computers and robots would take over human force by an interconnection between the two. It is all about optimisation of smart, flexible supply chains, factories and distribution models where machines capture and convey data. There are majorly three key trends that are expected to change the life of industries and employees – Digitization, Industrialisation and Optimisation. The objective here is that machines talk to other machines & products and information is processed and distributed in real time, which results in profound change to the entire industrial ecosystem.
Industry 4.0 is the need of the hour due to confrontation with increased number of products, options, competition and changing customer preferences and has nine key technological components - Autonomous Robots, Big Data, AR (Augmented Realilty) Additive manufacturing, Cloud Computing, Cyber Security, Internet of Things (IOT) and Simulation. Globally countries and their governments’ have been taking several initiatives such as building regional hubs, adopting additive manufacturing and developing 3D technology platforms.
Industry 4.0 started in Germany and is expected to bring forth the idea that advances in automotive will help the industry focus on key functional pillars such as technology, integration/collaboration and processes. The momentum gradually picks up in the United States, Japan, China, the Nordic countries and the United Kingdom to bring Industry 4.0 into the system. Companies all over the world are expecting to dramatically increase digitisation over the next five years. By 2020, the US aims to achieve 74 percent digitisation from the current levels of 32 percent, Asia Pacific to 67 percent from current 36 percent and the Europe, the Middle East and the Africa to 71 percent from current 30 percent. Thus, Industry 4.0 includes some mega trends that are expected to be key enablers for the automotive industry’s transition.
Countries have also been attracting significant FDI to push various Industry 4.0 initiatives. Vietnam made an FDI contribution in 2015 of US$ 14.5 billion, but still stands far behind today by being in the second revolutionary phase. Further, Philippines is expected to be one of the fastest growing automotive markets in South East Asia by 2020. On the other hand, China has laid immense focus on Industry 4.0 in its 13th Five Year Plan and aims to increase its productivity by 25 to 30%. However, UK is slightly backward in this context as only 8% manufacturers are found to have an understanding of Industry 4.0.
Overall, a global inclination is evident towards Industry 4.0 at an elevated level which is also measured as Networked Readiness Index (NRI) in the global market. Networked readiness Index is a key indicator of how countries are doing in the digital world. It depends on whether a country possesses the drivers necessary for digital technologies to meet their potential, and whether these technologies are actually having an impact on the economy and society. The NRI measure showcases the position of countries and an assessment is made based on strategy & organisation, smart factory, operations, products, data driven services and employees. NRI ranks Singapore at first and India at 91 for Industry 4.0. wherein innovations take place in the automotive industry on the following points as - Connected Cars, Automated Driving, Product Lifecycle Management, Cyber Physical Production System, Nearfield communication system(NFC) Integrated GNSS, Automotive Ethernet.
Further, Industry 4.0 is an opportunity to change the economic rules of the industry, especially to overcome the dependence of India on the labour arbitrage based manufacturing work. India has a number of programs to enable innovation and ensure the talent pipeline for manufacturing. There is great importance rendered to Industry 4.0 by India, being the 6th largest manufacturing country. It strives to quickly adapt to the emerging changing environment and is expected to capture more than 20% in IOT market in next 5 years. Particularly, Andhra Pradesh as state is the first to adopt a policy on IOT.
With these initiatives, by 2026 India is expected to be 3rd largest automotive market having emergence of Highways and road networks as also proposed in the union budget 2017-18 and with Faster Adoption and Manufacturing of Hybrid and Electric vehicle (FAME) policy to make electric cars a possibility with a sizeable market segment in future. The Automotive Mission Plan 2016-26 focuses on making it top third country in automotive market by increasing exports to 35% with setting up of separate department to minister the emission norms and safety issue.
Of paramount importance is, ‘Make in India’ concept which has had a huge impact in attracting foreign investment because of: R&D Incentives, favourable FDI Policy, implementation of GST, increasing safety concerns, adaptation in connected mobility segment, IOT Developments, Big Data analytics to build a strong network across industry players and government. A sustainable partnership model is essential between government, private firms, industry bodies, research and financing institutions for promoting Industry 4.0.
Consequently, Industry 4.0 will revolutionise manufacturing around the globe, as did the first three industrial revolutions. With global supply chains and highly interactive markets, this revolution will be vastly different from the previous ones, being much faster and generating results that were heretofore unexpected. It will highlight the fact that small changes in one area of the manufacturing ecosystem will create significant ripples throughout the ecosystem, due to connectivity throughout the supply chain and the speed at which information propagates. Furthermore, Industry 4.0 will enable information to flow not only from manufacturer to product, but between producers, products and, most importantly, customers. The ability to embrace Industry 4.0 and use the opportunities will be a key to success in the new global market for many companies which are both well established and quite new and very innovative. It is clear that Industry 4.0 presents tremendous opportunities, and highlights the need for a highly trained and flexible workforce and production capacity that can answer the needs of tomorrow as well as those of today.
(The Author is Partner, Grant Thornton India LLP)
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