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Industry 4.0: The Effects

Mahmut Sert

Industrial Engineering - Faculty of Management


Raşit Öner

Management Engineering- Faculty of Management


Öznur Utangeç

Industrial Engineering - Faculty of Management


English 201

Tim Davis

Apr 16, 2017

The Effects of Industry 4.0

Thesis:  Industry 4.0 will have three major effects on human life in the near future which are                                                             

      productivity, unemployment and new technologies.

I. Productivity

A. Cost

  1. Productivity conversion

  2. Productivity manufacturing costs

B. Labor Productivity

    1. The application of automation and information systems

    2. The health and safety of human workers

II. Unemployment

A. Removing of the middle-class

 1. Jobs that can be replaced by robots

     2. Danger for white collars

 B. Universal Basic Income

    1. No more new jobs

    2. New Elite Class

    3. Example from Finland  

    4. Basic Income vs Traditional Economics

III. In technology

 A. Digitalization

 1. Data Analysis & Digital Security  

 2. Internet of Things

B. New Technological Devices

1. Autonomous Robots

2. 3D Printers

3. Smart Factories

There was a time when people thought labor was a necessity for manufacturing products. In fact, human power has been mainly replaced by steam power, electricity and machinery as technology has advanced since the dawn of the Industrial Revolution. Now, we are living in the age of the new digital industrial technology called Industry 4.0. According to Rüssman et al., \"In this transformation, sensors, machines, work pieces and IT systems will be connected along the value chain.\" Connecting the systems to each other by Internet brings about making clear analysis and predicting possible failures and adopting them to changes (2015, Chapter. 2). Obviously, getting computers and automation together with systems equipped with machine learning algorithms have some consequences on the way factories work. Apart from the old Industry Revolutions, Industry 4.0 will change the whole system in the world by making machines learn and connect with each other. Industry 4.0 will have three major effects on human life in the near future which are Productivity, Unemployment and New Technologies.

    The first effect of Industry 4.0 to human life in near future is productivity because it will provide great savings in manufacturing and industry. To begin with, costs of manufacturing can be decreased by Industry 4.0 which increases productivity with technological improvements, but firms need new and expensive devices. For example, new, expensive and latest technology devices have huge cost but they are profitable in the long term. According to RüBmann et al., engineers who work on Industry 4.0 will transform production from simple automatic cells to combined, automatic plants which get into touch each other and improve elasticity, quickness and quality (2015, p. 2). These advanced attributes allow to be produce more product in less time. RüBmann et al. state that productivity developments on reorganization prices vary from 15 to 25 percent, excluding equipment. Productivity increases

5 to 8 percent will be accomplished when the equipment prices are included (2015, p. 5). With the correct expense planning of conversion, it is clear that a firm or factory will make profits in the long term. In addition, Industry 4.0 also ensures data for all details via computer control and reduces the error rate to the minimum so manufacturing costs decrease. According to RüBmann et al., actually the maximum cost savings about 50 percent for producer, will be generated by the advantages of automatic control for logistics (2015, p. 11). Results of the Fourth Industrial Revolution are not for only specific sections of factory, they are for all factory. Marr states that when all stages of the fabrication and shipment operation have information, procurement succession could be more easily checked. For better dependable and logical productivity, a product could be manufactured by tests of PC. Furthermore, the outcomes for large numbers of firms could raise incomes, market portion and gains (2016, p. 4). If economy of companies will increase, companies can invest more technological enterprises. When a company starts to grow with applications of Industry 4.0, snow ball effect will undergo for this company. As RüBmann et al. (quoted Industry 4.0 – The Future of Productivity and Growth in Manufacturing Industries) declared:

Industry 4.0 will make it possible to gather and analyze data across machines, enabling faster, more flexible, and more efficient processes to produce higher-quality goods at reduced costs. This in turn will increase manufacturing productivity, shift economics, foster industrial growth, and modify the profile of the workforce—ultimately changing the competitiveness of companies and regions. (2015, p. 4)

Ideally, manufacturing costs decrease and economy of firms increase when improvements of Industry 4.0 are applied by bosses and managers. It is clear that decreasing costs of

manufacturing with Industry 4.0 is a major effect for them being regarded as advantages of Industry 4.0.   

    Apart from reducing the manufacturing costs, Industry 4.0 also manages a noteworthy increase in the labor productivity. One way of doing this is through the application of automation and information systems. For instance, the information systems such as enterprise resource planning (ERP) and manufacturing execution system (MES) greatly increase labor and factory productivity. MSG Experts state that the increment in employee’s productiveness is simplified by data systems. Cooperation in all levels of institution and sections has improved with publicity of email, mutual video call facilities and collective white board. Application and practice of different plans across countries and cities are ensured by the boosted cooperation (2016, para.4-5). Also, the application of automation and information systems aims at minimizing waste of time. Industrial Internet Consortium claim that the

Enterprise Resource Planning software system programs an optimized indent working timetable and enables the logistics to operate without any problem so the workers deliver components which arrive from the storage right on time (2016, p. 1). With fast communication between different departments, it is clear that factories can produce more products in short term. In addition, Industry 4.0 is also planned so as to improve the health and safety conditions of human workers with more safe machines, early warning system and advanced detectors. As Sniderman, Mahto and Cotteleer (quoted in Industry 4.0 and Manufacturing Ecosystems) declared:

Industry 4.0 technologies can enable safer conditions for workers, enhancing labor productivity and effectiveness. Joy Global, a mining equipment manufacturer, added about 7,000 sensors to its remote-controlled extraction device, enabling it to mine in

extremely deep mineshafts—areas often dangerous to workers who typically perform the work. Similarly, Boeing uses a positioning system to pinpoint worker location and assess the status of their safety harnesses, improving worker safety. (2016, p.15)

Being one step ahead of problems and defects reduces the risks of accidents that may happen. Bliss claims that companies which already manufacture latest technology products have an obvious opposing benefit. For instance, establishments which specialize in machinery and plant engineering use detectors to mechanically point out if an engine requires repair before this leads to problems (2016, para. 5). This really is a big step for saving life of workers and reducing number of work accidents. All things considered, one cannot deny the fact that developing health and safety conditions of human workers is one major effect of developments of Industry 4.0 which increases labor productivity.

 The second effect of Industry 4.0 in the near future will be the creation of the huge amount of unemployed people. Firstly, in this revolution unemployment will occur permanently so that means removing of the middle class by contrast with the past three revolutions in the history. For instance, jobs that can be replaced by robots are the ones that managers operate nowadays via Industry 4.0.  Frances Karamouzis, vice president  and distinguished analyst at Gartner, indicates that by 2018, at least three million  workers worldwide will be supervised by robobosses (Chui, Manyika & Miremadi, 2016, Chapter. 4). It is obvious that many managerial tasks can be done by robots and that can make many members of middle class useless. Many of the people working hard and effective is a necessary workforce for governments and corporations. However, when they become unskillful they will be replaced by machines that use artificial intelligence.  In addition to that, unemployment is not just a risk for blue collars working in fabrics but also danger for

white collars. For example, According to James Manyika Last year, recently represented

technologies could automate 45 percent of the jobs people workers do and about see 30 percent or more of their constituent activities of 60 percent of all occupations can be replaced by robots thanks to technologies available today (Karamouzis cited by Pettey, 2016, Chapter. 2). The significant feature of this revolution is that it will clearly not create new jobs for white collars like the Industrial Revolution in the 18th century because according to Bernard Marr, new way of working way of fabrics requires little input from human operators (Marr, 2016, Chapter. 2). Ideally, this time people that was working in mine that found a new job in a room in front of a computer will experience hard time to find a new job due to robots can now do heavy jobs like the mine jobs and the managerial jobs like operating the machines.

In addition, Industry 4.0 also creates a new economic system due to the fact that it will not create new jobs. When workers are replaced by robots people cannot be paid. For example, according to Elizabeth Rhodes, the research director for Y Combinator’s UBI Project, if technology destroys jobs or jobs continue to become less secure a huge amount of people are going to be unable to satisfy their requirements with earnings from employment (Rhodes cited by Sadowski, 2016, Chapter.4). It is obvious that the current Money system will collapse due to diminishing number of jobs. Apart from money system, Industry 4.0 will affect workforce environment. For example, Odipo Riaga indicates that governments will take care of their citizens’ basic needs (food, clothing, shelter, education, health) through a payment system called universal basic income, in which they are paid for being citizens. Citizens can use this

Money that government give e.g. at the rate of 200$ per month per person to demand for luxury goods and services created by robots. This, in basic theory, should be able to work

(Riagan, 2016, c.13). Clearly, this really is a changing people’s class. When people are

ensured for basic demands they can spend the money on fancy stuff they want to buy.

Moreover, many countries even started basic income projects in this year. For instance,

Finland has started a radical experiment giving 2,000 citizens a guaranteed income.

According to Kattasova, Participants will receive €560 a month and the main idea of this universal income is that it ensures workers greater security, especially as technological development reduces the need for human labor (Kottasova, 2016, Chapter. 2). After Finland Canada and Germany started the same basic income Project in some cities of their country. Obviously, other countries will come up with their own plans for protecting their citizens from advanced robotic automation system that makes people jobless. Universal basic income can be more efficient than traditional welfare systems, and will also protect people better as economies change through automation (Henley, 2017, c. 13). Consequently, the majority of people will receive basic universal income in the near future.

It is obvious that people that have corporations and today’s billionaires will have so much power on economy that it will create a new elite class. How these elites use that much of a power or see other people is unknown for now. It is clear that the new money system and creation of new elite class are the most significant effects of Industry 4.0.

  The third effect of Industry 4.0 on the human life in the near future is technological development because new smart devices and opportunities change individuals’ daily routine and their habits. To begin with, digitalization can be achieved by driving digital transformation. For example, the maximum storage of data results in more data analysis need. To summarize McKinsey Digital (2015), digital conversion is necessary for companies’ future. For this conversion associations should improve their digital facility also they have to

realize that data managing is going to be a main part of the routine layout (p. 9). With the correct planning of data store, it is clear that specialists can find whatever they need to know and give the right decision. Clearly companies attach importance to decision-making, data and data analytics are a crucial a point for Industry 4.0. According to Geissbauer, Vedso & Schrauf (2016), the external resources and interior information should be combined because varied types of data accumulate from several resources. With using the professional data analytics techniques is important by building from data to the valuation (p.18). In view of all this information, data systems effects is going to occur in business life predominantly. But it affects also health; to illustrate, Smit, Kreutzer, Moeller & Carlberg (2016), state that smart clinics where sensors and equipment in charge to determine patients’ information and health issues should be protected data and need data security. Assuming that hackers access information of patients by occupying clinics network, it is a danger for life and health (p. 38). In addition, when accessing the database becomes effortless, connectivity between departments or devices would be simple. Moreover it may lead to security problems. Smit et al. (2016), indicated that the devastating violence that could be deliberate or casual and the undesirable behavior of unapproved users bring about data security issues and should be guarded against (p. 35). Data security would be accessed each part of every moment of an individuals’ life. For example, according to McKinsey Digital (2015), data needs to be protected from a security system that is called cyber security. Cyber security contains all the stages in the manufacturing system and governance data (p. 9). While building digital conversion, predictable associations make own security system and conceive digital trust. In addition to these, Industry 4.0 affects the Internet connectivity among devices, or to put it in different way Internet of Things. Internet based products and services will become

widespread. As Roblek, Meško and Krapež (2016), state that Internet of Things (IoT) symbolizes the association between all small inventions in smart projects. Digitalization plays a crucial role by constructing new business models due to the fact that new technological inventions reach the Internet easily and fast (p. 4). Internet of Things is going to increase demand of smart devices. Without human impact devices can communicate and decide what they should do. It is clear that technological development provides digitalization that has potential to convert the human role life cycle. Apart from digitalization, Industry 4.0 manages a noteworthy impact on the new technological devices. One way of doing this is thorough autonomous robots. For example autonomous robot technology will change manufacturing layout. As Rüßmann et al. (2015), claim producers overcame complicated missions by using robots in plenty of industries, yet robots have been developing and getting better day by day. In the near future robots features are greater self-governing, adaptable, joint and they will communicate with each other. If autonomous robots drive in today production system, cost will decrease and facility of robots will expand (p. 3). Moreover need of labor is going to diminish because of autonomous robots. They can work faultlessly without human controls. When there is an issue or a defect in a robot, it sends a message to other robots which work in the same production line. Automatically the system finds a solution that could wait to fix defected robot on its own or add another robot to the production line. Obviously, self-directed inventions spread from manufacturing system to the varied areas that has human activity. As Kagermann (quoted in Change Through Digitalization – Value Creation in the Age of Industry 4.0) claimed in 2015,

In the future, smart navigation systems on board cars, buses, trains and other vehicles will share information about traffic volumes, particulate levels and disruption to local

public transport services, enabling traffic in the cities of tomorrow to be managed

autonomously (p. 27).

The automation process will obtain various successes, convert individuals’ roles in society and reach various areas. In addition, the additive manufacturing will be more popular by increasing use of 3D printers. According to Berman (2012), while outputs are constructed on a stratified basis, 3D printers apply additive manufacturing method via using the principle of a series of cross sectional segments (p.155). It is clear that 3D printers present simple and optional produce for consumers. Mechanism of work leans on a software which includes data of coordinates. Moreover they create new production sectors which produce identical products. In addition to these, Industry 4.0 affects factories to become smart. As Kagermann (quoted in Change Through Digitalization – Value Creation in the Age of Industry 4.0) declared in 2015

In the smart factory, human being, machine and resources communicate with each other as naturally as in a social network. This turns the conventional approach to manufacturing on its head; products are uniquely identifiable, may be located at all

times and know their own history, current status and alternative routes to achieve their target state. (p. 33)

As a result of Industry 4.0 smart technology will enable smart production in smart factories which are going to work during all the day. Moreover smart factories take control energy consumption. To summarize Nayak (2015), in the Website of high energy costs are a threat for the companies and they should be reduced. Smart factories use smart inventions

such as meters, grids and sensors decide necessary energy rate and assemble level of energy for production in long term (para. 6). Ideally, companies desire to avoid waste of energy, for this reason smart factories add new value which is no need light. New smart factories are called lights out factories and usage of lights out factories are going to rise. On accounts of all these facts, it can be said that technology is a significant part of Industry 4.0. Eventually new inventions, new products and new methods are going to be facts in the near future.  

 In conclusion, in the future productivity, unemployment and new technologies will be the three significant influences of Industry 4.0 on people life. Despite the fact of being newer than recent revolutions, Industry 4.0 converts manufacturing systems as well as the role of the human in production. It also affects daily routines and devices of people through developing connectivity. For all these reasons, The Fourth Industrial Revolution offers various opportunities to reach and use information for individuals when needed. It seems inevitable that Industry 4.0 which is starting to be used in every area for diverse purposes, will soon become more widespread so that it affects every point of human life. Therefore, Industry 4.0 should become a world strategy to increase output even though it looks like the manufacturing strategy of only Germany. Also, government and private organizations should attach importance to funding and supporting of engineers’ demands for this transformation. Consequently, The Fourth Industrial Revolution will truly rotate to the near future of the world so that a new era will start for the humanity.  

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