Industry 4.0 and Regional Transformations

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By Professor David Bailey and Professor Lisa De Propris
Department of Management

Previous industrial revolutions were intricately associated with new technologies.

Innovations in technology have often triggered a surge of production, the first example of this was steam power and railways, which then grew to the introduction of electricity and synthetic chemistry, and finally led to electronics, computers and aerospace.

Today a raft of new technologies including Artificial Intelligence (AI), automation, 3D printing, sensors and much more are seen as driving a wave of innovation that takes us into a fourth industrial revolution, or ‘Industry 4.0’. This is likely to transform how industry – and the wider economy – works.

In turn, what is termed ‘smart manufacturing’ may enable the upgrading and anchoring of manufacturing activities even in advanced and high-cost economies such as the European Union. We have identified three key characteristics of smart manufacturing:

  1. New technologies will stimulate new sectors and upgrade existing ones

Core to this is the symbiosis between traditional manufacturing and services, through processes of “servitisation”. Take Rolls-Royce, which of course produces engines, but also sells them within a “power-by-the-hour” maintenance package that restructures its offering as a service that delivers the ability to fly planes rather than simply selling a one-off product.

  1. Smart manufacturing will fill market niches for personalised and customised products

These will be produced in small batches or even as unique pieces which require customers to co-innovate or even co-produce with the manufacturer.  One example is Shapeways, which offers a 3D printing marketplace and service. Customers can design their own work and create 3D printable files alongside Shapeways, which are then made for them.

Products like this tend to have a high content of technology, innovation, customised design and servicing. Moreover, their consumers tend not to be as price sensitive, so technology, knowledge and innovation come to the fore in terms of what makes the firm compete in the market.

  1. Smart manufacturing will redesign product supply chains by integrating the local and the global more strategically

Some hands-on innovators in the so-called “makers movement” are making the most of a trend towards linking innovating and making. They choose suppliers nearer to home, but connect with demand both close and far from home.

This offers the prospect of a more efficient form of production, which we can also see in the increased use of more sustainable processes, where resources are re-manufactured and components re-used, and where bio, waste or natural products are used as feedstocks.

It is this kind of circular-economy style efficiency that presents a real opportunity for advanced economies to pursue more evenly distributed and sustainable socio-economic growth.

Shaping policy for Industry 4.0

Policies need to be put in place to enable businesses to properly embrace Industry 4.0. The need for constant re-skilling and upskilling is important as technologies develop and automation eliminates many jobs while creating new ones.

Industry 4.0 will play out differently across sectors and regions. A ‘transformative’ industrial policy will be needed to bring them together with the new emerging technologies. What this suggests is that we need more of a regional scale to industrial policy. Governments don’t always do this very well. The British government’s industrial strategy, for example, was meant to join up sector policy and place but so far has largely failed to do so.

Indeed, a major concern is government commitment and the lack of scale. Beyond the ‘Made Smarter’ pilot, there is £121 million for the UK as a whole for business to adopt new digital technologies. This isn’t going to go very far, and doesn’t compensate for the government’s scrapping of the Manufacturing Advisory Service a few years ago, which was a major policy blunder.

Other countries like Germany and Sweden have gone much further in embracing Industry 4.0 and supporting businesses in making the most of Industry 4.0 opportunities. The UK needs to follow suit.

Our RSA Regions and Cities book Industry 4.0 and Regional Transformations brings together a group of expert contributors to explore the opportunities and the challenges that Industry 4.0 (or smart manufacturing) is likely to pose for regions, firms and jobs in Europe.

Drawing on theory and empirical cases, it considers emerging issues like servitization, new innovation models for local production systems and the increase in reshoring.

Industry 4.0 and Regional Transformations captures the complexity of this new manufacturing model in an accessible way and considers its implications for the future. It will be essential reading for advanced students and researchers and policy makers in regional studies, industrial policy, economic geography, innovation studies, operations management and engineering.

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