Some of the most cherished political, economic and social structures have been turned on their heads. In a sense, capitalism remains the dominant economic model, but is now evolving drastically in response to ecological impacts, resource scarcity, demographic trends, technology and a host of other factors.
The endless consumer culture that was prevalent throughout the first world has all but collapsed, as more people and businesses place greater strain on living systems, limits to prosperity are coming to be determined by natural capital rather than industrial prowess. This is not to say that the world is running out of commodities in the near future. The prices for most raw materials are at a twenty-eight-year low and are still falling. Supplies are cheap and appear to be abundant, due to a number of reasons: the collapse of the Asian economies, globalization of trade, cheaper transport costs, imbalances in market power that enable commodity traders and middlemen to squeeze producers, and in large measure the success of powerful new extractive technologies, whose correspondingly extensive damage to ecosystems is seldom given a monetary value. The traditional definition of capital is accumulated wealth in the form of investments, factories, and equipment.
Humankind has inherited a 3.8-billion-year store of natural capital. At present rates of use and degradation, there will be little left by the end of the century. This is not only a matter of aesthetics and morality, it is of the utmost practical concern to society and all people. Despite reams of press about the state of the environment and rafts of laws attempting to prevent further loss, the stock of natural capital is plummeting and the vital life-giving services that flow from it are critical to our prosperity.
A transformative natural capitalism recognizes the critical interdependency between the production and use of human-made capital and the maintenance and supply of natural capital. As human population doubles and the resources available per person drop by one-half to three-fourths, a remarkable transformation of industry and commerce can occur.
Unfortunately, the industrial model today is still based on the principle of decreasing product costs through the volume of products manufactured: the higher the volume produced, the lower unit costs become. As a result this industry has been primarily concerned with optimizing the costs and price of products and less so with optimizing the capital required to make them. This industrial paradigm is now being questioned because there is only so far it can go. Given the climate of uncertainty with regard to volumes – a climate generated by the economic crisis – and the increasing diversity of customers and their expectations, the investments required to manufacture products at the lowest cost and in large numbers have created an inflationary trend in capital employed caused by a lack of flexibility or the under-use of the manufacturing base.
At the beginning of the industrial revolution, labor was overworked and relatively scarce (the population was about one-tenth of current totals), while global stocks of natural capital were abundant and unexploited. But today the situation has been reversed: after two centuries of rises in labor productivity, the liquidation of natural resources at their extraction cost rather than their replacement value, and the exploitation of living systems as if they were free, infinite, and in perpetual renewal, it is people who have become an abundant resource, while nature is becoming disturbingly scarce.
Applying the same economic logic that drove the industrial revolution to this newly emerging pattern of scarcity implies that, if there is to be prosperity in the future, society must make its use of resources vastly more productive—deriving four, ten, or even a hundred times as much benefit from each unit of energy, water, materials, or anything else borrowed from the planet and consumed. Achieving this degree of efficiency may not be as difficult as it might seem because from a materials and energy perspective, the economy is massively inefficient.
In the next industrial transition it is not volumes, the scale effect or the labor cost factor that will create value, but product customization, and, in economic terms, the reduction of capital employed to obtain them. These new value drivers possess considerable potential for creating new activities and jobs. Emerging possibilities that will arise from the birth of a new type of industrialism, one that differs in its philosophy, goals, and fundamental processes from the industrial system that is the standard today.
Through this transformation, society will be able to create a vital economy that uses radically less material and energy. This economy can free up resources, reduce taxes on personal income, increase per-capita spending on social ills (while simultaneously reducing those ills), and begin to restore the damaged environment of the earth. These necessary changes done properly can promote economic efficiency, ecological conservation, and social equity.
INDUSTRY 4.0 will massively change work in the future. Automation will enable ever-smaller series production (one-off production) – labor will nevertheless continue to be an important part of production. Thus, Industry 4.0 means much more than connectivity. The future includes intelligent data acquisition, storage and distribution by objects and people. Traditional production-line workers and knowledge workers tasks will amalgamate to an ever greater degree. As a result, many labor processes will be carried out more efficiently and effectively in the future. The processes will also provide a variety of new assistance systems. This means that administration and production processes will be further automated as well. Industry 4.0 includes a truly circular –bio based- economy, instead of making products from new materials and disposing of them after use, supplies will be continuously recovered and re-used, thereby eliminating waste and making better use of resources. Aside from being good for the environment, this has business benefits too – such as cost savings and business continuity by decoupling growth from the reliance on scarce raw materials.
There is more to Industry 4.0 than its technical dimension. Technologies like factory virtualization, smart and intelligent machines, the IoT, the cyber production system, 3D technology, cobots determine the debate:
- Time-critical process optimization inside factory to support zero-defect manufacturing, increased efficiencies, worker satisfaction and safety, leveraging the integration of massive sensing technologies including 3D scanning technologies, adoption of wearables, and collaborative robots in closed-loop control systems. This use case family is characterized by communication latencies that may go below 1ms.
- Non time-critical optimizations inside factory to realize increased flexibility and eco sustainability, and to increase operational efficiency e.g. through minimal stock levels. Given the harsh and metalized industrial environments, indoor coverage and high availability are key requirements.
- Remote maintenance and control optimizing the cost of operation while increasing uptime. This use case family involves the integration of 3D virtual reality, and will require increased capacity to facilitate video-supported remote maintenance, from any place in the world.
- Seamless intra-/inter-enterprise communication, allowing the monitoring of assets distributed in larger areas, the efficient coordination of cross value chain activities and the optimization of logistic flows. To support these use case, there is a specific need for flexible, reliable and seamless connectivity across different access technologies, as well as the support for mobility.
- Connected goods, to facilitate the creation of new value added services and the optimization computer aided design driven by real-time data, collected during the complete lifetime of a product. There is the need for ultra-low-power (high autonomy), and ultra-low-cost communication platforms.
This forth industrial revolution will transform the economic paradigm and the mechanisms for creating value that underpin it. Manufacturing has, in effect, switched from a mindset of mass production to one of mass customization. No longer is it based on scale and volume effects but on flexible and localized production situated close to centers of demand. It manufactures ‘on demand’ and no longer creates inventory, instead dynamically adapting itself to demand. It is more predictive and auto-corrective and it involves less trial and error. Its logic is now focused not on the product but on usage, and it has also switched from a rigid form of labor organization, inherited from Taylorism, to a flexible form – enhancing the appeal of work as a result. It potentially represents a complete overhaul of the economic rationale behind business:
RADICAL RESOURCE PRODUCTIVITY. Radically increased resource productivity is the cornerstone of natural capitalism because using resources more effectively has three significant benefits: it slows resource depletion at one end of the value chain, lowers pollution at the other end, and provides a basis to increase worldwide employment with meaningful jobs. The result can be lower costs for business and society, which no longer has to pay for the chief causes of ecosystem and social disruption. Nearly all environmental and social harm is an artifact of the uneconomically wasteful use of human and natural resources, but radical resource productivity strategies can nearly halt the degradation of the biosphere, make it more profitable to employ people, and thus safeguard against the loss of vital living systems and social cohesion.
BIOMIMICRY. Reducing the wasteful throughput of materials— indeed, eliminating the very idea of waste—can be accomplished by redesigning industrial systems on biological lines that change the nature of industrial processes and materials, enabling the constant reuse of materials in continuous closed cycles, and often the elimination of toxicity.
SERVICE AND FLOW ECONOMY. This calls for a fundamental change in the relationship between producer and consumer, a shift from an economy of goods and purchases to one of service and flow. In essence, an economy that is based on a flow of economic services can better protect the ecosystem services upon which it depends. This will entail a new perception of value, a shift from the acquisition of goods as a measure of affluence to an economy where the continuous receipt of quality, utility, and performance promotes well-being. This concept offers incentives to put into practice the first two innovations of natural capitalism by restructuring the economy to focus on relationships that better meet customers changing value needs and to reward automatically both resource productivity and closed-loop cycles of materials use.
INVESTING IN NATURAL CAPITAL. This works toward reversing worldwide planetary destruction through reinvestments in sustaining, restoring, and expanding stocks of natural capital, so that the biosphere can produce more abundant ecosystem services and natural resources.
All four changes are interrelated and interdependent; all four generate numerous benefits and opportunities in markets, finance, materials, distribution, and employment. Together, they can reduce environmental harm, create economic growth, and increase meaningful employment.
Automated flows (via autonomous vehicles or cobots) provide a relatively low Return On Capital Employed (ROCE) impact, because savings on logistics costs are partly offset by investments in automation solutions (vehicles, equipment and software). However, the issue here is not automation, but making the whole system more flexible and responsive and cutting inventory levels and throughput, which impact on ROCE. Such an automated system will be able to perform tasks that are beyond human capabilities with a huge combination of flows and parts diversity required by customization.
Smart machines are able to correct themselves and can operate both separately to and in connection with each other, through the night, for example. Given their ability to operate for far longer on their own, the operator adopts a very different approach of problem solving or correction. Instead of doing it, they make the machine do it.
Predictive maintenance systems enable improved planning of machine downtime, since it becomes foreseeable. This ensures that tools are used in a more efficient way. The impact on the job performed by the operator is considerable. From a logic of manual and visual inspection, they will adopt a logic of diagnosis and problem solving.
The cyber-production system is the upper layer of command of the factory and its suppliers: It enables mass customization and the readjusting of production planning in line with demand variations. It will also allow switching from a switch from push production – make and build up inventory – to pull-production – make to order. A yield management approach can be applied for the product pricing, with discounts according to lead time. All of this brings planning and logistics jobs and management practices into question and ultimately leads to their transformation.
Several scenarios revolve around a more complex relationship between humans and machines:
- The automation scenario: systems direct humans. Monitoring and control tasks are taken over by technology. It prepares and distributes information in real time. Employees respond to the needs of cyberphysical systems (CPS) and take on primarily executive tasks. The abilities of lesser skilled workers are thereby devalued.
- The hybrid scenario: monitoring and control tasks are performed via cooperative and interactive technologies, networked objects and people. The demands on employees increase because they have to be considerably more flexible.
- The specialization scenario: people use systems. CPS is a tool to support decision-making. The dominant role of the qualified workers is maintained.
THE EMERGING MENTAL model are centers of creativity and innovation, embedded in effective networks of relationships (for example with suppliers and universities) where capable and talented people use world-class technologies and processes to create new ways of adding value.
Future human-factory relations will become more flexible through the use of advanced IT that supports dynamic arrangement of work-time schedules, so that personal schedules will be more respected. Also the sharing of knowledge across platforms will be enhanced and learning cycles will be shortened due to data storage, semantic technologies and the ability of the worker to merge and analyze the company’s experiences with his/her own experiences for the creation of new ideas. Additionally, smart robotic technologies will be able to contribute to improvement of ergonomics in production to help address the needs of workers and support them in load intensive and routine tasks, which will provide workers with the opportunity to focus on knowledge-intensive activities. Also customer integration, which enables customer-specific, or customer-driven product design and faster joint innovation cycles, should be mentioned as a concept of focusing on humans in manufacturing.
WILL WE HAVE PEOPLE-LESS FACTORIES? Will robots replace human workers in the factories soon? Are we heading in the direction of an erstwhile science-fiction scenario where machines dominate human race? If the past helps us predict the future, these fears may be exaggerated. The previous three industrial revolutions did not reduce employment in general. A different kind of talent and skills will however be essential. The workforce will play an increasingly important role in future manufacturing, although technological advances will lead to the automation of many existing manual processes. Rather than replacing people, these developments will change their roles towards more knowledge-based work. The rise of smart technology will be a key driver of this shift, with people required to work as part of an integrated socio-technical system. There will be a change from ‘doing’ the manufacturing to monitoring automated processes in real-time and responding to feedback from machines to optimize process capability. Whilst there may be some de-skilling in traditional trades, there will be widespread up-skilling in areas related to technology, and the organization and management of processes particularly with respect to meeting the needs of the customer. In essence, reskilling will be required. Technological advances will be rapid and will need to be matched by continual training and development, and flexible non-bureaucratic processes. For some a change in mindset will be required such that training is viewed as investing in the future rather than a short-term cost.
HOT TOPICS (for discussion)
- Sustainable manufacturing including recycling and minimization of waste.
- Introduction of green manufacturing technologies.
- Improved and simplified ICT including simulation/modelling tools for design, processes and manufacturing systems.
- Automation is a given; advanced robotics and intelligent manufacturing systems.
- Next generation materials with novel functionalities.
- Manufacturing enterprise systems and responsive, distributed design and production systems.
- Straightforwardly reconfigurable facilities and systems, that are agile and capable of fast ramp up as demand grows.
- The importance of talented, well-educated and creative people.
- Business models that focus on creating, operating and exploiting more integrated value chains.