Download INDUSTRY 4.0 REVOLUTION. CHALLENGES AND

Lettera Clu b
September 2016 - no. 77
Club The European House - Ambrosetti
This Lettera is an initiative of Ambrosetti Club.
However, its content does not necessarily reflect the views of Club members.
77
INDUSTRY 4.0 REVOLUTION.
CHALLENGES AND OPPORTUNITIES FOR EUROPE
1
2
X Commissione Permanente, “Indagine conoscitiva su
«Industria 4.0»: quale modello applicare al tessuto
industriale italiano. Strumenti per favorire la digitalizzazione
delle filiere industriali nazionali”, June 30, 2016.
Observatory on Europe is the think tank conceived by
The European House - Ambrosetti in Brussels. It aims to
pragmatically contribute to the success of the European
Union, providing its political and economic leaders, as
well as its citizens, with high quality studies, analyses
and proposals in order to help them build a stronger
Europe from economic, social and political standpoints.
EUROPEAN MANUFACTURING
INVESTMENT AND SIMULATION
NEEDS
NEW
For centuries, manufacturing has been the productive core of the European Union. This remained
true until the expansion of service industries in
the second half of the last century when, little-bylittle, manufacturing saw its weight decline within a
number of European economies, leaving room for
services which, in any case, remain closely tied to
the industrial sector.
In fact, while in 2000 manufacturing accounted for
18.8% of Added Value in the European Union,
fourteen years later this percentage had dropped
to 15.5%.
Trend and weight of Gross Value added in EU manufacturing sector
(2000=100 and % on total value added), 2000-2014.
18.8%
120.6
15.5%
% weight of manufacturing GVA on total activities GVA
Total Activities GVA growth
% share on total GVA
145.9
Index year (2000=100)
The term “Industria 4.0” is becoming increasingly
central in the economic, social and political debate,
both nationally and internationally. It refers to the
application of digital technologies to the manufacturing sector.
This debate centers around the changes in models
for business, production and work organization
made possible by digital technologies, as well as
their impact on value creation, productivity and
employment.
Experts agree in their definition of this phenomenon
as the “fourth industrial revolution”, indication
of its magnitude and importance of the changes
connected with it.
The European Union has understood the scope of
Industry 4.0 and has activated policy measures and
allocated funds to ensure that the continent does
not find itself unprepared or left behind in the face
of international competition.
The Italian government has also recently placed this issue at the center of its agenda. In July
2016, the Minister for Economic Development
presented the results of a research on Industry 4.0
models that could be applied to Italian business1
and announced the inclusion in the next “Legge
Finanziaria” of a major investment plan to promote digitalization in Italian companies.
The Observatory on Europe2 dedicated to the challenges and opportunities connected with Industry
4.0 detailed study, analysis and discussion at its
ninth forum held on June 30, 2016.
This Lettera offers a summary of the analysis and
proposals that emerged within this context, and also
presents the challenges and opportunities connected with the Industry 4.0 approach, particularly
given the current state of European manufacturing.
Manufacturing GVA growth
Source: The European House-Ambrosetti
elaboration on Eurostat and AMECO data, 2016
European manufacturing is also losing ground on a
global level. In 1995, European manufactured products accounted for 31% of the world total, while
in 2013 their share had fallen to 27%. During the
same period, the European Union’s contribution to
global Added Value produced by the manufacturing
sector fell from 23% to 17%.
This decline in the manufacturing sector is not
an exclusively European phenomenon, nor is it
crisis-related. In fact, it affects all the main
industrialized economies.
1
However, European manufacturing is growing
less than in the United States. Between 2000
and 2014, the added value generated in Europe
Nonetheless,
the EU manufacturing
sectorthe
is one generated by
increased
by 20.6%, while
becomingAmerican
less-important
on a was
global
level,
industry
34%.
performing worse
than
the US and struggling
to
3
in the European
manufacLabor
productivity
recover from the 2008 crisis
turing sector also grew less than in the United
States4. The same is true for industrial production which, in Europe, is struggling to recover
Some facts:
from the crisis, while in the United States it has
The share of the manufacturing sector to total European
surpassed
pre-2008
levels.
But this
added value dropped
from 18.8%
in 2000
to 15.5%
in is not the case
2014
for all industrial sectors. High-tech manufacturing
hasthe
been
than others and grew by over
On a global level,
shareless-affected
of European manufacturing
between
2000
andin2015.
exports dropped35%
from 31%
in 1995
to 27%
2013
The
declining
relevance
of manufacturing in
The weight of European manufacturing added value to
economies
is toalso
from the
the world totalEuropean
dropped from
23% in 1995
17%worrying
in
2013
standpoint of employment. In 2000, this sector
employed
18% manufacturing
of the European
Between 2000 and
2014, European
added workforce, but
value grew by 20.6%,
while thatin
of the
US byThe
34% absolute number of
only 14.2%
2014.
thoselabor
employed
in the
sector
has also fallen, with a
EU manufacturing
productivity
grew
by 2.1%/
year between 2000
2014, 15%
while in
the US it2000
grew and 2014.
dropand
of over
between
by3.2%
Despite this less-than-rosy picture, Europe cannot
EU industrial production
is struggling
to recover
from
allow itself
to abandon
its industrial
base or see it
the crisis, while in the United States it has surpassed
further
eroded.
In
fact,
the
manufacturing
sector
pre-2008 levels
remains central to the growth, the development
and the competitiveness of the European Union
and its economy. It generates a turnover of more
€7 billion,
accounts for 15.5% of the total
priority for EUthan
growth
and development.
Added
Value,
purchases
more than €5,400 billion
ide the key to recovery
in
goods
and
services
each
year, and still employs
f digital technologies to the manufacturing sector
14.2% of the total workforce.
enon as the “fourth industrial
revolution”
the in the service sector is cloIn the EU,
60% given
of jobs
and work organization, as well as the impact on
sely tied to manufacturing, as is 65% of the productivity, 74.6% of exports and 65% of private
Industry 4.0, expected benefits:
investment in R&D5. The average retribution level
Greater efficiency
quality
products
processes
perand
capita
in inthe
sectorand
is also
20% higher than the
one
of
the
economy
overall.
Greater focus on cost centers
In light of these figures and the importance of
Increased productivity
manufacturing for other sectors of the economy
More rapid processes
and society at-large, in our view, relaunching
European
manufacturing
sector is a priority
Management and
participation
in global value chains
for the European Union, to render it more comGreater customer involvement
petitive on a global level6.
H CONCEPT
INDUSTRY 4.0 COULD BE A DECISIVE LEVER
IN RELAUNCHING EUROPEAN INDUSTRY
RESEARCH
es and young people. It4 is also
fundamental
invest2.1%/year
in the digital
Between
2000 andto2014,
in the EU compared
the workforce, especiallywith
management,
which
3.2% in the
US. is being asked to
rough continuos learning
initiativesOECD, Eurostat and European Commission,
5 Source:
The application of The
cutting-edge
digitalsector
and computer
manufacturing
remains, even today,
centralprocesses
to the growth,
development and
technologies to production
and industrial
competitiveness
therelaunch
European Union
organization could serve
as a driverof to
and its economy
European manufacturing. In fact, in recent years,
digitalization has been transforming not only society
and the most innovative sectors of the economy, but
Some key statistics regarding European manufacturing:
also traditional industry, thanks to the following,
It generates
a turnover of more than €7,000 billion
interconnected, enabling
factors:
– potential offeredItbyrepresents
the analysis
of structured,
15.5%
of the total comAdded Value in the
European
Union
plex databases (Big
Data
analytics)
– additive manufacturing
that and
provides
greaIt purchases goods
servicesfor
worth
over €5,400 billion
a year
ter customization,
more complex and sustainable
designs, and more
rapid14.2%
and ofeffective
prototype
It employs
the European
workfroce
and testing phases
It generates
74.6%platforms
of exports to allow
– integrated digital
and cloud
all players and equipment
the producIt undertakes involved
to 65% ofin
private
investment in R&D
tion process throughout the entire value chain to
60% of European Union service sector jobs are connected
communicate and
make
decisions
in real time
to and
depend
on manufacturing
– Industry of Things, which refers to all devices,
Contributes to 65% of productivity in Europe
sensors and smart machinery capable of commuIts per capita
leveland
is 20%
nicating and interacting
withretribution
each other
withhigher than the
rest of the economy overall
people, transmitting
data in real time, anticipating
breakdowns, etc.
– increased involvement of the customer equipped
with new technologies and involved in the processes
Relaunching European manufacturing is a
of product creation, testing, distribution, purchaIndustry 4.0 could provi
sing and post-sales assistance
The
term
Industry
refers to the application of
– automation which provides for increased4.0
decentralization, efficiency, security
andagree
productivity.
Experts
in their definition of this phenome
radical changes
in business models, production
The positive impacts on European
manufacturing
value creation, productivity and employment
expected from this “fourth industrial revolution” are
numerous:
Industry 4.0, enabling factors:
– greater efficiency
and and
productivity
thanks
to
Structured
complex database
analytics
data analytics, automation, enhanced quality conmanufacturing
trol of products Additive
and processes,
preventive diagnostics of equipment
status, digital
greater
focus
in-house
Integrated
and
cloudon
platforms
cost centers and on distribution. It is estimated
Industry of Things
that, thanks to efficiency savings of between 6%
Increased in
customer
centrality
and 8%, the increase
turnover
is expected to
7
surpass €370 billion/year
Automation
– more rapid processes thanks to supply chains
based on data analytics, with a reduction in delivery order times of 120% and time-to-market
Urgent action is needed to remove obstac
lower by 70%.
the development of digi
– management and participation in interconnected
Proposals of the Observatory on Europe:
and digitalized global value chains characterized by
Setofcommon
guided by
the market, based on wha
major integration
supplierstandards,
and outsourcer
chains
open ecosystems, without damaging Europe’s ability to innova
– enhanced customer
involvement
with
higher
levels
required between companies and other players, including thos
of customization and product quality.
Promote the activation of company and cross-industry cooper
These benefits will
not be the
of large
cost-benefit
resultprerogative
from investments
in digitalization
companies alone, even small- and medium-sized
Complete the European Digital Single Market, whose corners
companies will be
to benefit
from
increasingly
theable
activation
of which
could
result in benefits to the Europea
less-expensive equipment and software, as well as
Create adequate digital skills, not only focusing on universitie
industrial robots capable
educationof
of adapting
people whotoareproduction
already established members of
guidetasks.
companies during this period of significant change, thr
peaks and diversified
model. This must involve
stakeholders, provide unified
6 all relevant
European Commission
shares
this view, and in 2014 it
wide level, thus avoiding The
fragmentation
and overlap,
promoting
set
itself
the
on between industries and companies.target to relaunch European manufacturing so
7
cles and create the right environment for
ital industry in Europe
at currently exists and capable of promoting interoperability and
ate. Without these, it will be impossible to activate the synergies
se from different industries, value chains and sectors
ration networks that are indispensable for obtaining the maximum
stones provide the basis
development of Industry 4.0 and
3 for the“Apparent
Labour Productivity” has been used,
an economy of over €400 Here
billion a year
equivalent to Gross Added Value per person employed.
2016.
that, by 2020, 20% of European GDP will be generated by
the manufacturing sector.
2
Develop a real platform for Industry 4.0 based on the German m
governance of the various initiatives on a national and EU-w
Source: The European
House-Ambrosetti
elaboration
of
investment,
national or regional
specialization,
and cooperatio
European Commission and European Parliament data,
Industry 4.0, Digitalization for production and growth, 2016.
3
H CONCEPT
INDUSTRY 4.0 COULD BE A DECISIVE LEVER
EUROPEAN INDUSTRY
RESEARCH CONCEPT
IN RELAUNCHING
The application
of the
cutting-edge
digital and
computer
Nonetheless,
EU manufacturing
sector
is
becoming
less-important
on a global
technologies
to production
processes
and level,
industrial
performingcould
worseserve
than the
and struggling
to
organization
as US
a driver
to relaunch
recover from the 2008 crisis
European manufacturing. In fact, in recent years,
digitalization has been transforming not only society
and the most innovative sectors of the economy, but
Some facts:
Some facts:
Some key statistics regarding European manufacturing:
also traditional industry, thanks to the following,
The share of the manufacturing
It generates asector
turnover
to total
of more
European
than €7,000 billion
The share of theenabling
manufacturing
sector to total European
interconnected,
factors:
added value dropped from 18.8% in 2000 to 15.5% in
added value dropped from 18.8% in 2000 to 15.5% in
– potential
offered by the analysis of structured, com2014
2014
It represents 15.5% of the total Added Value in the
European Union
plex databases (Big Data analytics)
On a global level, the share of European manufacturing
On a global level, the share of European manufacturing
– additive
manufacturing
that toprovides
for greaexports dropped from
31% in 1995
27%
in 2013
exports dropped
from 31% in 1995
27% in 2013
It purchases
goodstoand
services
worth over €5,400 billion
a year
ter customization, more complex and sustainable
The weight of European manufacturing added value to
The weight of European manufacturing added value to
designs,
rapid
the world total dropped
from14.2%
23% of
in the
1995
to 17%workfroce
in
the worldand
total more
dropped
from and
23% effective
in 1995 toprototype
17% in
It employs
European
2013
2013testing phases
and
It generates 74.6% of exports
– integrated
digital and cloud platforms to allow
Between 2000 and 2014, European manufacturing added
Between 2000 and 2014, European manufacturing added
all
players
and
equipment
involved
inbythe
producvalue grew by 20.6%,
while thattoof65%
the US
by 34%investment in R&D
value
grew by
20.6%,
while that
of the US
34%
It undertakes
of private
tion process throughout the entire value chain to
EU manufacturing60%
labor
of European
productivity
Union
grew
service
by sector
2.1%/jobs are connected
EU manufacturing labor productivity grew by 2.1%/
communicate
and and
make
decisions
real
year between 2000
to and
and 2014,
dependwhile
on manufacturing
in the US it grew
year between 2000
2014,
while ininthe
UStime
it grew
by3.2%
by3.2% of Things, which refers to all devices,
– Industry
Contributes to 65% of productivity in Europe
sensors
and smart
machinery
capable
of commuEU industrial production is struggling to recover from
EU industrial
production
is struggling
to recover
from
the crisis, while inItsthe
it haslevel
surpassed
the crisis,and
while
in the United
has surpassed
perUnited
capita States
retribution
is 20% higher than the
nicating
interacting
withStates
eachitother
and with
pre-2008 levels rest of the economy overall
pre-2008 levels
people,
transmitting data in real time, anticipating
breakdowns, etc.
– increased involvement of the customer equipped
with new technologies and involved in the processes
priority for EU growth
Relaunching
and development.
European manufacturing is a priority
for EU growth and development.
of product creation, testing, distribution, purchaide the key to recovery
Industry 4.0 could provide the
key
to recovery
sing and post-sales assistance
f digital technologies to the manufacturing
The term
sector
Industry 4.0 refers to the application of digital
technologies
to the manufacturing
– automation which
provides for sector
increased decentralization,
security and
Experts
the “fourthefficiency,
industrial revolution”
givenproductivity.
the
enon as the “fourth industrial revolution”
givenagree
the in their definition of this phenomenon as
radical
changes
work
organization,
as wellonasEuropean
the impactmanufacturing
on
and work organization, as well as the
impact
on in business models, production and
The
positive
impacts
value creation, productivity and employment
expected from this “fourth industrial revolution” are
numerous:
Industry 4.0, expected
Industry
benefits:
4.0, enabling factors:
Industry 4.0, expected benefits:
–
greater
efficiency
thanks to
Greater efficiency Structured
and qualityand
in products
complexand
database
processes
analytics
Greater efficiency
and and
qualityproductivity
in products and processes
data analytics, automation, enhanced quality conGreater focus on cost
Additive
centers
manufacturing
Greater
focus on cost
trol
of products
andcenters
processes, preventive diagnostics
of equipment
status, greater focus on in-house
Increased productivity
Integrated digital and cloud platforms
Increased
productivity
cost centers and on distribution. It is estimated
More rapid processes
Industry of Things
More rapid processes
that, thanks to efficiency savings of between 6%
Management and Increased
participation
customer
in global
centrality
value chains
Management
participation
in global value
chains to
and
8%, theandincrease
in turnover
is expected
7
surpass
€370 billion/year
Greater customer Automation
involvement
Greater customer
involvement
– more rapid processes thanks to supply chains
based on data analytics, with a reduction in deli120% and time-to-market
cles and create the
Urgent
right action
environment
is needed
for to remove obstacles very
and order
createtimes
the ofright
environment for
lower by 70%.
ital industry in Europe
the development of digital industry in Europe
– management and participation in interconnected
Proposals of the Observatory on Europe:
and digitalized global value chains characterized by
at currently exists and capable
Set common
of promoting
standards,
interoperability
guided by the
andmarket, based on what currently
and capable
of promoting
interoperability
and
majorexists
integration
of supplier
and outsourcer
chains
ate. Without these, it willopen
be impossible
ecosystems,
towithout
activatedamaging
the synergies
Europe’s ability to innovate. Without these, it will be impossible to activate the synergies
–
enhanced
customer
involvement
with
higher
levels
se from different industries,
required
valuebetween
chains and
companies
sectors and other players, including those from different industries, value chains and sectors
of customization and product quality.
ration networks that are indispensable
Promote the activation
for obtaining
of company
the maximum
and cross-industry cooperation networks that are indispensable for obtaining the maximum
These
benefits will not be the prerogative of large
cost-benefit result from investments in digitalization
companies alone, even small- and medium-sized
stones provide the basis Complete
for the development
the European
of Industry
Digital Single
4.0 andMarket, whose cornerstones provide the basis for the development of Industry 4.0 and
companies
will
be billion
able to
benefit from increasingly
an economy of over €400the
activation
of over
€400
a year
billion
a yearof which could result in benefits to the European economy
less-expensive equipment and software, as well as
es and young people. It isCreate
also fundamental
adequate digital
to invest
skills,
in the
not digital
only focusing on universities and young people. It is also fundamental to invest in the digital
capable
of adapting
tobeing
production
the workforce, especially
education
management,
of people
which
who
is are
being
already
askedestablished
to
members of theindustrial
workforce,robots
especially
management,
which is
asked to
rough continuos learningguide
initiatives
companies during this period of significant change, through
continuos
learning initiatives
peaks
and diversified
tasks.
Nonetheless, the
TheEU
manufacturing
manufacturing
sector
sector
remains,
is
even today,
becoming less-important
central toonthe
a global
growth,
level,
development and
performing worse than
competitiveness
the US and struggling
of the European
to
Union
recover from the 2008and
crisis
its economy
model. This must involveDevelop
all relevant
stakeholders,
unified
a real
platform forprovide
Industry
4.0 based on the German model. This must involve all relevant stakeholders, provide unified
wide level, thus avoidinggovernance
fragmentation
andvarious
overlap,
promoting
of the
initiatives
on a national and EU-wide level, thus avoiding fragmentation and overlap, promoting
7 Source:
The European
House-Ambrosetti elaboration of
on between industries and
companies.
investment,
national or regional specialization, and cooperation between
industries
and companies.
European Commission and European Parliament data,
Industry 4.0, Digitalization for production and growth, 2016.
3
For the benefits outlined above to be realized,
action must be taken quickly to remove obstacles
and create the proper environment for the
development of digital industry in Europe. Taking
action immediately is key: it is estimated that the
potential loss from delays in the digitalization of
European manufacturing will exceed €600 billion
by 20208.
Towards this, the Observatory on Europe has identified the following proposals for priority action:
– the creation of common standards, guided by
the market, based on what currently exists and
capable of promoting interoperability and open
ecosystems, without damaging Europe’s ability
to innovate. Without these, it will be impossible
to activate the synergies required between companies and other players, including those from
different industries, value chains and sectors
– the activation of company and cross-industry
cooperation networks that are indispensable
for obtaining the maximum result in terms of costbenefit from investment in digitalization
– the completion of the European Digital Single
Market, whose cornerstones provide the basis
for the development of Industry 4.0 and the
activation of which could result in benefits to the
European economy of over €400 billion a year
– the creation of adequate digital skills9. To
date, the major focus has been placed on universities and young people. We believe that,
through continuous learning initiatives, it is also
fundamental to invest in the digital education of
people who are already established members of
the workforce, especially management, which
is being asked to guide companies during this
period of significant change
– the development of a real Industry 4.0 platform
based on the German “Industrie 4.0” model.
This must involve all relevant stakeholders, provide unified governance of the various initiatives on
a national and EU-wide level, thus avoiding fragmentation and overlap, promoting investment,
national or regional specialization, and cooperation between industries and companies.
In this regard, the first encouraging steps have been
taken by the European Commission which, in April
2016, took on many of these priorities by launching
the “Digitising European Industry” strategy that
is designed to coordinate the various European and
national initiatives in this area, and activate the
public/private investment required to take on the
priority issues still unresolved (standards, regulatory
structure, skills, e-government, Open Science, etc.).
The creation of a special steering committee by the
Italian government, also involving companies, goes
in the direction to create in Italy a platform for
industry 4.0 similar to the German one.
8
9
OUR PROPOSALS FOR MAXIMIZING
BENEFITS FROM INDUSTRY 4.0
THE
Source: European Commission, “Digitising European
Industry Fact Sheet”, April 2016.
It is estimated that 32% of the European workforce lacks
or has limited digital skills. In addition, by 2020, 852,000
jobs will not be filled due to the lack of graduates in
computer-related fields. Companies themselves report a
gap in in-house digital skills, 94% of which is considered
serious or moderate.
The next Lettera will be dedicated to
“The impacts of reforms in the PA, Jobs Act,
banking and credit sector and constitutional reform on businesses and the public”
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4
YEAR X
ISSUE no. 77
Lettera Club
The European House
Ambrosetti, 2016
All rights
resered.
MANAGING
EDITOR
Nino Ciravegna
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