The fourth industrial revolution is underway and like every new iteration born out of the technology sector, it has been given the future-forward moniker of Industry 4.0. The impact of this industrial revolution could be greater than the combined impact of the previous three revolutions, which is a strong claim when considering the productive might generated from the previous three.
The parts that are coming together at this moment are the keys to understanding why this new evolution of industry could be larger than all previous revolutions. One can imagine a world where these parts are fully installed and optimally operating. What are the innovations that are creating such optimism around the potential of Industry 4.0?
One can begin to imagine how these parts of Industry 4.0 will come together to create an environment where risk is significantly reduced and productivity is significantly improved. To imagine the future world, take a step back and look at how humans manage their productivity and risk.
Humans manage risk and ensure productivity is optimized by utilizing their senses. Threats to well-being are seen, heard, tasted, smelled and felt. Likewise, the ability to improve productive potential is driven from the combination of these senses coming together to optimize the output of efforts.
Building on the human senses analogy, how do humans manage the risks faced by the physical world (or built world assets)? In the past, they would use these same senses when determining the condition of physical and natural assets around them. Effectively, human beings managed the assets of the world through their senses.
The physical (and natural) assets of the world have relied upon inspections by human beings to ensure the optimization of their productivity and risk reduction potential. Such an inspection framework is not ideal as there are not enough human beings to properly assess the condition of physical world assets and humans can make mistakes when assessing an asset’s condition.
Given the component parts of Industry 4.0, outlined above, imagine how assets will be managed in their future state.
IoT devices
IoT devices will provide sensory data from the asset in real-time thereby bringing the asset to an aware state. This would be like having hundreds of highly reliable humans monitoring all dimensions of the asset 24 hours a day; 7 days a week. Until now, such monitoring was previously unattainable due to logistics and costs. But the potential of Industry 4.0 technology doesn’t stop there. All these IoT devices provide a powerful repository of data that can be combined with other data sources to create a truly efficient state for the asset: a state where the asset is aware not only in real-time but aware of its potential future state.
The key parts of Industry 4.0 come together to provide full transparency into the asset’s current state and real-time awareness to minimize event impact. Industry 4.0 promises to even provide predictive awareness through the harnessing of machine learning/artificial intelligence algorithms that sift through mounds of data looking for learned data signatures that predict future risk events.
By combining these key components of Industry 4.0, governments, corporations and citizens should realize a significant reduction in the total cost of owning assets. Aware assets will have a greater likelihood of being completed on-time and on-budget, delivered defect-free, and, perhaps most importantly, remaining operational throughout their extended life – in other words, minimal unplanned downtime.
Combining the potential of asset certainty in the future state with an estimate of the total cost of asset ownership within the economy truly demonstrates why some believe that Industry 4.0 will have a greater impact on the global economy than the previous three industrial revolutions.
The total cost of ownership for an asset must factor in the cost of design, construction, operations, human capital and societal costs. The operational costs, human capital costs and societal costs are those incurred over the entire life of the asset and thus should be considered in present value. For typical assets, the design is approximately 10% of the construction costs, and the construction costs are approximately 15% of the operational costs. Further, human capital costs are approximately double the operational costs. Currently, according to Arcadis, the total inventory of built world assets globally is over $220 trillion. Based on this measure, the total cost of ownership for design, construction, operations and human capital is as follows:
- Design & Construction$220 Trillion1 (4.67% of total cost of ownership2)
- Operations $1.5 Quadrillion (6.67 times design & construction)
- Human Capital $3 Quadrillion (2 times operations)
- TOTAL $4.72 Quadrillion
The total cost of ownership of the current inventory of physical assets is a staggering $4.72 quadrillion. The above calculation does not consider the societal costs of the asset. These costs can be equally staggering, which include things like lost productivity from being stuck on a subway, health impacts of a chemical leak on the local population, impact of the asset on the environment. Given that the cost to the economic numbers in the quadrillions and given the potential impact on these costs from Industry 4.0 technologies, one can begin to understand why some believe this industrial revolution could be far more significant than the previous three.
A technological revolution in the way assets are designed, constructed and operated couldn’t have come at a better moment in history given the many issues facing the global economy. Productivity and risk will be significantly impacted by the convergence of these technologies. The speed and transparency of data available to asset owners will increase the certainty around the total cost of ownership and performance potential. Both combined have the potential to leave a lasting positive impact on the global economy.
