I spent the past week at the University of Birmingham in England with a group of 16 Operations and Economics Professors from across Europe. This was the EC “Makers Conference.” I was there to lecture and to represent the Reshoring Institute (www.ReshoringInstitute.org ). This group of universities is working together to provide research and assistance to companies that are reshoring manufacturing and building production capability in Europe. Some of the biggest buzz of the week was around the idea of Industry 4.0 (the Internet of Things) and Servitization.
The term “Industrie 4.0” comes from a project in the high-tech strategy group of the German government, which promotes connection via the Internet. It is the fourth industrial revolution in manufacturing.
- The first industrial revolution was the mechanization of production using water and steam power
- The second industrial revolution introduced mass production with the help of electric power
- The third industrial revolution was the digital revolution and the use of electronics and IT to further automate production
- The fourth industrial revolution is the Internet of Things
Industry 4.0, the Fourth Industrial Revolution, is all about connecting machinery to the Internet. Industry 4.0 creates the “smart factory” where machinery and processes are monitored over the Internet and then communicate and cooperate with each other. Just imagine up to 50 billion machines connected in some way over the Internet.
This of course, has significant ramifications for Reshoring. The more automation is introduced into manufacturing, the more efficient labor becomes. This shifts the economics of manufacturing to allow for the total cost of ownership/production to be competitive in the US. This supports reshoring of production or producing in local markets for the local consumers. The overall cost to produce and deliver goods declines.