Industry 4.0: a catalyst for trade with Asia?

07 January 2014

Since the concept was first highlighted, at the Hannover Messe this year, Industry 4.0 has been the buzzword on everyone’s lips. John Browett, general manager of The CC-Link Partners Association (CLPA), discusses its possible impact on international trade.

From an industrial networking point of view, Industry 4.0 really has two sets of implications. Starting in the boardroom, the first issue is its importance to international trade. Moving on to the shop floor, the second issue is its potential technical impact – particularly on networking technologies such as CC-Link.

The basis of Industry 4.0 is the combination of so called ‘cyber-physical’ concepts and systems, such as the Internet-of-Things (IoT), Machine-to-Machine (M2M) and Cloud Computing, to create a more intelligent factory. This really translates into the international language of flexibility, adaptability and efficiency.
Virtualised technology, such as Cloud and IoT are a first step towards making geography irrelevant and M2M is a similar step towards improving flexibility in international manufacturing. As a result, Industry 4.0 could be interpreted as a way of controlling international production more effectively.

If you have facilities in Asia, for example, Industry 4.0 could make it easier to track what is going on there, in the same way you can manage and measure the facility 100 metres from where you are reading this.

There is, of course, a balance here between offshoring and re-shoring – the remote and the close to hand. It matters what kind of manufacturing you are involved in for instance. If you are making millions of cheap commodity items every day, it is not really important where you make them, from a management point of view. It is a simple design that is the same every time.

However, higher value manufacturing, with lots of variations that demand flexibility might traditionally have been made closer to home, irrespective of where home is, geographically speaking. Perhaps now, in the light of Industry 4.0, there is a good argument that this kind of production could easily be moved to cheaper locales such as China, India and the rest of the Far East.The longer-term viewManufacturing in countries where labour is cheap, could be perceived as a smart business decision in the short and medium term. But in the long term, there will be no cheap labour. By the time the UK’s recently born Prince George is on the throne, the wage of a factory worker in China, the Czech Republic and the UK will not be that different. Chasing cheap cannot be sustainable for your five-year business plan in the longer term.

However, rising wages in the East are not a bad thing for European manufacturers. China has already seen the emergence of a new middle class, as the result of its ultra-accelerated industrial revolution. There is real spending power among this group and as a result, there is real spending power in Chinese industry.

Asia is the place the West should be focussed on selling to – not just buying from. This means building factories there to produce product for the local market – not just using the region as a cheap way to make products for Europe. It means filling up the empty shipping containers that leave our ports for Asia every day, having deposited their outbound cargo in European economies.

CC-Link’s Gateway to China (G2C) programme can help to achieve this, by providing help to develop products for the Asian market. The G2C programme provides a package of development and marketing opportunities for the small cost of a CLPA membership.

Just as Asian manufacturers – such as Toyota, Nissan and Honda – build cars in Europe for the local market, European manufacturers should consider doing the same in Asia. Industry 4.0 can help us do this and we should take action

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