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New digital and smart technologies are improving processes within the manufacturing industry, leading to what is being called the ‘fourth Industrial Revolution’ or ‘Industry 4.0’. The EU-funded project MAKERS brings together a range of European and international organisations to study issues affecting competitiveness, such as novel technologies, globalisation, regional smart specialisation, the role of small companies, local value chains, skills development and sustainability, among others.
A main result of the project so far has been an analysis of a new direction in the industry’s business model: ‘servitisation’. This refers to the trend of providing services packaged with a product being sold. These services could range from maintenance to more sophisticated contracts based on performance, such as the delivery of scans, copies and printed documents.
The researchers found that European SMEs are often reluctant to implement these kinds of service business models due to the long-term risks. They also found this kind of approach was especially beneficial for firms with high investments in research and development.
Keeping manufacturers in touch with market needs enables increased innovation and the development of more useful and user-friendly products, they found. Another adaptation is that manufacturing firms have started to focus their business strategy on hiring and leasing products rather than selling them.
Other trends studied include the growing involvement of customers in manufacturing processes, leading to more customisation and personalised products, and new relationships between manufacturing and services.
“Technological change is not just about production efficiency via automation and digitalisation – this will have huge implications for labour and jobs,” says project coordinator Lisa Propis from the University of Birmingham, UK. “Biotech, nanotech, neurotech, green and renewables, ICT and mobile technology, 3D, artificial intelligence, robotics, sensoring and space technology, and drones: these disruptive technologies are expected to seep into each and every sector, changing processes and products.”
Reshoring and jobs
Another key aim of the project is to investigate the factors that would encourage firms that were founded in the EU to bring their headquarters back home – a process known as ‘reshoring’. From the mid-90s onward, competitive wages and low production costs in Asia in particular encouraged many companies to move abroad.
The MAKERS project has used case studies of various sectors in European countries and in countries such as China and India to examine the factors driving reshoring and to build on these.
A better exchange rate, increased transport costs, quality concerns, and rising wages in parts of Asia and Central and Eastern Europe are the main factors driving reshoring, the project found.
Challenges could include a lack of space for building factories and manufacturing plants, and the skills and size of the labour market. One of the preliminary conclusions is that pro-manufacturing policies are necessary to increase incentives for reshoring, and promoting new digital technologies is an effective way to do this.
“The MAKERS project explores this new Industry 4.0 model as a historical opportunity to upgrade and anchor smart manufacturing activities in an advanced and high-cost economy such as the European Union,” says De Propis.
MAKERS received funding through the EU’s Marie Skłodowska-Curie actions programme and organised annual summer schools for young researchers covering a range of issues involved in developing proposals and examining methodologies. A themed workshop and a scientific session with business, academics and policymakers have already been held, videos have been created and the project is presenting at international conferences and policy events.