International businesses are at risk of being caught flat-footed by the advent of Industry 4.0 and its transformational technologies that are poised to disrupt global value chains and create new, automated production hubs close to consumers increasingly interested in products tailored to local tastes, a new A.T. Kearney report said.
From Internet of Things and artificial intelligence to advanced robotics, augmented and virtual reality, and 3-D printing, Industry 4.0 technologies are “arriving more swiftly than most businesses and government leaders realize,” A.T. Kearney said in the “Competing in an Age of Multi-Localism” study.
In particular, the $35-billion robotics industry is already affecting how companies produce goods and is among the key drivers of the resurgence in near- and reshoring. “Increasingly sophisticated automation, particularly when coupled with rising transportation costs, is thinning out the level of labor arbitrage that exists when producing in low-cost countries,” the study said.
For instance, Adidas has been among first movers jumping on the potential presented by 3-D printing, leveraging the technology to mass-produce 3-D printed shoe soles with the help of Silicon Valley innovator Carbon. The German athletic brand told Forbes it plans to produce 100,000 of the 3-D printed mid-soles this year, with the goal of scaling up to “millions” in the near term. Adidas’ real vision, however, is for mass customization to become a reality; customers who get their feet scanned in store would then receive footwear 3-D printed for their specific foot specifications.
Despite the many opportunities that 3-D printing presents, large companies with complex international supply chains will likely move cautiously when considering changes to their supply and production networks. Indeed, A.T. Kearney pointed out in the report that “significant offshore investments that companies have already made have a long operating life cycle and are not easily abandoned.”
Automated manufacturing might be a boon for getting products to market quickly but it faces opposition from those who fear its potential to erode workforces. Not only will Industry 4.0 technologies upend low-skilled labor forces in developing economies, but “they are also likely to displace some low- and medium-skilled workers in developed markets,” the report said.
“Production enabled by [Industry 4.0] technologies may therefore exacerbate rather than assuage the trend of rising populism fueled by wage destruction and job loss,” the report noted. The trend is one that could slow Industry 4.0 technology adoption in certain markets as policymakers and the public tend to think this type of tech means job losses are around the corner.
“Multi-localism is not a passing fad,” Paul Laudicina, founder and chairman of A.T. Kearney’s Global Business Policy Council and co-author of the report, said. “All companies must determine how to become locally integrated enterprises in a fundamentally transformed operating environment. Executives that ignore the imperative to transform will find their companies increasingly uncompetitive in the marketplace.”
Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.