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AI, automation and
the economy:
understanding
industry 4.0

Author: Nick Reese

While the history of automation in manufacturing goes back decades, the world is now welcoming a new age of automation that could outperform the human workforce.

As a result, automation and the economy are about to become even more entwined as more work is done by robots, artificial intelligence (AI) and smart devices. This could help manufacturers become more nimble and responsive to the marketplace, improve the quality and availability of products for consumers, and enable workers to focus on more valuable and engaging tasks.

AI and the economy: what is Industry 4.0?

Until relatively recently, AI and the economy have had little overlap. However, digital transformation has now made AI one of the leading drivers of economic growth as organizations digitize every aspect of the work experience. Manufacturing is no different; with many opportunities to connect machines together and leverage the data they create, manufacturers can now approach their entire production process in a way that would be impossible without the help of AI.

Industrial manufacturing driven by the Internet of Things (IoT)—or Industry 4.0—represents the future of manufacturing and a window into the evolving relationship between automation and the economy. With Industry 4.0, also known as the Fourth Industrial Revolution, products could be built independently throughout the production process thanks to the ability of internet-enabled machinery to share data back and forth. This could support new digital business models that allow manufacturers to quickly pivot what and how they build to better meet the demands of the market.

In addition, the data that is created could be leveraged throughout the organization, benefiting everyone from finance teams who can create more accurate quarterly forecasts to maintenance engineers who can perform predictive maintenance that reduces downtime. As a result, the global Industry 4.0 market is expected to grow to $210 billion by 2026.

Automation and the economy: the broader impact

By its nature, automation replaces human-driven work with machine-driven work. While automation, and the Fourth Industrial Revolution specifically, could lead to massive disruption as manufacturers replace human workers with artificial intelligence and robotics, those jobs could be replaced with new roles that emerge.

According to the World Economic Forum's "Future of Jobs 2020" report, 43% of businesses indicate that they are set to reduce their workforce due to technology integration. However, 34% say they plan to expand their workforce due to technology integration, while 41% plan to expand their use of contractors for task-specialized work.

By 2025, the report notes the time spent on current tasks at work by humans and machines may be equal. As a result of this new division of labor, it predicts that 85 million jobs may be displaced due to Industry 4.0 automation. However, it also predicts that 97 million new jobs may emerge to meet the new needs of manufacturing. In other words, the convergence of AI and the economy is more complex than it may seem at first, and there could be a net upside potential in the end.

Just as spreadsheets decimated the paper ledger industry, for example, Industry 4.0 may eliminate many manual, low-skill positions. However, spreadsheets didn't stop the need for analytically minded workers; it just freed them from the drudgery of entering numbers onto paper by hand. Similarly, the Fourth Industrial Revolution could allow workers to shift their work from repetitive labor to critical thinking, analysis and problem-solving. Already, manufacturers are looking to Industry 4.0 to redeploy employees to create more value; according to the World Economic Forum, companies hope to internally redeploy 50% of workers displaced by technological automation through reskilling as opposed to making wider use of layoffs.

Connectivity is the key to Industry 4.0

How will 5G affect automation and the economy? While it has the potential to impact almost every industry, manufacturing is where the world may see the most change. By being able to connect IoT devices across the supply chain, 5G could help manufacturers to be even more responsive throughout the entire manufacturing process.

Because 5G promises a decrease in latency and an increase in speed and device density, manufacturers could unlock the full value of the data that every machine and device creates to deliver new use cases and business models that would be unthinkable just a few years ago. This could result in new products aimed at increasing productivity and improving cost-effectiveness, and could even improve safety of workers through technology like digital twins, which allows workers to train with a model of the machinery instead of directly with the machine itself.

As 5G allows manufacturers to digitize everything from the assembly line to final delivery, the industry needs to think not only about how to incorporate digital automation into operations but also about how to reinvent the fundamental basis of their operations.

Industry 4.0 should also benefit from edge computing solutions, which allow near real-time monitoring and operation of machines and smart devices. Verizon 5G Edge delivers industry-leading solutions for private multi-access edge (MEC) computing and mobile edge computing. With the right end-to-end Industrial Internet of Things (IIoT) solutions, you can leverage edge computing to extend your infrastructure to where the real work of your business happens. Ultra-low latency enables a real-time enterprise that allows you to deliver innovative new services faster and more cost-effectively.

Discover how Verizon 5G can help make automated factories smarter, more nimble and safer.