Industry 4.0 – Industrial IoT: Bringing the jobs back

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Industry 4.0 – Industrial IoT: Bringing the jobs back

Americans talk about the industrial IoT but in Germany it’s called Industry 4.0. Whatever the label, it’s the catch-all for the future of industrial production. The automation and mass customization being delivered, combined with advances in artificial intelligence will have an enormous effect on decreasing traditional labor turn, this is starting to make industries look carefully at their offshore outsourcing commitments and there are signs that ‘reshoring’ – bringing the work back home – is becoming more attractive.

by Anja Schlenker

For decades, European and American companies have been shipping jobs overseas to take advantage of lower-wage economies. This trend is now being reversed owing to the onset of Industry 4.0. IoT, automation and mass customization have eroded offshoring benefits. But ‘reshoring’ may not exactly translate into employment for all.
Since before his inauguration, US President Donald Trump has vowed to reverse the trend to outsource business processes abroad. His argument is that this robs the US of thousands of jobs, but the counter-concern is the increased costs that may result. However, when manual processes accounted for the major costs of production, offshoring made financial sense but its benefits are evaporating as automation moves in. Trump loves tweeting on his Android phone (reputedly a South Korean Samsung) but he also has
an Apple iPhone. Despite this, he has been a rabid critic of Apple. Last year, he called for a boycott of its products, in a tweet from his smartphone, and demanded Apple should stop manufacturing products overseas. He insisted that any patriotic firm would bring the work back home and boost the jobs market. Pundits immediately pounced on this, claiming it would make premium priced Apple products prohibitively expensive.

European companies have been more reluctant than others to ship jobs overseas

No matter what the truth may be, offshoring is now less attractive and reshoring is becoming a major trend on both sides of the Atlantic. The reasons, however, tend to be mainly economic, not patriotic. After decades of offshoring to low wage regions, like Asia or Eastern Europe, rising labor costs and increasing automation in countries like the UK, Germany, and France are making competitive advantages disappear. A study by the Boston Consulting Group maintains that cost benefits from offshoring have been consistently overestimated and problems with managing offshore facilities have been underestimated. The authors of the Made in America, Again report, maintain labor contributes only 10% to production costs, concluding that “within fve years, rising Chinese wages, higher US productivity, a weaker dollar, and other factors, will virtually close the cost gap between the US and China for many goods consumed in North America.”
While this may be music to the ears of President Trump, it also applies to Europe, especially to German firms which have been more reluctant to outsource overseas than their peers in Italy or France, for instance. A good example is the popular European scale-model railroad maker Märklin. Inside its main factory at Göppingen near Stuttgart numerous digital printers work round the clock painting details on miniature railroad cars and trains.
The company is currently reshaping its production facilities. CEO Florian Sieber explains: “Over the past three years we have invested approximately €30m in our production facilities in Göppingen and Gyoer in Hungary, reshoring production from China.”
While final assembly of toy trains still involves a lot of skilled manual labor, printing models and wagons in 3D saves time, material, and money. Automation requires little human intervention and the smart robots can self-diagnose and signal when they need repairs or maintenance work. The improvements in the efficiency of logistics and production outweigh higher labor costs in other areas. “We need the highest possible degree of precision, and we only produce small volumes,” Sieber asserts.
“Having the whole production range in-house saves us time-to-market and secures the constant high quality customers expect from Märklin.”

Industrial IoT: Shifting the production paradigm

Drawing on new technologies like IoT, smart energy and cloud computing, Industry 4.0 can provide mass customization at an unprecedented scale. Products can be designed and made to individual customer specifications without significant extra cost. Customers, on the other hand, may be willing to pay extra for, perhaps, a running shoe that offers a perfect fit. The key to successfully implementing a new spin on bespoke products is to be geographically closer to the customer. Sports clothing and equipment maker Adidas aims to produce running shoes from a new facility in Ansbach, near Nuremberg, using the localized branding Futurecraft MFG (Made for Germany). The highly-automated production facility, called the Speedfactory, is the first of a new style of manufacturing plant. “This factory represents a major change in industrial innovation,” says James Carnes, VP for strategy creation at Adidas. “This kind of factory will manufacture highly functional products faster than ever before. By switching to fully-automated manufacturing, production can be moved to wherever the customers are.”Adidas has announced plans to open its next Speedfactory in Atlanta, Georgia, by the second half of 2017, creating 160 new jobs for US workers. In the meantime, the first German Speedfactory is being built next door to the Adidas headquarters and is scheduled to start production in mid-2017.

Industry 4.0 adidas Futurecraft - Industrial IoT

Reasons for Reshoring : According to the Fraunhofer Institute for System and Innovation Research, fewer companies than ever are offshoring. The main drivers for reshoring, namely better product quality management, time-to-market, and logistics, are being given increased impetus by the rising cost of labor in Asia.


It will have a capacity to make about 500,000 pairs of trainers a year; just a fraction of the estimated 300m they produce elsewhere. The factory is unlike any other Adidas plant. Instead of externally ordering components for new shoes, most of the parts will be made on the shop floor from raw materials, such as plastics, fibers and other materials. Production will be highly automated and use processes such as robot cutting, computerized knitting, and 3D printing, essentially adding layer upon layer until the final shoe is finished. The machines all get their instructions from a computer design program that can modify the size and shape of each shoe to fit the personal measurements of individual customers. This allows the customer effectively to design their own shoes by choosing from a huge catalog of different shapes and colors, as well as various kinds of soles and cushioning. The shoe fitting, to suit the width of a customer’s foot, for example, will also be adjustable. Because the shoes will all be made locally, German customers can pull on their new shoes within a few days, instead of having to wait around three months for them to be shipped from China. In the vibrant runningshoe business that’s a serious delay, since at least three quarters of new designs are currently on sale for less than a year. Shoes could be shipped in the belly of a freight airliner instead of a container ship but this would cause a huge increase in transportation costs. While automated machines and 3D printers will take over most of the Speedfactory’s manufacturing stages, there’s still some work for humans to do – just not as many jobs as in a traditional factory. Adidas expects to employ about 160 workers in the new facility, most of them in highly skilled positions – unlike the majority of their colleagues at Adidas’ Far Eastern locations.

Industry 4.0: Will a robot take my job?

This seems to confirm the worst fear of unions and workers’ councils, which fear that robots will increasingly compete with humans for jobs. These concerns are not by any means new. In 1933, the economist John Maynard Keynes coined the phrase “technical unemployment” to describe the effects of innovation on the job market. In 2013, two Oxford scholars Carl Frey and Michael Osborne published the results of their research into the effects of technological progress on employment, claiming that within 20 years up to 47% of ‘human’ jobs in the US could be done just as well, or even better, by industrial computers or algorithms.n what they termed “bottleneck activities,” the researchers believe automation will be less successful. These include services like coaching or psychotherapy, as well as most creative processes.
Building on Frey and Osborne’s work, the German Center for European Economic Research (ZEW) recently estimated that the potential for the automation of jobs in the industrialized nations is probably around 42%. Because it is more likely that certain activities will be automated and activities differ from job to job, ZEW admits that the total number might be lower but automation will impact on low and high-skilled workers in different ways.

Qualifying for Industry 4.0 or Industrial IoT

With robots and automation on the rise, demand will certainly increase for workers who can program, understand and interpret what machines do. Already, 65% of jobs in the US are somehow related to IT. Employees and employers need more and better IT education not only at university level but also at schools.
Sieber at Märklin is especially proud of his company’s dual system of classroom education and on-the-job training. “It helps us compete for the highly-qualified employees we need,” he believes. Employees need additional skills to supplement their IT expertise so they can handle a new order of jobs that are more complex and increasingly involve problem solving. Dr. Andreas Heindl of the German Academy of Technical Science, (Acatech), believes that “interdisciplinary thinking as well as processual know-how is crucial.” He adds, “companies need to escape from their silos and generate the ability to communicate with colleagues from other disciplines if they want to participate successfully in Industry 4.0 projects.” There is a danger for workers that the flexibility required and the increasing complexity of developing new skills could cause stress, as technological integration raises the bar. People could be frustrated by a loss of competencies outmoded by automation and rising alienation generated by creeping automation. Companies will need to be prepared to deal with new issues if they are to prevent a loss in productivity and in creativity caused by frustration and despair among employees. The changes in the working environment need to be understood: The machines must adapt to the people,in the reshaping of their work environment and the development of their job roles.

Industry 4.0 Adidas Speedfactory - Industrial IoT

Adidas Speedfactory: A running shoe made in China takes about three months to reach customers in Europe. Smart manufacturing locally can cut that to days – a crucial advantage in the age of customer empowerment


This new sense of self-determination in employees will help them to cope with increased autonomy, independently designing and organizing their work environment. Ideally this will lead to more interesting and fulfilling work for employees and managers.

A problem on the road to leisure and plenty?

President Trump’s belief that pulling jobs back home will reduce unemployment is short-term-ism at best or a delusion at worst. Automated production will start to leap forward as IoT gains more application areas and adopter confidence. Artificial intelligence will enhance these largely autonomous systems and begin to replace the middle-management tier. Jobs for the jobless may score points with the disadvantaged but the challenge is to discover skills areas that cannot be readily mechanized, and ways in which new production methods can engender customer loyalty through tailored products for local needs. In 1930, Keynes published an essay called Economic Possibilities for Our Grandchildren. It predicted that in 100 years (2030) technological progress would increase the output of goods per hour worked to the point where people would need to work less and less to satisfy their needs.

Machines must adapt to people and not vice versa

Ultimately, they would hardly have to work at all. “For the first time since his creation, man will be faced with his real, his
permanent, problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well”, Keynes wrote. It’s essential for the boardroom and employees to use the future robotic workforce to improve the working environment. Building and shaping interesting job profiles is the only hope of creating the future of “leisure and plenty” Keynes predicted.

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