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Procedia Computer
Science 00 (2019) 000–000
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Procedia Computer Science 158 (2019) 625–631
rd
3 World Conference on Technology, Innovation and Entrepreneurship (WOCTINE)
3rd World Conference on Technology, Innovation and Entrepreneurship (WOCTINE)
Industry 4.0 and Competitiveness
Industry 4.0 and Competitiveness
Hasan Çebi BAL1, Çisil ERKAN 2
Technical
Turkey
2
HasanKaradeniz
Çebi
BAL1,University,
Çisil ERKAN
Istanbul University,Turkey
1
2
1
Abstract
Karadeniz Technical University, Turkey
2
Istanbul University,Turkey
Abstract
Industry 4.0 has come to be the beginning of a new era for humanity along with rapidly-progressive technology.
Whereas this new era has favourably created fresh opportunities for governments, businesses, and individuals, it is
seemingly4.0a problematic
to swiftly
integrate
theseera
new
technologies
in society in order
to sustain
Industry
has come tostep
be the
beginning
of a new
forforthcoming
humanity along
with rapidly-progressive
technology.
economicthis
welfare.
Firsthas
having
appeared
in thefresh
17th century,
the industrial
revolutionsbusinesses,
then prioritised
manpower only
Whereas
new era
favourably
created
opportunities
for governments,
and individuals,
it is
as a physical
force whilststep
Industry
4.0, last
of the industrial
precedence
to brainpower
most
seemingly
a problematic
to swiftly
integrate
these newrevolutions,
forthcominggives
technologies
in society
in orderastothe
sustain
prominentwelfare.
elementFirst
in creating
value.
Thus,
circumstances
haverevolutions
led to the withdrawal
of the
foreign direct
economic
havingadded
appeared
in the
17thsuch
century,
the industrial
then prioritised
manpower
only
investments
the countries
that have
in these investments
to their low-cost
labour, and
as
a physicaltoforce
whilst Industry
4.0,been
last drawing
of the industrial
revolutions, owing
gives precedence
to brainpower
as therefore
the most
caused vitalelement
problems
within global
and such
competitiveness.
Industry
4.0tohas
not only
structure
of
prominent
in creating
addedeconomy
value. Thus,
circumstances
have led
thechanged
withdrawal
of thethe
foreign
direct
labour but to
also
factors
that drawing
affect competitiveness
such owing
as institutions,
the financial
system,
the
investments
thesignificant
countries that
have been
in these investments
to their low-cost
labour, and
therefore
infrastructure,
innovation
skills,
health,
education,
and macroeconomic
Considerable
can be
caused
vital problems
within
global
economy
and competitiveness.
Industryvariables.
4.0 has changed
not onlychanges
the structure
of
observed
regarding
the competitiveness
factors
andcompetitiveness
creating competitive
and advantages
in this ever-changing
labour
but
also significant
factors that
affect
such quality
as institutions,
the financial
system, the
and -developinginnovation
world economy.
study
evaluatesand
thesemacroeconomic
innovations andvariables.
changes that
have appeared
after Industry
infrastructure,
skills, This
health,
education,
Considerable
changes
can be
4.0 and interprets
thethe
statistics
and the data.
Theand
effects
of thecompetitive
emerging innovations
the countries’
observed
regarding
competitiveness
factors
creating
quality andon
advantages
in thiscompetitiveness
ever-changing
have-developing
been investigated
after which
thestudy
positive
and negative
effects were
discussed
and
world economy.
This
evaluates
these innovations
and
changescomparatively.
that have appeared after Industry
4.0 and interprets the statistics and the data. The effects of the emerging innovations on the countries’ competitiveness
have been investigated after which the positive and negative effects were discussed comparatively.
© 2019 The Author(s). Published by Elsevier B.V.
© 2019 The Authors. Published by Elsevier B.V.
Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and
Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and
Entrepreneurship
©
2019 The Author(s). Published by Elsevier B.V.
Entrepreneurship
Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and
Keywords: Competitiveness, Industry 4.0, Labour force
Entrepreneurship
Keywords: Competitiveness, Industry 4.0, Labour force
1. Introduction
1. Introduction
Industrial revolution can be defined as the involvement of scientific discoveries in manufacturing processes, steampowered machines bringing about the machinery industry and the great capital accumulation due tothe mass
Industrial revolution can be defined as the involvement of scientific discoveries in manufacturing processes, steampowered
bringingPublished
about the
machinery
1877-0509©machines
2019 The Author(s).
by Elsevier
B.V. industry and the great capital accumulation due tothe mass
Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship
1877-0509© 2019 The Author(s). Published by Elsevier B.V.
Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship
1877-0509 © 2019 The Authors. Published by Elsevier B.V.
Peer-review under responsibility of the scientific committee of the 3rd World Conference on Technology, Innovation and Entrepreneurship
10.1016/j.procs.2019.09.096
Hasan Çebi Bal et al. / Procedia Computer Science 158 (2019) 625–631
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production that began in England in the 18th century. Constantly improved scientifically as the time progresses, the
historical process has reached a stage where industry 4.0 is the main element in the production of cognitive power.
The technological innovations and developments brought by Industry 4.0have uncovered the effects of this
revolution on the economy. The macroeconomic effects are observable within countries’ economies, whereas the
microeconomic effects are visible on all natural and legal persons and businesses in each sector. The use of automation
technologies in production has decreased the need for human labour. This development carries the risk of loss of these
foreign investments for the eastern countries that attract foreign direct investments owing to cheap labour.
Furthermore, countries that implement the Industry 4.0 applications effectively whilst improving themgain significant
competitive advantages, increasing along with developments, within global economy [1].
2. Industry 4.0 and Its Development
The latest stage in today’s industrial revolutions, industry 4.0 continues as a stage that brings great change in
manufacturing, consumption and supply processes. Unlike the previousindustrial revolutions, this process is not a
result of any economic, political or social booms but a product of the developments and improvements that occurred
within industry 3.0. Industry 4.0 is an approach first presentedat the Hannover fair. The essence of this
approachconsists of machines and production systems that do not require manpower and operate independently of
people. Owing to the developments in the field of technology, production processes have become smart and selfexecutable systems [2]. The components of Industry 4.0 can be listed as big data, autonomous robots, augmented
reality, additive manufacturing, cloud computing, cyber security, internet of things, system integration and simulation.
•
•
•
•
•
•
•
•
Big data has recently been put to use in manufacturing.It is the collection and comprehensive evaluation of
the data obtained from various sources such as manufacturing systems, corporate and customer-based
management systems. The use of big data increases the quality of production, saves energy and facilitates
the maintenance of machinery and equipment [3].
Thanks to their virtual vision capabilities during manufacturing, autonomous robots recognise different parts
and produces different reactions to each part or product. Their ability to work side by side with people and
their ability to learn have been their most important feature. The rapid change in robot technology has made
robots more autonomous and collaborative.
Augmented reality is the combination of virtual environments with real images using the devices’ ability of
recognising objects. Warehouse management supports a variety of services such as interactive marketing of
products and enabling repairs and montage through mobile devices. These systems are at beginning stages.
Additive manufacturing is a layer-by-layer manufacturing of a selected material such as plastic and nylon. It
is a technology associated with the terms 3D printer and 3D printing. Product development in additive
manufacturing technology is done at much cheaper costs. By eliminating the stages between the designing
and manufacturing phases of the product, it is possible to transition to manufacturing immediately after the
design.
Cloud computing is a technological service that allows data to be stored on the internet using a virtual storage
system that is easily accessed when needed.
Commonly used, external drivesprovide advantages such as more storage space, quick transfer of data and
cost savings in backup. Large companies reduce workload and high costs through this technology.
Cyber security is ensuring security and protecting integrity and confidentialitywithin life on cyber networks.
Today’s smart factories often encounter well-organised attacks. Based on the concept of cyber security for
corporations, companies and SMEs, the first term that comes to mind is information security.The most
important asset for corporations in this age is “data/information”. Organizations can compile, process, sell,
rent, or use information to produce a product or value. Many standards have been established globally in
order to provide information security which is necessary for corporations. In cases where security is not
provided, cyber attackers may cause serious damage to institutions by accessing data unauthorised.
Internet of things refers to a network where physical objects such as cars, clocks, glasses, work machines and
so on are connected to one another or to larger systems. Today, devices such as smart wristbands, smart
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•
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watches, smart t-shirts, smart rackets, home automation systems and smart cars, through investments, can
connect to the internet via Wi-Fi and Bluetooth technology. Although they are not widely used yet,studies in
this field are increasing rapidly and these technologies are easily adaptable for people. Playing an important
role in the appearance of smart factory systems, IoTenables devices within factory manufacturing to
communicate with each other. This communication provides immediate access to manufacturing information
at the factory. Additionally, any malfunctions or problems that may occur in manufacturing are reported to
the manager instantly.
System integration involves rapid response to changes in the manufacturing process and faster solutions to
problems. Some of the advantages that horizontal and vertical integration adds to industry 4.0 are facilitating
customer-based and personalised manufacturing, increasing resource efficiency, and optimizing the global
supply chain. Furthermore, enterprises are becoming more flexible with this system.
Simulation matters for industry 4.0 in terms of product design and development. These modelling
applications will enable virtual collaborationswhich will shorten the period of time used for product
development and reduce the need for quality controls. Options developed for risky jobs will also ensure that
the health and safety standards required for workers are met. Similar benefits provided at different stages of
the manufacturing processwill ultimately increase productivity while reducing costs and increasing customer
satisfaction.
2. Competitive Power in Businesses and the Markers of the Competitive Force
Competition is a race that brings out the better. Competitive force or competitiveness is the fundamental feature
in beinga participant and being the best in this race. In order to enhance the competitiveness for businesses, their
competence in technology, costs and making a difference should be revaluated. Companies will be able to develop
innovations based on these competencies or create differences in comparison to their competitors. This provides a
concrete demonstration of competitiveness. Competitiveness is to provide superior service than competitors or other
organizations in the market, high-quality and different products and most importantly to ensure that it is perceived.
M. Porter states that there are five factors affecting market competition and business decisions. These are as follows:
• Industry Rivalry
• Barriers to Entry, Threats of New Entrants
• Bargaining Power of Suppliers
• Threat of Substitutes
• Bargaining Power of Buyers
On competition analysis, Michael Porter speaks of three key concepts that will increase competitive advantage or
competitiveness. These are cost leadership, differentiation and focus [4].
Cost Leadership focuses on the ability to create a price advantage by keeping manufacturing costs under control
and thus creating competitiveness. It is the manufacturing of the products in the relevant industry at the lowest cost in
order to provide competitive advantage by the enterprises. Seemingly, the enterprises that implement the cost
leadership strategy form manufacturing flowcharts using fixed machinery and standard manufacturing systems, thus
minimizing waste and increasing their productivity. In addition to minimizing the costs of inputs during
manufacturing, product development, delivery, distribution and advertising activities are supported to minimise costs
[5]. In order to succeed in cost leadership strategy, enterprises should have a large market share in their sectors or
have privileged inputs such as raw material and labour [6].
Differentiation is the ability to create superior products and services that are different from existing products and
services in the market, to develop superior technology, services and processes, and to reflect them clearly on results.
Differentiation strategy can be actualised in many fields such as successful product design or brand, advanced
technology, successful customer service, high-quality product, successful dealership network, use of technology and
effective distribution channels [7]. In order to implement the differentiation strategy effectively; senior managers
working in R&D, marketing-sales and finance departments must cooperate in continuous communication with each
other [5]. The differentiation strategy can be analysed in three categories as follows;
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•
•
•
Differentiation in the characteristics of the service and products offered by the enterprise, product promotion,
the timing of market-entry,
Differentiation between the attitudes of the enterprise and the customers regarding product customisation and
marketing,
Applying the differentiation strategy by focusing on issues such as product distribution, delivery and product
mix whilst making comparisons between enterprises.
Focus expresses the ability to focus on the selected objectives and to create competitiveness for the organisation
by establishing all the strategies planned in connection with and specialising on these objectives. It is a crucial strategy
in which businesses concentrate on customer groups with specific needs, narrow target audience, and thus provide
sustainable competitive power [9]. The focus strategy is realised in two ways [6];
• The organisation aims to gain cost advantage by focusing on costs in business objectives,
• The organisation wants to gain competitive advantage by focusing on differentiation within its objectives.
Cost leadership and differentiation strategies encompass the entire sector, while the focus strategy covers smaller
groups of customers in one sector. According to Porter (1985), businesses succeed in applying one of these three
strategies based on their circumstances and needs and create competitive advantage.
4. Competitive Power in Countries and the Markers of the Competitive Force
If a country can produce goods and services that meet the demands of both local and international markets, it is a
competitive country within free market and trade. Analysing competitiveness on a global level involves fundamental
factors such as how countries adapt to the globalization process, a sustainable increase in income and employment
opportunities for the unemployed, how effective and efficient they use manufacturing factors, how high quality and
low cost the manufacturing companies are. Realising these factors, the income of the country and the purchasing
power of individuals increase along with the productivity in manufacturing. These developments will also improve
the life standards of citizens. Concordantly, the Global Competitiveness Index was established in 1979 by the World
Economic Forum to determine the competitiveness of countries which was calculated in certain periods on the basis
of selected criteria and is continuously updated today. The last of the Global Competition Index was calculated for
140 countries in 2018. The data used in the calculation were obtained from the ministries of the countries, statistical
institutions, collaborators of the World Economic Forum, Economist Intelligence Unit, IMF and other institutions. In
case the data required for the index cannot be obtained from these institutions, data is provided by a survey by the
World Economic Forum [10]. Since 2005, these calculations have been presented in a report every year finalised as
the global competitiveness report. The reports prepared as a result of the index help identify the weaknesses and
strengths of the competitiveness in each country as well as policy development processes.
The main components used in calculating the global competition index are identified as 12 sub-headings under 4
main headings as follows:
Table 1. Global Competitiveness Index Main Components.
Enabling Environment
Human Capital
1) Intuitions
7) Product Market
2) Infrastructure
8) Labour Market
3) Information and Communication
9) Financial System
Technology Adoption
10) Market Size
4) Macroeconomic Stability
Markets
Innovation Ecosystem
5) Health
11) Business Dynamism
6) Skills
12) Innovation Capability
Source: The Global Competitiveness Report 2018
Intuitions consist of individuals, firms and government agencies working to contribute to the increase in income
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and welfare. Public institutions as well as private sector organizations play an important role in increasing welfare. If
the infrastructure is at an advanced level, the negative impacts from transnational distances will be minimised. The
safety and quality of transport roads will reduce the cost of time. Macroeconomic stability is a significant component
in terms of demonstrating productivity increase. It shows the stability of macroeconomic indicators such as GDP,
inflation, employment and foreign trade. The component of Information and Communication Technology Adoption
takes into account how industries in an economy adopt technology to increase the quantity and quality of their
manufacturing. More importantly, it should be calculated whether or not the companies have access to the products
that have emerged as a result of technological developments. Health and skills are especially important in increasing
the productivity of the employees and creating a qualified workforce. The increase in the number and quality of
graduates of higher education and vocational schools shows that the workforce is increasingly better educated.
Additionally, product market, labour market and financial system components that affect competitiveness play a role
in efficient functioning of markets. Especially, the labour market is of great significancein ensuring that the employed
people are put to work properlywithin the market. The market shows the importance of the international market as
well as the domestic market and that the competitiveness of the exporting countries has increased. The business
dynamism component increases productivity and positively affects the competitiveness of countries. Innovation
capability, which is the last component, gains importance in both the discovery and development of new products and
services [12]. While all these components are important in competitiveness separately, if they are put to use together,
countries will achieve a higher level of competition.
4. The Effects of Industry 4.0 on the Competitive Powers of Businesses and Countries
Industry 4.0 has led humanity and nations into a new era. This new era has created new opportunities for billions
of people, businesses and governments around the world. Along with these opportunities,the increasing inequality and
geopolitical problems among countries have enhanced societies' concerns about globalisation and raised political
problems. Although economic growth has been strong in the last three years globally, this change remains fragile
economically. With the opportunities created by Industry 4.0 and the negative consequences of globalisation, leaders
take long-term and innovative measures and strive for solutions aimed at development. Human capital, innovation,
technology, flexibility and agility have been the most important factors in achieving economic success in Industry 4.0.
In order for countries to improve economically, they must use technology better and combine it with other
competitiveness factors. Accordingly, the World Economic Forum published the new Global Competitiveness Index
4.0 report to measure the long-term competitiveness of countries [13].
Global Competitiveness Index 4.0 (GCI 4.0)consists of 12 steps: institutions, infrastructure, adaptation of
information and communication technologies, macroeconomic stability, health, talents, product market, labour
market, financial system, market size, company mobility and innovation ability. The scoring system is out of 100. The
highest score, 100, indicates how much each component, and then all components, has been applied. The countries
intop the GCI 10 4.0 10 and their scores are shown in Table 2.
1
2
3
4
5
6
7
8
9
10
Table 2. Global Competitiveness Index 4.0 Top 10
United States
85.6
Singapore
83.5
Germany
82.8
Switzerland
82.6
Japan
82.5
Netherlands
82.4
Hong Kong
82.3
United Kingdom
82.0
Sweden
81.7
Denmark
80.6
Source: The Global Competitiveness Report 2018
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Among the 140 countries in competitiveness ranking in thereport, the USA, Singapore and Germany took the top
three places. They were followed by Switzerland, Japan, the Netherlands, Hong Kong, England, Sweden and
Denmark. The top 4 spots were the same as the 2017 ranking. Japan rose by three places to the 5th place compared
with 2017 and became the most progressive country. The first of the findings highlighted in the report on industry 4.0
and competitiveness was that each country can achieve competitiveness. The second finding was that in today's
economies, there are huge gaps between countries in terms of competitiveness and there is a risk that these gaps will
grow further due to the technological developments that come with industry 4.0. The third finding was that the ability
to use technology, an important factor for economic leap, has been limited in many countries. The main reason for
this is the incompetence of institutions, lack of infrastructure and skills. The fourth finding was that holistic strategies
to promote innovation are necessary in adapting to industry 4.0. Many countries fail to implement these strategies.
The last finding is that countries will be more resistant to economic shocks by strengthening the fundamental
components of competitiveness [14]. Countries need forward-thinking and innovative leadership to achieve their goals
for sustainable development and growth.
6. Conclusion
As less labour will be employed, unit costs are getting cheaperin countries that have manufacturing that is
compatible with industry 4.0. This change gives them a competitive advantage in the exportation of their products,
leading to an increase in exports and a decrease in imports. This also eliminates the advantages of countries such as
China that manufacture with the cheapest labour cost compared with countries that comply with industry 4.0.
Industry 4.0 investments will reduce the employment of low-level labour force while increasing the employment
of qualified labour force in areas such as design and information technology.
The increase in personalised product manufacturing will lead to an increase in sales and manufacturing.
The quality of manufacturing increases with smart systems. By producing information usingdata analysis software,
faultless, higher quality products are manufactured. Since loss will be mostly eliminated in manufacturing using smart
systems, there will be a decrease in costs. Time and costs for maintenance and repair will also reduce. Thus, as both
the quality and quantity of manufacturing increase in a short time, there will be more exportation and less importation.
Along with innovation and other changes, industry 4.0 will increase the share of high value-added products from
global trade.
These developments in manufacturing will lead to an increase in economic growth.
Integrated strategies for innovation, training for the needed skills in workforce and industry 4.0 applications need
to be developed and turned into government policy.
Turkey also needs to be analysed in this aspect. Turkey needs to urgently upgrade the global competitiveness
index. The existing training system is no longer suitable for this Industrial Revolution and does not serve any
functional purpose. Consequently, in order to educate generations that are avantgarderesearchers who love education
and reading, the National Education System needs a well-planned and unchanging structure as soon as possible. The
fact that the government is the pioneer for the promotion of the Industry 4.0 applications will allow us to increase our
exports, decrease our imports and thus close the current account deficit.
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