June 10, 2019 by David Bowcott
The fourth industrial revolution is upon us and like every new iteration born out of the technology sector it has been given a future-forward moniker: Industry 4.0. Some believe the impact from this industrial revolution could be greater than the fallout of the previous three combined. That is quite a claim when you consider the productive might generated by the previous three:
To truly understand why some believe this evolution of industry will dwarf all evolutions previously seen, you must investigate the component parts that are coming together at this moment in time and begin to imagine a world where these segments are fully installed and operating optimally. Refer to the chart below for the innovations that are creating such optimism around the potential of Industry 4.0. With these key components identified we can begin to imagine how these segments will come together to create an environment where risk is significantly reduced and productivity significantly improved. For us to imagine that future world, let’s take a step back and look at how human beings manage their productivity and risk.
Typically, we manage risk and ensure our productivity is optimized by utilizing our basic senses. Threats to our well-being are seen, heard, tasted, smelled and felt. Likewise, our ability to improve our productive potential is driven from the combination of these senses coming together to optimize the output of our efforts.
Building on this analogy, how do humans manage the risks faced by the physical world (or built world assets)? Well, in the past, they would use these same senses when determining the condition of physical and natural assets around them. Effectively, human beings managed the assets of the world through their senses.
In the past, the physical (and natural) assets of the world have relied upon inspections by human beings to ensure their productivity and risk reduction potential was optimized. But such an inspection framework is not ideal, as humans can make mistakes and there are not enough of us to properly assess the condition of all the physical world’s assets.
Given the component parts of Industry 4.0, let’s imagine how assets will be managed in their future state.
IoT devices can collect sensory data from an asset in real-time, bringing it to an aware state. It’s the state-of-the-art equivalent of hundreds of highly reliable humans monitoring all dimensions of an asset 24 hours a day, seven days a week. Until now, such monitoring was unattainable due to logistics and costs. But the potential of Industry 4.0 technology doesn’t stop there. All these IoT devices provide a powerful repository of data that can be combined with other data sources to create a truly efficient state for the asset — a state in which the asset is aware not only in real-time, but predictive, or aware of its potential future state.
The key components of Industry 4.0 provide the asset full transparency into its current state, real-time awareness to minimize event impact and even predictive awareness through the harnessing of machine learning/artificial intelligence algorithms that sift through mounds of data looking for learned data signatures that predict future risk events.
By combining these key aspects of Industry 4.0, governments, corporations and everyday people should realize a significant reduction in the total cost of owning assets. Aware assets will have a greater likelihood of being completed on-time and on-budget, and they will have a greater likelihood of being delivered defect-free. Perhaps most importantly, they will also have a greater likelihood of remaining operational throughout their extended life — in other words, face minimal unplanned downtime.
To truly understand why some believe that Industry 4.0 could have a greater impact on the global economy than the previous three industrial revolutions, you have to take the potential of the future state of asset’s in the economy and combine this knowledge with an estimate of the total cost of ownership of all assets within the economy.
When looking at the total cost of ownership for an asset, you must factor in the cost of design, construction, operations, human capital, and societal costs. It should be noted that the operational costs, human capital costs and societal costs are those incurred over the entire life of the asset and thus should be considered in a present value state.
For any typical asset, design makes up approximately 10 per cent of the construction costs, and the construction costs are approximately 15 per cent of the operational costs. Further, the human capital costs are approximately double the operational costs. Given these metrics, consider the following, the total inventory of built world assets globally is over $220 trillion. Based on this measure, the total cost of ownership for design, construction, operations and human capital is as beyond comprehension at a staggering $4.72 quadrillion!
It is important to note that the above calculation does not consider the societal costs of the asset. These costs, such as being stuck on a subway or the impact of a chemical leak on the local population, can be equally enormous.
Seeing how we are talking about a cost to the economy that numbers in the quadrillions and given the potential impact on these costs from Industry 4.0 technologies, you can begin to understand why some believe this industrial revolution will dwarf the previous three. In addition, with the global economy currently facing numerous hurdles, you start to see how significant modernizing the way we design, construct and operate assets would be at this moment in history.
Productivity and risk will be significantly impacted by the convergence of these technologies and the economy will be forever changed. Hopefully it will be for the better.
This column first appeared in the June 2019 issue of On-Site. To read through the full issue, click here.
David Bowcott is Global Director – Growth, Innovation & Insight, Global Construction and Infrastructure Group at Aon Risk Solutions. Please send comments to email@example.com