Industrial Revolution (IR4.0) Impact on Management

Baderisang Mohamed

,Shaira Ismail

and Dahlan Abdullah

Faculty of Business and Management, Universiti Teknologi MARA, Cawangan Pulau Pinang, Malaysia

Faculty of Hotel and Tourism Management, Universiti Teknologi MARA, Cawangan Pulau Pinang, Malaysia

Keywords:

Artiﬁcial Intelligent, Machine Learning, Big Data Analysis, Decision Making, Management.

Abstract:

Industry 4.0 refers to the development processes that took place in industries primarily in the manufacturing

and chain production departments. The managerial decisions made by executives in industry 4.0 setting has

signiﬁcant impacts on various areas such as technology, data management and analytics, data security, risk

management, regulatory compliance, validation, and human resource practices. The fourth industrial revolu-

tion will see a massive application of Artiﬁcial Intelligence, sensors, enterprise-level solution platforms, and

Machine Learning. It is also projected that the volume of external and internal Internet of Things (IoT) data

will increase in industry 4.0 and will see a dramatic transformation to information. The IR4.0 will lead to

an excess ﬂow of data to quality professionals in real-time and this data will emerge from multiple sources

simultaneously calling for intelligent use to enable quick and efﬁcient decision making. The managers and

quality management personnel need to make appropriate decisions that will see a smooth transition to digital

technology to improve the efﬁciency and quality of produced goods and services.The fourth industrial revolu-

tion will make it compulsory for companies to implement effective risk management strategies with the aim of

improving product quality and operational efﬁciency by allowing machine learning and AI to provide the best

services. For that reason, the risk management team needs to draw plans that will see the proper implementa-

tion of these strategies. Moreover, the quality managers need to ensure effective implementation of Quality 4.0

or EQMS 4.O that will go hand in hand with the fourth industrial revolution. Previous studies on how industry

4.0 inﬂuences managerial decisions have been insufﬁcient and unsatisfactory. Therefore, the paper aims at

providing a comprehensive discussion of the impacts of the fourth industrial revolution on management.

1 INTRODUCTION

The fourth industrial revolution, also known as Indus-

try 4.0 (IR4.0), refers to the development processes

that took place in manufacturing industries and chain

production. The term was initially coined in 2011

with the name “industrie 4.0” with the aim of en-

hancing the competitiveness of German in the man-

ufacturing industry. Its pioneers came from diversi-

ﬁed ﬁelds including business, academia, and politics.

The federal government of German embraced the idea

in its High-Tech Strategy for 2020. Despite industry

4.0 being poised to bring signiﬁcant changes in vari-

ous areas of quality management, many professionals

still have no idea of how the concept will impact the

different things they do. However, it’s evident that

many organizational executives are monitoring this

paradigm-shifting strategy to garner sufﬁcient infor-

mation on the direction the change should take. Like-

wise, quality professionals should be well involved in

the monitoring process since they form a pivotal com-

ponent of Industry 4.0 dialogue for their respective

companies. As quality professionals embark into this

new era, it’s essential to have a plethora of informa-

tion regarding understanding the aspects and premises

of Industry 4.0 and its impacts on production, quality

management system, and the supply chain.

This paper will focus on the Industry 4.0 concept

aiming at speciﬁc tools for managers that is manage-

ment. Background of the concept, development plan

and current state will be addressed. Some software

technological background issues, which reﬂect essen-

tial aspects of Industry 4.0 concept, will be presented.

The paper is structured as follows. The second sec-

tion presents the core idea of Industry 4.0, its origin,

goals and elements as well as the adoption of technol-

ogy in industrial revolution development. Also IoT

application/software support delicate balance of digi-

tal trust to ensure the privacy of data and transparency

of information is addressed in the third section.

In the fourth section the challenges of data secu-

104

Mohamed, B., Ismail, S. and Abdullah, D.

Industrial Revolution (IR4.0) Impact on Management.

DOI: 10.5220/0009865501040109

In Proceedings of the International Conference on Creative Economics, Tourism and Information Management (ICCETIM 2019) - Creativity and Innovation Developments for Global

Competitiveness and Sustainability, pages 104-109

ISBN: 978-989-758-451-0

rity faces by companies for adoption of Industry 4.0 is

discussed and in the ﬁfth section, the question of regu-

latory compliance as Industry 4.0 is different from the

current norms of the industry. In the sixth section, the

question of risk management arises as the whole way

of doing things are different with the aim of improv-

ing product quality and operational efﬁciency. The

seventh section looks at the needs for new appropriate

strategies. In the eight sections, the various activities

of Human resources that need to be modiﬁed in order

to compliment the application of Industry 4.0 in the

industries. Lastly, the ﬁnal sections are where conclu-

sions are drawn and general topics are discussed. The

paper comprehensively reviews the effects of Industry

4.0 on management.

2 THE ROLE OF TECHNOLOGY

Proper implementation of Industry 4.0 will mean that

all industrial processes and products will undergo

intelligent networking to improve quality and efﬁ-

ciency. Fraunhofer Institute conducted a study in

2013 to review the potential for growth and expan-

sion of companies using IR4 technologies. The ﬁnd-

ings of the survey indicated ﬁve main technologies

areas that affect this growth. These include embed-

ded systems, strong networks, IT security, smart fac-

tories, and cloud computing (Nagy et al., 2018). A

similar study by (R

ußmann et al., 2015), established

nine technologies that will mark complete transfor-

mation into the industry 4.0. These included auto-

mated robots, integrated horizontal and vertical sys-

tems, cyber security, 3D printing (additive produc-

tion), big data analysis, simulation, industrial IoT,

cloud-based services, and augmented reality.

The graph below shows some of the industrial

transformations from the ﬁrst to the fourth industrial

revolution.

Figure 1: The Industrial Transformations

The above graph implies that the fourth industrial

revolution requires machines to be connected as a col-

laborative community in an industrial setting. It also

demands the application of advanced prediction tools

to enable systematic processing of data into informa-

tion to explain uncertainties hence helping in making

of informed decisions (Nagy et al., 2018),. Most or-

ganizations will demand upgrading of some platforms

on quality management systems (QMS) and supply

chain to convert the industry into a smart factory that

will have the capacity of meeting the requirements of

the sector 4.0. Some of the technological changes

include substituting old equipment with modernized

ones, Artiﬁcial Intelligence (AI), implementation of

sensors, enterprise-level solution platforms, and Ma-

chine Learning (ML). It is also projected that the vol-

ume of external and internal IoT data will increase

and will see a dramatic transformation to informa-

tion. Furthermore, IR4 will lead to innovation of pre-

dictive analytics that will enhance prevention, and the

daily norm will be continuous learning and improve-

ment (Nagy et al., 2018). Therefore, the mangers and

quality management personnel need to make appro-

priate decisions that will see smooth transition to dig-

ital technology to improve efﬁciency and quality of

produced goods and services.

3 THE MANAGEMENT OF DATA

AND ANALYTICS

Figure 2: List of URLs for digital resources used in the

course (partial list.) Source : (Nagy et al., 2018).

It’s important to embed data and processes to form

an integral part of the ecosystem for the QMS and

the employees to succeed and make signiﬁcant con-

tributions to the bottom-line beneﬁts of the company.

The Industry 4.0 will lead to an excess ﬂow of data

to quality professionals in real-time and this data will

emerge from multiple sources simultaneously calling

for intelligent use to enable quick and efﬁcient de-

cision making. The quality management personnel

need to derive effective methods of embracing inter-

nal and external data and technology and utilize them

to cultivate a culture of innovation while enhanc-

ing the overall quality (Nagy et al., 2018).The last

few years have recorded immense transformations in

the IT and telecommunications leading to networking

Industrial Revolution (IR4.0) Impact on Management

105

of electronic devices, also known as the internet of

things (IoT) (Wielki, 2017). A study conducted by

(Nagy et al., 2018) to determine the application of In-

ternet of Things (IoT) in industries came up with the

following prevalence rates at Figure 2.

4 THE CHALLENGES OF

SECURITY

Industry 4.0 is projected to result in production of vast

volumes of data and information. As a result, it is cru-

cial to ensure the integrity of the data to protect the in-

tellectual property of the company. The healthcare in-

dustry will mark a new milestone in producing smart

products that have the ability to send and accept data

between the machine and human beings (Shrouf et al.,

2014). It is thus imperative to ensure that the incom-

ing data is harmless to the device as this guarantees

patient safety. The challenge goes back to the manu-

facturer who is supposed to implement the necessary

strategies to ensure the device transmits the right data

and information without exposing the IP and details

of the patient. This equally calls for a delicate bal-

ance of digital trust to ensure the privacy of data and

transparency of information (Shrouf et al., 2014).

Data security is an area of concern for organi-

zational leaders since it determines the uniqueness

and the competitiveness of the product. The qual-

ity management staff must come up with appropriate

decisions that will ensure controlled access of data

through proper encryption and enhancing the secu-

rity of networks, sensors, and devices (Hossain and

Muhammad, 2016). It is possible for new entrants

to evade the market with smart products and other

services hence implementing and innovating a more

modern form of customer-centric business model that

extends the industrial boundaries is of importance.

The big question arises on the most appropriate time

for taking the plunge. This is because if a speciﬁc

company waits for too long, the new entrants and the

existing competitors get an opportunity to tailor the

market and seek to beneﬁt from the learning process

(Tesch et al., 2017). As a consequence, the manage-

ment team needs to make strategic decisions to avoid

unnecessary competitions.

5 THE IMPACT ON

REGULATORY COMPLIANCE

Many industries are working diligently to examine

how machine learning, and artiﬁcial knowledge can

be leveraged deeply in their daily operations. How-

ever, the executive is well aware that this is a chal-

lenging task as it is entirely different from the current

norm in industries. Artiﬁcial intelligence (AI) is one

of the technologies that can be potentially useful es-

pecially in industry 4.0 setting because it is capable of

enhancing deep learning, and thus can help comput-

ers to run multiple scenarios at a neck-breaking speed

(Moeuf et al., 2018). It can lead to the electric gen-

eration and access to vast amounts of data, and this

can be easily availed to the broader industry thanks

to the cloud storage technology. AI-powered digi-

tal twins are useful in detecting anomalies and devi-

ations, as well as simulation and prediction. Digital

twin technology is capable of utilizing sensor data to

create a digital representation of the existing assets,

and then apply speciﬁc conditions to learn from the

outcomes. Some of these conditions in the health-

care industry include how different sizes of drugs im-

pact the breakdown schedules or the probability of a

client developing speciﬁc drug adverse effects. The

digital twins can then be applied to learn and adapt

during this process of discovering new information

(Saucedo-Mart

ınez et al., 2018).

Artiﬁcial intelligence could present an exciting

method of manufacturing medications by running po-

tential simulations and then utilizing the data to drive

development and design (Wagner et al., 2017). How-

ever, the technology comes with various potential is-

sues since the pharmaceutical industry has strict regu-

lations regarding the manufacture and distribution of

drugs. As a result, organizational management needs

to work on establishing new standards and procedures

to allow AI and other technologies to be adopted

(Wagner et al., 2017).

6 THE IMPORTANCE OF RISK

MANAGEMENT

Risk management is the process of identifying, an-

alyzing, and responding to threats with the aim of

achieving the objectives of the project. Quality pro-

fessionals cannot deny the pressing needs to estab-

lish a fully functional quality risk management sys-

tem into every QMS process (Kirazli and Moetz,

2015). This is strongly evidenced by the most re-

cent standardization updates done by the EU MDR

and ISO 13485:2016 implying that effective risk man-

agement is pivotal in the current post-crisis economy

(Tupa et al., 2017). It is one of the nine knowledge

ﬁelds documented by the Project Management Insti-

tute (PMI) and is far by far the most complicated com-

ponent of project management.

ICCETIM 2019 - International Conference on Creative Economics, Tourism Information Management

106

Risk management helps organizations to under-

stand the meaning of risk, the people at risk, and risk

prevention strategies. If the techniques for preventing

risk are adequate, then the risk management personnel

need to employ sufﬁcient measures to ensure the risks

are managed at reasonable and acceptable levels (Glas

and Kleemann, 2016). Nowadays, the law mandates

companiesespecially the largescale organizations to

implement proper systems of managing risks to en-

hance the safety of the employees. The fourth indus-

trial revolution will make it compulsory for compa-

nies to implement effective risk management strate-

gies with the aim of improving product quality and

operational efﬁciency by allowing machine learning

and AI to provide the best services. For that reason,

the risk management team needs to draw plans that

will see the proper implementation of these strategies

(Tupa et al., 2017).

7 THE INFLUENCE OF

VALIDATION

Industry 4.0 has various impacts on the validation

of machine learning and artiﬁcial intelligence which

in turn impacts quality operations. Currently, the

validation philosophy states that companies should

always experience expected results, and the imple-

mented validation techniques and processes should

aim at demonstrating that they will attain the expected

outcome (Sanders et al., 2016). However, in the IR4

setting, industries should expect to experience unex-

pected results. The machine learning and artiﬁcial

intelligence algorithms function by learning, and it’s

not strange for them to learn something that was not

initially anticipated by the algorithm originator. Al-

though the digested results may be unexpected, the

available evidence indicates that they may be valid.

Therefore, the quality management personnel draw

appropriate strategies that will see the implementa-

tion of Quality 4.0 or EQMS 4.O that will go hand

in hand with the fourth industrial revolution (Sanders

et al., 2016).

8 THE HUMAN RESOURCE

PRACTICES

A cultural shift is vital for successful implementation

of the industry 4.0. The change in cultural practices

calls for additional investment in both people and

change management. The human resource (HR) prac-

tices comprise one of the primary sources that can be

applied by companies in shaping the skills, behaviors,

attitudes, and abilities of the employees to achieve

the goals of the organization (Shamim et al., 2016).

The managers need to design effective HR practices

that will enhance the innovativeness, learning, and

knowledge management capacity among the employ-

ees. Some of these HR practices include stafﬁng,

training, compensation, performance appraisal, and

job design (Prieto and P

erez-Santana, 2014).

8.1 Stafﬁng: the hiring process on industry 4.0 set-

ting should be based on competence, skills, and het-

erogeneity of knowledge. Therefore, the recruiters

should subject individuals to extensive interviews to

assess these qualities before employing them. The

companies should spend considerable efforts in se-

lecting the appropriate candidates for each job utiliz-

ing comprehensive selection and recruitment proce-

dures (Prieto and P

erez-Santana, 2014).

For instance, to employ innovative candidates, the

recruiters should concentrate on identifying the qual-

ities that are crucial for innovation, e.g. being open

to experience, that can be examined by psychomet-

ric testing in the selection procedure. There are var-

ious characteristics of a candidate who is open to

new experience including active imagination, atten-

tiveness, intellectual curiosity, ﬂexible thinking, in-

ner feeling, variety preferences, and interest. Further-

more, prospective candidates who are open to new ex-

perience will demonstrate a positive attitude towards

learning (Bonekamp and Sure, 2015). In the selec-

tion and recruitment process, employers should con-

sider the candidates with higher learning orientation

as this promotes learning and innovation aligning the

company goals with those of industry 4.0. Employ-

ees with top learning goal orientation are highly in-

terested in participating in challenging tasks, are al-

ways ready to improve, have a tendency of achieving

mastery, and are more than willing to develop a new

set of skills (Kim and Lee, 2013). The hiring man-

ager should also consider the future potential of the

candidate and how important he or she will be in con-

tributing to the achievement of the objectives of the

fourth industrial revolution.

8.2 Training: in the industry 4.0 setting, organiza-

tions should design their training programs in a man-

ner that promotes learning and innovative capability.

The educational programs should be comprehensive

enough to enable employees to multitask which im-

prove the level of production. The training offered

does not need to be directly relevant to the employee’s

job but should be geared towards increasing the vari-

ety of skills (Marques et al., 2017).The training pro-

grams should be continuous with refresher courses to

remind the employees of their scope, roles, and re-

Industrial Revolution (IR4.0) Impact on Management

107

sponsibilities. They should also focus on building a

team and teamwork skills and manager should engage

in daily routine mentoring to increase efﬁciency in

production. Moreover, managers should ensure that

employees receive training to boost their problem-

solving skills (Shamim et al., 2016).

8.3 Compensation: in the industry 4.0 environ-

ment, the system of compensating employees should

be a reﬂection of the contributions of the employ-

ees towards the company. The organizations should

pay the employees based on their individual, group,

and organizational performance (Prieto and P

erez-

Santana, 2014). The managers should implement

strategies that will create a link between job perfor-

mance and the reward which includes payment of ad-

ditional incentives and proﬁt sharing. Such a sys-

tem of compensation enhances a favorable environ-

ment for innovation and learning (Prieto and P

erez-

Santana, 2014).

8.4 Performance Appraisal: the best suitable per-

formance appraisal for industry 4.0 should focus on

improving results, behaviors, and the development

of employees. The employees should be updated

on their performance daily. Additionally, the per-

formance appraisal should be more of an objective

than subjective, and this implies that the performance

should be evaluated quantitatively by the use of ma-

trixes (Shamim et al., 2016). An ideal process of

performance appraisal should comprise of develop-

ment of performance standards, communicating the

expected results, evaluating the actual performance,

comparing the actual performance with the set stan-

dards, a discussion of the appraisal with the employ-

ees, and implementing corrective measures where

necessary. There are many methods of performance

appraisal, but management objectives (MBO) are the

most commonly used. MBO is a practical perfor-

mance approach that is compatible with the fourth in-

dustrial revolution (Shamim et al., 2016).

8.5 Job design: it is how an industry organizes

the tasks in a speciﬁc position including how and

when the tasks are accomplished and any other fac-

tors affecting work like the conditions and the order

in which the functions are to be completed. The job

design is an essential factor that enhances the climate

of learning and innovation and should be character-

ized by job rotation, extensive transfer of roles to the

employees, and ﬂexible assignments in multiple ar-

eas. Moreover, the job design should cultivate a cul-

ture of teamwork and collaboration (Prieto and P

erez-

Santana, 2014). An industry 4.0 setting is character-

ized by learning and innovation, and as a result, a job

design can signiﬁcantly help the company to adjust to

the business environment.

9 CONCLUSIONS

Industry 4.0 refers to the development processes that

took place in manufacturing industries and chain pro-

duction. The fourth industrial revolution is poised to

impact various areas of management including tech-

nology, data and analytics management, security of

data, regulatory compliance, risk management, val-

idation, and HR practices. The industry 4.0 envi-

ronment is characterized by learning and innovation

and inﬂuences various HR practices such as train-

ing, performance appraisal, compensation, stafﬁng,

and job design. In stafﬁng, innovativeness, learning,

and knowledge management capacity among the ap-

plicant is highly sought. Proper characteristics of a

candidate is the one who is open to new experience

including active imagination, attentiveness, intellec-

tual curiosity, ﬂexible thinking, inner feeling, vari-

ety preferences, and interest. Employee training top

learning goal orientation are highly interested in par-

ticipating in challenging tasks, are always ready to

improve, have a tendency of achieving mastery, and

are more than willing to develop a new set of skills

and should be geared towards increasing the variety

of skills. And focus on building a team and teamwork

skills to increase efﬁciency in production. Moreover,

managers should implement strategies that will cre-

ate a link between job performance and the reward

which includes payment of additional incentives and

proﬁt sharing. Performance appraisal should be more

of an objective than subjective, and this implies that

the performance should be evaluated quantitatively by

the use of matrixes. The last but not least, the job de-

sign is an essential factor that enhances the climate

of learning and innovation and should be character-

ized by job rotation, extensive transfer of roles to the

employees, and ﬂexible assignments in multiple ar-

eas. Moreover, the job design should cultivate a cul-

ture of teamwork and collaboration. Therefore, the

managers should implement strategies that have pos-

itive impacts on these factors to facilitate the culture

of industry 4.0. The fourth industrial revolution will

increase the efﬁciency and quality of the produced

goods and services.

ACKNOWLEDGEMENTS

We would like to thanks Universiti Teknologi MARA,

Cawangan Pulau Pinang for the assistance and ﬁnan-

cial support rendered towards the production of this

paper.

ICCETIM 2019 - International Conference on Creative Economics, Tourism Information Management

108

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