Value Chain Drivers of the Fourth Industrial Revolution
Value chains are a fundamental aspect of the unfolding fourth industrial revolution. Each functional component provides a specific level of added value and is supported by a level of physical infrastructure. They are each impacted differently by a series of drivers:
  • Research and development. Even if innovation has been a key driver in prior stages of industrial development, technological development and competition have underlined the high value of innovation as innovative products are linked with high profit margins. This is further underlined by intellectual property protection schemes such as patents, licenses and proprietary designs. Even if the science, technology and design behind innovation can be complex, a large share of it remains collaborative and accessible. Therefore, new products are designed using an existing digitalized information base (including schematics), which adds a high level of value in part because of customization.
  • Procurement. With the setting of global supply chains, procurement has become a complex endeavor considering the wide variety of options, quality standards and financing strategies in getting resources and parts for the expected output. Access and connectivity to expanded procurement sources are expanded by the fourth industrial revolution. Additionally, more advanced information and communication technologies enables to add predictability, flexibility and adaptability to procurement. Environmental considerations are impacting procurement as well, with the recycling and reuse of materials.
  • Fabrication. The infrastructure intensiveness of fabrication has been enduring. The potential changes brought by what is defined as 3D printing as well as robotics is transforming manufacturing, which is becoming less labor intensive, more scalable and adaptable and using new materials. This changes the locational requirements of several manufacturing sectors as well as the scale of production with the potential for smaller production units servicing local markets.
  • Distribution. Automation has been a important driver for distribution with a push towards the automation of warehouses and distribution centers to increase their throughput and responsiveness. The same applies with containerization where terminals are being automated to improve gate, yard and transloading operations. The potential for automated vehicles, particularly for road, is also a driver that could impact the dynamics of freight distribution in the coming decades.
  • Marketing. The conventional retail landscape has been characterized by a strong real estate footprint since direct accessibility to consumers was a factor of marketing. Ecommerce has been an important driving force competing with and complementing standard retail systems. From a distribution perspective, this has favored the growth of home deliveries, often through new specialized online retailers. From a fabrication perspective, this has enabled new actors an option to access markets for niche goods of their own innovations.
  • Services. The service components of products, particularly electronics, vehicles and appliances, has increased through internet connectivity (the 'Internet of Things') and their ability to use sensors and geolocation. For devices such as smartphones, the service components in terms of software, communication and media is commonly more valuable than the device itself. Due to the growing importance of environmental considerations, service activities related to upgrade, maintenance and repair are bound to gain importance as well. Online platforms have enabled the possibility to make expanded forms of services available such as ride sharing services and port community systems.
Since most of these drivers were recently introduced, their full impacts is not entirely known and can only be speculated. Some could be far more reaching than expected while others could turn out to be simple hype. The full transformational consequences of the fourth industrial revolution on value chains remains to be seen.