Course: MBA- DSA Trimester: I

Subject: Economics for Managers

Name: Soumik Chakraborty Name: Surbhi Gawande Name: Rohit Rajwade

Roll No.: A006 Roll No.: A011 Roll No.: A023

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 INDEX

Sr. No. Description Page No.

Abstract 3
1. Common Factors 3
1.1 Production Process Sophistication 3
1.2 Degree of Automation 3
1.3 Workforce Readiness
4
1.4 Innovation Intensity
5
2. Industry specific factors
7
2.1 Primary 7
2.2 Secondary
2.3 Tertiary and Quaternary 9
3. References

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 ABSTRACT
Industry 4.0 programs and other initiatives like the industrial internet are changing the way the
industry works today. Cities with existing significant industrial capacities or the ones who want to
attract such investments need to prepare for the changing needs of the industry. For this they first
need to gauge their readiness for the revolution to come. We are proposing ways to measure this
readiness for both industry sectors individually as well as a nation as a whole.

1. COMMON FACTORS
2.4 Production Process Sophistication
2.5 Degree of Automation
2.6 Workforce Readiness
2.7 Innovation Intensity

1.1 Production Process Sophistication

It is a broad indicator since it incorporates technical features as well as possibilities of
differentiation, fragmentation and requirements of logistics and organization of the chain
value. “Sophistication index” attempts to deduce the competitive peculiarities of products on
the basis of the degree of development of each good.

1.2 Degree of Automation

Questions to be asked
 Who is making?
 Who is Checking?
 Who is managing?

Degree of Automation of a
Machine

Cyclic Operating Service

The cyclic degree of automation is determined from the formula,

𝑇𝑎𝑢𝑡
𝐾𝑎.𝑐 =
𝑇𝑒
where, 𝑇𝑎𝑢𝑡 = the operating time of the machine
𝑇𝑒 = the cycle time

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The operating degree of automation is determined from the formula,
𝑇𝑖.𝑡 − 𝑇𝑚
𝐾𝑎.𝑜 =
𝑇𝑖.𝑡
where, 𝑇𝑖.𝑡 = the time it takes to manufacture one production item on a given machine excluding
the time lost for personal needs and setting up
𝑇𝑚 = the required manual working time for one item of the person servicing the machine
and the time spent in adjusting the machine before starting operation.

The degree of automation of production is subdivided into aggregate and complex

categories.
The aggregate degree of automation is expressed by the formula
𝑁𝑎𝑢𝑡
𝐾𝑎.𝑝 =
𝑁
where, 𝑁𝑎𝑢𝑡 = the amount of automated equipment (on the site or in the shop, factory, or
department)
𝑁 = the total amount of equipment.

The complex degree of automation is expressed by the formula

𝑁𝑎𝑢𝑡…𝑝
𝐾𝑎.𝑝 =
𝑁
where, 𝑁𝑎𝑢𝑡..𝑝 = the number of machines installed in an automated line.
𝑁 = the total amount of equipment.
The cyclic degree of automation is the first step in automating production. A higher degree of
automation is complex automation.

1.3 Workforce Readiness

An augmented workforce is the future of work, where human and machine collaborate
together. This will have many implications to consider; how does this impact the talent
model? And, what is the future of HR when there’s no H in HR (e.g., machines, virtual agents,
virtual engineers doing work for us); for the silicon-based workforce: how do we manage
performance, benefits, and incentives of virtual workers? And, how do we hire, fire, and
promote them? For the carbon-based workforce: How do we manage cultural challenges to
prepare the workforce, retrain people to work in those environments, etc.?
We believe executives around the world are in the early stages of readying their organizations
to harness the full potential of Industry 4.0. As organizations adapt to Industry 4.0, there are
opportunities to strengthen key connections that will benefit their clients, their people, their
organizations, their communities and society more broadly along social impact, strategy,
technology and talent[2].

Industry 4.0- Driving role

Industry 3.0- Serving role
Dat-based Manufacturing
Automated Manufacturing
 Montitoring of
 Easy Tasks
Machines
 Repetitive Tasks
 Error Detection
 Watch and Call
 Decision Making
 Standardization
 Preventive Measures

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1.4 Innovation Intensity

Following are the questions to be asked to measure this particular parameter

Output
 Did your company introduce any new products or services to the market in the past
three years?
 Did your company introduce any products or services that are new for the sector in the
past three years?
 Did your company introduce any products or services that are new for your Country in
the past three years?
 Does your company possess any patents?
Process
 Did your company introduce any new or improved work processes in the past three
years?
 Does your company use an external network to exchange information (e.g. with
universities, suppliers, competitors, etc.)?
 Do you cooperate with other companies to develop innovative projects?
 Did your company perform or outsource any market research activities in the past
three years?
Input
 Does your company have any co-workers involved in renewal efforts in their daily
work?
 Does your company have any co-workers who attended education or training funded
by the company in the past year?
 Does your company possess a quality certificate (like ISO)?

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 Level 1 Level 2 Level 3 Level 4
Beginner Competent Professional Expert

Measures

Processes Production Production Production

which are processes processes processes
used are which use which use that uses the
1. Production process either labor primitive complex latest
sophistication intensive or technologies. technologies, technology.
using old but still have
technologies. scope for
upgrading.

No Simple Complex Maximum

Automation is Automation is automation in level of
in place. in place for both making automation
2. Degree of automation 100% making. But and with high
Manual. checking is checking. But value of
done managing is operating
manually. done degree.
manually.

Employees Technology Developed Leading

have little orfocused areas digital and edge digital
of the data analysis and analytics
3. Workforce Readiness no experience
business have skills across skills across
with digital
employees most areas of the business
technologies. with some the business.
digital skills.

Output: 0-1 Output: 1-2 Output: 1-2 Output: 3-4

4. Innovation Intensity Process: 0-1 Process: 1-2 Process: 1-2 Process: 3-4
Input: 0-1 Input: 1-2 Input: 1-2 Input: 3

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2. INDUSTRY SPECIFIC FACTORS

Types of Industry

Primary Secondary Tertiary Quaternary

2.1 Primary Sector

The primary sector of the economy includes any industry involved in the extraction and
collection of natural resources. This includes mining, agriculture, forestry and fishing. The
primary sector is sometimes known as the extraction sector – because it involves taking raw
materials. These can be renewable resources, such as fish, wool and wind power.
Measures for IR 4.0 Readiness in the Primary Sector:
The IoT deployment in the agricultural industry creates a more complex value network, with
potentially new actors in the value chain (such as connectivity providers) and new roles of
service and application providers. Here, we have focused on the measures for the
Agricultural Industry[1].
1. Connected Tractors:
 The tractor and the implement are key instruments of the development of the
agricultural industry.
 Connectivity and localization technologies (GPS) are optimizing the usage of these
agricultural tools.
 This includes driver’s assistance to optimise routes and shorten harvesting and crop
treatment, while reducing fuel consumption.
2. Extent of PA(Precision Agriculture) Components in Farming Equipment:
 Sensors installed in the equipments have tight monitoring systems and control over
crop treatments enable important gains in efficiency and productivity.

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 Figure 1 Extent of PA Component

The above figure represents the extent of PA Component used in farm equipments in
Europe.
3. Extent of Integration amongst machines and farms:
Beyond the introduction of new tools and practices, the real promise of Agriculture 4.0 in
terms of productivity increase resides in the ability to remotely collect, use, and exchange
data.
The extent of integration amongst machines and farms will ensure two important points:
 Transparency of production: Use of IoT to collect and publish information on the
production processes and the farm[1].
 Preventive Maintenance: Sensor deployments and connectivity enables the
manufacturers to track the usage of the product. They can detect early a loss of
performance and offer preventive maintenance operations.

Figure 2 Achieving the Ultimate goal of IR 4.0

The picture above shows how the ultimate goal of IR 4.0 in Agriculture can be achieved in
agriculture by integrating the different systems: Weather Data System, Farm Equipment
System, Seed Optimization System and Irrigation System.

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2.2 Secondary Sector
The manufacturing industry takes raw materials and combines them to produce a higher
value added finished product. For example, raw sheep wool can be spun to form a better-
quality wool. This wool can then be threaded and knitted to produce a jumper that can be
worn. However, the development of improved technology, such as spinning machines,
enabled the growth of larger factories. Benefiting from economies of scale, they were able
to reduce the cost of production and increase labour productivity. The higher labour
productivity also enabled higher wages and more income to spend on goods and services.
Measures for IR 4.0 Readiness in the Secondary Sector:
1. Robot Density in the Manufacturing Industry:
To measure the extent of automation which is currently being used in the manufacturing
industry, a parameter Robot Density has been used, which is defined by the number of
installed robots per 10000 employees. The current Global Average is 74/10000
employees.

Figure 3 Robot Density in Manufacturing industry

The above bar graph clearly shows that India is well below the average when it comes to
the Robot Density in the manufacturing industry, one of the primary parameters being
the MSME’s having less access, due to the high cost barrier associated to it.
2. Machine and Operation System Integration (M2M)
 M2M (Machine to Machine) describes devices and sensors that communicate with
each other via any form of networking i.e., a cell phone connecting via Bluetooth to a
car’s stereo.
 In manufacturing, the extent of integration among the systems is an indicator of the
preparedness of such factories for IR 4.0. More the M2M, more will be the
precision,flexibility and accuracy of the entire production process.
3. Operations Data Collection

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  The methodology behind the collection of data operations is an important parameter.
For moving towards a more data driven organization, where most of the decisions
would be taken based on the data generated, slightest of errors could prove costly to
the organization.
 Under the Tables section, Level 1 is assigned to an organization which does all the
collection manually and Level 4 is assigned to an organization which does the
collection with complete automation.
4. Operations Data Usage
 One of the aspects of IR 4.0 is the emphasis on usage of data to make important
business decisions.
 An organization which is ready for IR 4.0, would use more of data for decision making
in comparison to a beginner(Level 1), who would use data only for quality and
regulatory purposes.

2.3 Tertiary Sector and Quaternary Sector

 The service sector or the tertiary sector is concerned with the intangible aspect of offering
services to consumers and business. It involves retail of the manufactured goods. It also
provides services, such as insurance and banking. In the twentieth century, the service
sector has grown due to improved labour productivity and higher disposable income.
 The quaternary sector is said to the intellectual aspect of the economy. It includes
education, training, the development of technology, and research and development. It is
the process which enables entrepreneurs to innovate better manufacturing processes
and improve the quality of services offered in the economy.

Measures for IR 4.0 Readiness in the Tertiary and Quarternary Sector:

Some of the measures in these sectors have been mentioned here:
1. Extent of Data Driven Services:
 In this case, we measure the extent of how data driven services are offered with
customer integration. Integrating it with customers, makes it easier for the
organizations to be more customer centric and customize it accordingly.
 Level 1 has been assigned to the ones who offer data driven services without customer
integration, thus not utilizing data to meet the customer’s demands and Level 5 has
been assigned to the ones who offer data driven services with full customer
integration.

2. Internet of Services(IoS):
 The IOS (Internet of Services) is a next-generation blockchain technology that provides
the network infrastructure to support a service-oriented ecosystem.

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  The IOS platform not only provides its users a completely decentralized way to
exchange online services and digital goods.

3. IT and Data Security:

 This becomes an extremely important measure for the tertiary sector and readiness is
measured by how comprehensive is the current IT and Data security system.
 Implementation and frequent reviewing of where security solutions should be done
and organizations doing that would be in the Level 4 (Expert) Bracket.

REFERENCES
1. Industry 4.0 in agriculture Focus on IoT aspects: www.ec.europa.eu/growth/tools-
databases/dem/monitor/content/industry-40-agriculture-focus-iot-aspects
2. An IR 4 readiness assessment tool: https://www.crimsonandco.com/wp-
content/uploads/2017/10/Industry-4-readiness-assessment-tool-report-Oct-2017.pdf
3. Degree of Automation:
www.encyclopedia2.thefreedictionary.com/Degree+of+Automation
4. Production process sophistication:
www.tcdata360.worldbank.org/indicators/prod.soph?country=BRA&indicator=555&viz=
bubble_chart&years=2017&indicators=944
5. www.ondernemerschap.panteia.nl/pdf-ez/h199912.pdf
6. The Internet of Services — Intro to our Tech: https://medium.com/@iostoken/the-
internet-of-services-intro-to-our-tech-e91abfb13b8c

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