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Drivers and Barriers of Industry 4.

0 Adoption in Indonesian
Manufacturing Industry

Beby Lexa Rezqianita Romadhani Ardi


Department of Industrial Engineering Department of Industrial Engineering
Universitas Indonesia Universitas Indonesia
Depok, Indonesia Depok, Indonesia
beby.lexa81@ui.ac.id romadhani.ardi@ui.ac.id

ABSTRACT KEYWORDS
Industry 4.0, the fourth revolution Industry, has become a global Industry 4.0; Indonesian manufacturing; drivers; barriers
trend in the manufacturing industry because it is able to produce
a "smart factory" with cyber-physical systems (CPS). CPS ACM Reference format:
integrate the physical world with digital by monitoring physical Beby Lexa Rezqianita and Romadhani Ardi. 2020. Drivers and Barriers of
processes, making digital copies of the physical world, and Industry 4.0 Adoption in Indonesian Manufacturing Industry. In
making decentralized production systems. Industry 4.0 can Proceedings of ACM APCORISE ’20, June 2020, Depok, West Java,
Indonesia. ACM, New York, NY, USA, 6 pages.
increase productivity, revenue, business competitiveness,
https://doi.org/10.1145/3400934.3400958
customer service, and optimize manufacturing processes.
Implementing Industry 4.0 in the Indonesian manufacturing
industry is observed to be able to increase productivity and 1 Introduction
improve product quality. As a result, it has an impact on GDP
Industry 4.0 has become a global trend in the manufacturing
growth, increased technology adoption, and new employment
industry through automation and data exchange. This fourth
opportunities so that it becomes a game-changer for national
industrial revolution is a digital revolution in industrial
economic growth. However, based on the Indonesia Industry 4.0
production in which all areas of production enhance the
Readiness Index, the Indonesian manufacturing industry is still
connectivity and computerization. Industry 4.0 is able to produce
in the medium readiness stage. Therefore, this study aims to
a "smart factory" where technologies such as big data analytics,
identify drivers and barriers of Industry 4.0 adoption in the
Artificial Intelligence, Internet of Things, additive manufacturing
Indonesian manufacturing industry using literature review that
(3D printing), and robotic systems. Those technologies achieve
and have been validated through expert interviews. The results
cyber-physical systems that integrate the physical world with
of this study may help decision-makers and practitioners to
the digital world by monitoring physical processes, making
address the drivers and barriers highlighted, paving the way for
digital copies of the physical world, and making decentralized
successful implementation of Industry 4.0 across the
production systems, where people, machines, and resources
manufacturing sector.
communicate with one another. This contributes to improving
CCS CONCEPTS services, logistics, and resource planning in a cost-efficient
• Social and professional topics ➝ Governmental regulations manner [1,2]. Industry 4.0 can increase productivity, revenue,
• Applied computing ➝ Psychology business competitiveness, customer service, and optimization of
the manufacturing process [3]. In the era of Industry 4.0, the
Permission to make digital or hard copies of all or part of this work for personal industry can make full use of information and communication
or classroom use is granted without fee provided that copies are not made or technology, not only in the production process but also
distributed for profit or commercial advantage and that copies bear this notice
throughout the industrial value chain [4].
and the full citation on the first page. Copyrights for components of this work
owned by others than ACM must be honored. Abstracting with credit is
The manufacturing industry in Indonesia is the backbone of the
permitted. To copy otherwise, or republish, to post on servers or to redistribute
to lists, requires prior specific permission and/or a fee. Request permissions from national economy. In 2017, the contribution of this sector
Permissions@acm.org. reached 20 percent of gross domestic product (GDP), which is
the highest compared to other industries. In the last quarter of
APCORISE 2020, June 16–17, 2020, Depok, Indonesia
© 2020 Association for Computing Machinery.
2017, this sector recorded growth of 5.14 percent, far exceeding
ACM ISBN 978-1-4503-7600-6/20/06…$15.00 the achievement in the same period in the previous year of 3.91
https://doi.org/10.1145/3400934.3400958 percent. Throughout 2017, manufacturing experienced an
increase of 4.74 percent. In addition, the manufacturing industry

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APCORISE’20, June, 2020, Depok, West Java, Indonesia B. L. Rezqianita and R. Ardi

is the most significant contributor to exports. In 2017, the export Industry 4.0 in Indonesia is still limited. Therefore, this research
value of this industry was at USD 125 billion, or 76 percent of will identify drivers and barriers of Industry 4.0 adoption in the
Indonesia's total export value of USD 168.73 billion. The manufacturing industry, specifically manufacturing large
contribution of the manufacturing industry to the economy is in enterprises.
several indicators, such as investment, employment, foreign
export exchange, taxes, and its broad impact on other sectors [4].
2 Literature Review
To be able to improve product quality, increase productivity, and
improve efficiency of the production process, the Indonesian 2.1 The Concept of Industry 4.0
manufacturing industry needs to consider Industry 4.0
implementation. Implementing Industry 4.0 could become a The fourth industrial revolution, Industry 4.0, was introduced at
game-changer for national economic growth because it has an Hannover Fair 2011 by German Scientific Industry-Researcher
impact on GDP growth, increased technology adoption and Alliance as a digital revolution in industrial production in which
innovation, and 10 million new employment opportunities. all areas of production have increased connectivity and
Therefore, the Ministry of Industry has launched an integrated computerization [1,2]. Industry 4.0 is digitization of the
roadmap as Indonesia's strategy to deal with Industry 4.0 called manufacturing sector. It is driven by four disruptions: (1) the
"Making Indonesia 4.0" on April 4th, 2018 [4]. astonishing rise in data, computational power, and connectivity,
(2) the emergence of analytics and business-intelligence
“Making Indonesia 4.0” will provide clear directions for the capabilities, (3) human-machine interaction, and (4)
development of the Indonesian industry, especially in the five improvements in transferring digital instructions to the physical
priority manufacturing sectors, which are the food and beverage world [9]. Cyber-Physical Production System (CPPS) uses the
industry, the textile and clothing industry, the automotive globally available information and communications network for
industry, the chemical industry, and the electronics industry. an extensively automated exchange of information [21]. The
These five sectors were selected based on the evaluation of design principles of Industry 4.0 are connectivity, information
economic impacts and implementation eligibility criteria that transparency, technical assistance, and decentralization decisions
included measures of GDP, trade, potential effects on other [10].
sectors, investment size, and speed of market penetration [4].
There are nine pillars of Industry 4.0, which will transform cell
As one of the strategic efforts in accelerating the adoption of production into a thoroughly automated, integrated, and
Industry 4.0 in Indonesia, the Ministry of Industry has released optimized production flow. This condition results in greater
the Indonesia Industry 4.0 Readiness Index (INDI 4.0) as a efficiency and alteration in production relationships among
reference for industry and government to measure the industry's suppliers, producers, and customers as well as between humans
readiness to implement Industry 4.0. The assessment results and machines [22]. These pillars of Industry 4.0 are as follows.
show that the average readiness index of Indonesia's • Big Data and Analytics
manufacturing industry is at the level of 2.14. Among the five Comprehensive data collection and evaluation from various
priority sectors, the sectors that have the highest index are the equipment and production systems can be a standard that
textile industry at the level of 2.51; food and beverage 2.47; supports real-time decision making [22].
chemical 2.31; electronics 1.84; and automotive 1.72 [5]. Judging • Autonomous Robots
from the results of INDI 4.0, the Indonesian manufacturing Robots are used to run automated production tasks and are
industry is still in the medium readiness stage. Therefore, it able to work in areas that limit the presence of humans [22].
needs to examine drivers and barriers of the manufacturing • Simulation
industry in adopting Industry 4.0. Identification of the drivers Simulation will be used more extensively in plant operations
and barriers of the adoption of Industry 4.0 is essential to be able to reduce machine set-up time and improve quality. It
to determine strategies that utilize the drivers and overcome the leverages real-time data to reflect the physical world into
barriers so that the adoption of Industry 4.0 would increase in virtual models [22].
the Indonesian manufacturing industry. • System Integration: Horizontal and Vertical System Integration
The full digital integration and manufacturing process
There are several studies on Industry 4.0 in Indonesia, one of
automation in vertical and horizontal dimensions implies
which is development of a conceptual model regarding the effect
automation of communication and collaboration [22].
of the implementation of Industry 4.0 in Indonesia [6]. There is
• The Industrial Internet of Things
also research on the taxonomy of Industry 4.0 implementation
Internet of Things refers to a worldwide network of
strategy based on a statistical analysis of 33 manufacturing
interconnected objects that communicate via standard
sectors in Indonesia [7]. The Indonesian Ministry of Industry has
protocols [22].
also conducted a study on the synergy between green industry
• Cyber-security and Cyber-Physical Systems (CPS)
and Industry 4.0 in Indonesia by characteristic comparison, CPS is the systems in which integrating physical space
which the result shows that the Indonesia 4.0 program is in line (natural and human-made systems) with cyberspace
with the concept of green industry [8]. However, research on (computation, communication, and control systems) [22].
drivers and barriers of the manufacturing industry adopting
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Manufacturing Industry

• The Cloud 2.3 Barriers to Industry 4.0 Implementation


The organization needs to increase data sharing across the
units in Industry 4.0, so the cloud-based IT-platform serves as Several studies have suggested that high implementation costs
a technical pillar for connectivity and communication [22]. and lack of financial sources are significant obstacles to Industry
• Additive Manufacturing 4.0 technology adoption [1,13-19]. Human resources problems
Production of small batches of customized products will also inhibit the adoption of Industry 4.0, such as lack of skilled
extensively use additive-manufacturing methods to offer workforce [13-19], lack of leader with appropriate skills [13],
construction advantages and reduce transport distances and longer training time for staff [1,13,18], and lack of ability to
stock on hand [22].
identify the opportunities offered by Industry 4.0 technology
• Augmented Reality
[13,15]. Organizational barriers also should be considered, such
The augmented reality technology provides workers with
real-time information to improve decision making and as resistance to cultural change [1,14,16], lack of digital
working procedures [22]. infrastructure from the organization [1,13,17], inadequate
organizational structure [13], difficulty to form an Industry 4.0
Benefits of Industry 4.0 to business are increasing
competitiveness, increasing productivity, increasing revenue, strategy [14], conflicts in business organizations due to changed
increasing employment opportunities, optimizing the working conditions [20], and lack of knowledge management
manufacturing process, developing exponential technologies, system [1].
and delivering better customer service. Industry 4.0 will benefit
not only the manufacturing industries, but also the entire value A number of sources found that government could be the reason
chain, including producers and manufacturers, suppliers, and for a company does not apply the principles of Industry 4.0,
workers [3]. such as the absence of government regulations [14,18], the
absence of government incentives [18], and lack of standards
2.2 Drivers Behind Industry 4.0 [13,14]. Technical barriers such as cybersecurity [13,19], risk
As well as understanding the concept of Industry 4.0, it is of data loss [15], and the need for large amounts of storage
important to identify the driving factors that may encourage capacity [13] could also hinder Industry 4.0 adoption.
companies to move towards this approach. There is a study
stated that government policy positively influences the increased
use of advanced production technologies as part of the strategic 3 Methodology
response to Industry 4.0. The government can create a friendly A list of drivers and barriers of Industry 4.0 adoption in the
circumstance to attract the companies to adopt new technology. manufacturing industry was collected from literature studies. In
Supports from the government may be presented by nationalized this research, three experts from companies, which are the users
legislation, tax regulation, industrial standards, or hardware of Industry 4.0 technologies, were interviewed. The details of
infrastructure. This study also showed the available resources experts are listed in Table 1.
and the capability of understanding and implementing
innovation from a company influence the adoption of new Table 1: Details of experts interviewed.
technology [11]. Experts Type of Industry Experience

There is also a study that stated that financial benefits impacted A Food & beverage > 20 years
by Industry 4.0 technology increase the digitization of the B Electronics 10-15 years
production process. This study also showed that a strong focus
on improving productivity and efficiency becomes a crucial C Certification services 10-15 years
success factor in adopting Industry 4.0. Expectation of top
management to control and monitor continuously also takes
place to encourage the adoption of Industry 4.0 technology [13]. Expert A is the general manager of a company with the highest
index of INDI 4.0 among food & beverage companies. Experts B
Moreover, there are several studies that stated that external
and C are recruited by the Indonesian Ministry of Industry to be
pressure from competitors and market trends are additional
the part of “Making Indonesia 4.0” team. Therefore, the three of
driving factors that impact the adoption of new technology. In a
them are suitable to be interviewed to identify drivers and
highly competitive market, companies need to adapt advanced
barriers of Industry 4.0 adoption in the manufacturing industry.
technology either to maintain excellence or respond to customer
demand [11,13]. The collected drivers and barriers were validated through a
questionnaire that was filled by interviewing the experts. Based
Indonesian Ministry of Industry also has issued the industry
on their knowledge and experience, experts chose between
ecosystem for Industry 4.0, such as lighthouse companies and
“valid” and “no valid” of drivers and barriers list. Experts were
academic institutions, and has fundamental roles to play in
allowed to add drivers and barriers which have not listed yet.
helping manufacturers adopt Industry 4.0 technology [12].
Drivers and barriers which were validated at least by one expert
would be chosen as valid drivers and barriers.

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The interviews generated 19 drivers from five major dimensions Dimension Barrier Sources
and 24 barriers from five major dimensions listed in Tables 2 and Lack of knowledge [13]
3. The interviews were conducted during January 2020. Memos Inherent habits [1,14,16]
of learning points, experiences, and ideas are written after the Strategy making difficulties [14]
interviews. Limited knowledge management [1]
Specific lighthouse [24]
Lack of infrastructure [1,13,17]
4 Results and Discussion
Human Lack of competence from leaders [23]
This study examined the driving forces and main obstacles to resource Limited skilled leaders [13]
introducing digital technologies under Industry 4.0 in the Lack of competence from the [23]
manufacturing industry in Indonesia. Both the literature and the workforce
research results show that implementing Industry 4.0 presents a Limited skilled workforce [13-19]
number of driving factors and barrier factors for the Indonesian Lack of ability to identify [25]
manufacturing industry. opportunities
New driving factors that not covered in previous literature Lack of commitment [25]
studies are identified, such as data transparency, a discussion Lack of external experts [23]
forum about Industry 4.0, growth of technology providers, Training time [1,13,18]
academic curriculum, and apprenticeship program. New barriers Government Policy about ecosystem [14,18]
of the adoption of Industry 4.0 are also identified, such as the Policy about data security [14,18]
specific lighthouse, lack of competence from leaders and Lack of government’s infrastructure [24]
workers, lack of commitment from the digital transformation Lack of incentives [18]
team, lack of experts of Industry 4.0, and lack of infrastructure Lack of standards [13,14]
from the government. Technology Cybersecurity [13,19]
Storage capacity [15]
Table 2: The drivers of Industry 4.0 adoption in the
manufacturing industry Experts highlighted government programs as one of the main
Dimension Driver Sources drivers of Industry 4.0 adoption. When the government uses
Government Super Deduction Tax [5,11] media or policy to allocate more resources for innovation,
Innovation center [11,12] companies are more likely to respond to adopt new technology
INDI 4.0 [5,11] [11]. For instance, the Indonesian government has already
Market Competitor pressure [11,13] implemented Super Deduction Tax, which is, taxpayers can
Condition enjoy a tax deduction as high as 300 percent of the cost of their
Market trend [11,13]
research and development activities. The Indonesian government
Organization Reducing cost [13]
also launched INDI 4.0 to measure the readiness of industry to
Resources and capability [13]
implement Industry 4.0 [5]. Innovation center and human
Top management [13]
resources development are also under construction to
Productivity Reducing the error rate [13] accommodate five facilities; showcase center, capability center,
and Efficiency Improving lead time [13] Industry 4.0 ecosystem, delivery center, and innovation center
Reducing cycle time [13] [30]. Experts also highlighted the absence of government policy
Data transparency [23] could inhibit Industry 4.0 adoption. In Korea, the government
Reducing downtime [13] has established a national strategy of digital transformation
Industry Lighthouse access [12] called I-Korea 4.0. The Malaysia government has set a policy
Ecosystem Discussion forum [24] called Industry4WRD to encourage Industry 4.0 adoption [26].
Technology provider [24] The Indonesian government has also launched a roadmap as
Academic curriculum [25] Indonesia’s strategy to deal with Industry 4.0 called “Making
Apprenticeships [25] Indonesia 4.0” [4]. Moreover, overlapping regulations and
Research of Industry 4.0 [12] policies regarding Industry 4.0 become a challenge in Indonesia.
Government regulation should protect the company from data
Table 3: The barriers of Industry 4.0 adoption in the piracy and job losses but should not hamper new technologies’
manufacturing industry utilization. Complementary and collaborative technologies such
Dimension Barrier Sources as artificial intelligence’s (AI) ability to self-diagnose
Financial Implementation costs [1,13-19] manufacturing machines could enhance human productivity.
Financial sources [13] When human jobs are lost to automation, workers need to be
Organization Complexity of change [13] trained, especially in soft skills and creativity, because humans
could hardly compete with AI’s hard skills. Indonesia should
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focus on AI and big data adoption instead of robotics because a Despite the fact that digitalization obtains several financial
lot of labor needs to be absorbed in this country [28]. benefits, the adoption of Industry 4.0 technologies also requires a
significant amount of financial support, which may inhibit
An impactful driver that is taken into consideration is a market
companies [13-19]. Limited access to financial resources is also
condition [11,13]. Intensified competition in the market and
an obstacle. The company needs to invest in transforming the
rapid changes in demand have pushed companies to adopt
production system into Industry 4.0. Investment is not only for
advanced technologies to maintain excellence or respond to
the short term but should be an organized and monitored long-
customer demand [11]. Investing in Industry 4.0 technologies
term investment plan [27].
makes the company able to improve comparative advantage and
produce competitive advantages compared to its competitors. In Another significant barrier in implementing digital
addition, there are opportunities to develop new business models transformation is that companies do not have skilled human
and update value propositions. The existence of competition resources, either leaders or workers, with the competencies
with competitors makes the company more current and required. Leaders should know well about the benefits and
innovative, both in the production process and management. strategic steps of Industry 4.0 implementation. Therefore, leaders
With the increase in technology, flexibility is increased in could provide direction and organization that implements
responding to customer needs, and the quality offered has Industry 4.0 easily understood and carried out by all employees
increased, which resulted in achieving better customer [27]. Leaders need to carefully assess human resources
satisfaction [13,18]. competencies and analyze the digital skills amongst current
employees. Therefore, it is able to identify the lack of skillsets
The other drivers to increase the adoption rate of Industry 4.0
that the company currently has [29]. Retraining employees to
come from the organization. Reducing cost opportunity,
complement that lack of skills also become challenging because
company resources availability, and commitment from top
this takes a long time and increases cost [13]. However, most of
management are impactful factors to promote digital
the businesses experienced failure because of the inability of
transformation. Adopting Industry 4.0 technologies provides
employees to adapt. Therefore, the company needs to engage in
many financial benefits, such as the reduction in cost of
up-skilling and re-skilling programs for its employees [28]. The
operations and inventory management [13]. Company resource
company could also employ new talents in the digitization
availability influenced the ability of the company to evaluate,
process that are multi-skilled and flexible enough to adapt to any
accept, and implement new technology to achieve higher
technology, which is the requirement for Industry 4.0 [29].
objectives [11]. In INDI 4.0, policies from company leaders will
Companies and education facilities also need to collaborate to
be measured to find out how top management supports the
offer apprenticeships and degree courses about Industry 4.0
changing of the production system more efficiently by adopting
technologies [15].
technologies of Industry 4.0. The company’s strategy, company
investment, and commitment from top management are crucial Human resources is a critical element in the process of
to the successful transformation of Industry 4.0. Besides, the transforming a company into Industry 4.0. Not only the skillsets
organizational structure is also being assessed, such as the of the workforce, but also includes the culture of the
availability of a special team to transform the company into organization, such as discipline, willingness to learn, and
Industry 4.0 [27]. ingrained habits [1,27]. As with any change, organizational
resistance may become a powerful barrier to adopt new
Another critical factor is productivity and efficiency, which
technology. Organizational resistance may come from employees
involve several driving factors. By implementing Industry 4.0
who worry about losing jobs or lack the necessary skills for new
technologies, the company is able to improve quality by
technologies [13]. Employees who tend to be open to change will
reducing the error rate, improve lead time, reduce cycle time,
be better prepared to transform into Industry 4.0 otherwise, if
improve data transparency, and reduce downtime [13].
employees resist changes, companies will find it more
The ecosystem of Industry 4.0 also plays a vital role to drive the challenging to implement Industry 4.0 [27].
adoption rate of digitalization. The lighthouse companies have
Another barrier of Industry 4.0 implementation comes from
overcome typical challenges faced by many companies.
technology. Practitioners have a notice about cybersecurity and
Therefore, they are served as industry benchmarks for the digital
data storage capacity. In INDI 4.0, cybersecurity and centralized
transformation process [31]. The discussion forum can also
data storage and control system are assessment points to
accommodate companies to share solutions related to digital
measure the readiness of a company adopting Industry 4.0 [27].
transformation problems [24]. Academic institutions can help
The need to protect critical industrial systems from
manufacturers adopt Industry 4.0 technologies by pursuing
cybersecurity threats increases significantly because of the
technology development through research and adapting the
increased connectivity and use of standard communications
academic curriculum to satisfy the specific demands of Industry
protocols that come with Industry 4.0 [22]. Security in storing,
4.0 talent [32]. An apprenticeship program can also benefit the
transferring, and processing data is essential, so companies that
Industry 4.0 ecosystem by equipping new workers with desired
new skills [25, 32].
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