Industry 4.0 Implications On Human Capital: A Review: Journal For Studies in Management and Planning

Journal for Studies in Management and
Planning
ISSN: 2395-0463 Vol-4, Special Issue-13
7th International Conference on Technology Management,
Business, and Entrepreneurship (ICTMBE2018)
held in 17 & 18 October at The Katerina Hotel, Johor, Malaysia
organised by
Faculty of Technology Management and Business, Universiti Tun
Hussein Onn Malaysia, Malaysia
In Collaboration with Faculty of Economy and Management, Bogor
Agricultural University, Indonesia.
Industry 4.0 Implications on Human Capital: A Review

*Nurazwa Ahmad1, Alina Shamsuddin2, Noor Aslinda Abu Seman3
1,2,3
Faculty of Technology Management and Business,
Universiti Tun Hussein Onn Malaysia, Johor, Malaysia
*Corresponding E-mail: nurazwa@uthm.edu.my
Abstract
Manufacturing industry is currently going through the Industry 4.0 revolution where the conventional
production and operations are moving towards the reliance on the advancement of information technology and
artificial intelligence. Lately, there are groups of researchers who investigated and discussed deeply the
conceivable negative challenges in smart manufacturing on future human capital. Thus, there is a need to
identify the firm’s strategy and responses in adapting to the substitution of human workers by robot and
automation. Findings from the literatures will be analyzed to provide suggestion for future research endeavors
which will becomes a reliable source to measure the firm and employees readiness in respond to the latest
industrial revolution.
Keywords: Industry 4.0; Smart manufacturing; Human capital; Employees readiness
1.0 Introduction
Stepping on the shoulder of the Third Industrial Revolution, Industry 4.0 is an industrial
modernization that results from the implementation of sophisticated technologies at production stage
that could generate upgraded standards, services, flexibility and quality for the clients and the firms to
satisfy the requirements of latest business and service paradigms (Khan & Turowski, 2016). The
applied technologies include interconnected IoT (Internet of Things), collaboration of services and
people, better communication standards, decentralized decision, applications of Cyber Physical
Systems (CPS), Augmented Reality (AR), Artificial Intelligence (AI), information transparency with
cyber security, Big Data Analysis, advanced robots, additive manufacturing, sensors and digital twin
simulation models (Wrobel-Lachowska, Polak-Sopinska, & Wisniewski, 2018). This smart
manufacturing transformation promotes digital business models and processes with extensive
consequences for employees and is forecasted to pose enormous influences on both labour content
and work organization which may alter the way the human capital is taking role and enhancing value
since it is the creativity of human capital that catalyzes the process of becoming and spreading of
Industry 4.0 (Bonekamp & Sure, 2015).
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Gone the days of manipulating industrial manual processes, and taken over by a complex
array of intelligent devices and sensors that communicate in machine-to-machine languages. Although
it is prematurely envisaged, it was predicted that the unskilled and semi-skilled worker will be less
relevant since there will be no industrial jobs left for many of them within just a few years (Hirsch-
Kreinsen, 2016), although the volume of potential job losses caused by the new technologies is
debatable because certainly, Industry 4.0 will provide future jobs through creating new business
models. Advanced robots are able to perform monotonous actions with much greater efficiency and
with much less errors. Human however, has unique abilities of a person not just to reproduce and
transform knowledge, but also to create new knowledge (Kolesnichenko, Radyukova, & Pakhomov,
2019). Hence, full automation is unlikely since the machine could not completely replace human
abilities, making human factor is a component that will continue to play a crucial role in Industry 4.0.
Therefore, employee readiness in accepting the flux of new cyber technologies by equipping
themselves with relevant knowledge and skills is crucial in ensuring they could survive to retain their
positon in the firm. Since if the new revolution could really create mass unemployment, it also cause
social and economic concerns and there will be shortage of quality talents that could only be filled by
selective employees. For example, an Automated Teller Machine (ATM) could replace a bunch of
bank’s cashiers, but it needs a person to monitor the machine’s operation.
2.0 Literature Review
2.1 Industry 4.0
Industry 4.0 or smart manufacturing relies on the emerging technologies depicted in Figure 1,
bringing about new requirements for the manufacturing workforce. It is all about the cyber-physical
systems, cloud manufacturing, cyber security and big data analytic. These technologies are
progressing at a very rapid pace. This persistent technological progress will bring the machines and
computers to finally reach the point where they will perform the tasks on par or better than the normal
person (Bonekamp & Sure, 2015). This latest industrial paradigm will create a significant influence
on labor market and professional roles and it is crucial to ensure that more jobs are created than those
that will disappear (Pereira & Romero, 2017). For example, smart manufacturing is causing the
reduction of workforces happens in the field where manual activities are less performed and a lot of
jobs will be replaced by machines due to the technological revolution.

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Figure 1: The Vision of Industry 4.0

Source: (Flynn, Dance & Schaefer, 2017)
2.2 Human Capital in the Industry 4.0
In the organisation context, human capital is encompassing a set of education, experience,

knowledge and skills that are possessed and utilized by employees to generate value to ensure the
firm’s success (Agolla, 2018). This new industrial paradigm is anticipated to have consequences on
markets, industry with improved process, increased productivity, economy strengthened, upgraded
social and will create new business models with different working environment and restructuring the
human capital. The critical elements in human capital which are education, knowledge, experience
and skills are the core substances in human capital assessment (Agolla, 2018). According to the
report by (Industriall Global Union, 2017), today’s workers are not necessarily lack skills but the new
workplace requires skills that they don’t have although it is agreed that the smart manufacturing
would not only abolish jobs but also to create new oppoturnities (Bonekamp & Sure, 2015). This new
opportunities however most probably will demand for workers which are high skilled, innovative and
dynamic (Shamim, Cang, Yu, & Li, 2016), with preference of the employees with high IT
competence that have good understanding of practical, engineering and programming skills
(Bonekamp & Sure, 2015; Industriall Global Union, 2017). As such, unskilled and semi-skilled
workers with empathetic and lower creative routine jobs will be most affected (Flynn, Dance, &
Schaefer, 2017), which creates the fear of job loss (Sciutti, Mara, Tagliasco, & Sandini, 2018).
On the other hand, Industry 4.0 provides opportunity to re-invent jobs and pay more attention
in employees’ skill development. The holistic method for managing human resources for Industry 4.0
lists out four required employee competencies that are technical, methodological, social and personal
competencies (Hecklau, Galeitzke, Flachs, & Kohl, 2016). To be competitive the workers could

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retain their job at the company and make effort to upgrade knowledge, skills and competencies in job-
related fields (Agolla, 2018), or they can just quit to prevent destructive psychological effects (Hirsch-
Kreinsen, 2016). Some jobs that are automatable are likely to change. The World Economic Forum’s
study forecasted that 5 million jobs will be lost before 2020 as human capital will be replaced with
artificial intelligence (AI), robotics, nanotechnology and other socio-economic factors. However,
some 2.1 million new jobs in more specialized areas such as engineering, mathematics, computing
and architecture will be created and workers who successfully combine mathematical and
interpersonal skills in the knowledge-based economies of the future should find many rewarding and
lucrative opportunities (Caruso, 2018). However, employees that stuck in manual and clerical works
will likely be laid off if they fail to equip themselves with the required skills to strive for the new jobs.
Therefore, it is necessary to introduce new flexible concept in skills training with future-ready
curricula. The 2016 World Economic Forum in Davos revealed that 7 million employees of mainly
classic office works, will cease to exist because Industry 4.0 will eliminate existing business models
and entire companies. However, at the same time, the revolution will create 2 million new jobs mainly
in computer science, mathematics, electronics and information technology areas. It is the evidence
that we are moving towards smarter, more complex and more automated society (Ciolacu, Svasta,
Berg, & Popp, 2017).
Human capital will remain the key information processor, troubleshooter, equipment monitor
and decision maker that requires higher cognitive demands and mental tasks to control the processes
that evolved from simple (with mechanization) to complicated and complex cognitive (with
computerization) system, and even emotional (with semi/full automation) (Waschull, Bokhorst, &
Wortmann, 2017). Talent in the areas of lean management, the Internet of things (IoT), cloud
computing, and big data is a key resource because with talents employees can tackle uncertainty in a
production environment by utilizing their flexibility, tacit knowledge, adaptability, and unlimited
variability of behavior (Chang & Yeh, 2018). Employees must have the initiative to learn how to
engage with the new revolution and conduct life-learning process to continuously improve their
performance and technological knowledge in terms of both quality and quantity. Employees with job
specialization will be less important than employees with multi-purpose skills and have the capacity
for adaptation. The new smart manufacturing is one of the significant factors that affect human capital,
the demand and supply of skills, occupational structures and driving job displacements (Kergroach,
2017).
2.3 Human Capital Readiness
To empower employee readiness and for future protection of their competitiveness in the
market, there should be a shift from the traditional education to an sophisticated set of techniques for
skill developments to handle the key enabling technologies efficiently and building digital
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competences to operate machines such as cyber-physical systems (CPS), augmented reality (AR),
human-robot collaboration (cobot), and smart devices (Mourtzis, 2018). This is the fundamental
infrastructure of the system that manages every level of production, distribution, consumption,
collection and processing of big data. Upgrading the skills enable the employees to face all the
challenges, barriers, and needs for the Industry 4.0 because employment rate is one of the most
debatable aspects digitalization influence which induces a restructuring of the workforce. Robots and
computers will trim down the number of jobs in assembling lines and productions (Salento, 2018).
To tackle the human capital crisis, all relevant parties must involve in the retraining and
upskilling of the employees to enhance their readiness to combat increase in unemployment and
shortage of talent (Kusmin, Ley, & Normak, 2017). In manufacturing firms, Industry 4.0 has a
substantial influence on the placement of the production employees and requires the management to
adjust the manufacturing environment. In broader scope, there will be a disruptive change of
economic, technological and social systems because the employment landscape will change over the
coming years with new challenges and new opportunities that demand the future employees that are
able to adapt and grow (Gaspar, Julião, & Cruz, 2018). There will be many changes in employment
patterns and demands on employee in job qualification with a new generation of employees that born
in the era of communication technologies with skills such as communication, technical literacy,
learning ability and creativity (Grenčíková & Vojtovič, 2017).
Moreover, it is expected that by 2020, 50 percent of the human capital will comprise of
millennial or Gen Y (born between 1980 – 2000) employees and Gen Z (born after 2000) that born in
the internet era, social media, and smartphones and have different expectations from their employers
such as anytime–anywhere collaboration, instant feedback, open culture, and data–driven decisions
(Sivathanu & Pillai, 2018). As such, assistances are needed to show the employees the necessary
skills and expertise to be acquired so when new jobs are created, they are ready to fill in (Motyl,
Baronio, Uberti, Speranza, & Filippi, 2017). The qualified employees should be trained in the
internet and sensor technologies environment that allows an interactive system for the users to
enhance their interdisciplinary skills in specific digital workflows (Baygin, Yetis, Karakose, & Akin,
2016). This is because Industry 4.0 promotes integration of human in the manufacturing process with
real time data monitoring in Computer Integrated Manufacturing (CIM) (Vaidya, Ambad, & Bhosle,
2018). In view of this, there is a need to continuously qualify the human capital about new and
evolving technology trends because in the production system, human is the most flexible entity. Even
though Industry 4.0 would change the human capital requirements completely, the new business
models are able to change current jobs that are replaced by intelligent machines with new employment
opportunities (Rajnai & Kocsis, 2017). Industry 4.0 will increase the complexity of daily tasks and
require flexibility to perform adaptive abilities in smart factories that are equipped with the integration
of advanced digital manufacturing capabilities (Longo, Nicoletti, & Padovano, 2017).

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3.0 Review Methodology
This paper provide an indepth review analyses on the human capital in the context of Industry
4.0. As Industry 4.0 revolution and smart manufacturing are relatively new research areas, the
practical based dilemmas of human factors and case data in production setting from companies have
been scarcely explored. Before conducting case research strategy, the authors have conducted a
Systematic Literature Review (SLR) and derived a future employability prospect and strategies for
exit plan for the lower and semi-skilled human capital. There are three objectives for conducting the
SLR which are; (1) to identify the areas of coverage in Industry 4.0 research avenues related to human
capital domain in the past five years, (2) to identify the status of human capital research in the context
of Industry 4.0, and (3) to recognize the possibilities of future research directions which related to
human capital in conjunction with the Industry 4.0.
Prior to the application of SLR, for the selection of database, a bulk of journals and articles
have been selected from the Scopus database since it is the largest abstract and citation database of
peer-reviewed literature. Scopus database is a well known with its high quality peer-reviewed journals
in top-level areas such as life sciences, social sciences, physical sciences and health sciences which
makes it relevant to supply the desired literatures and accurate information for this study.
The literatures finding only covered five years back from 2014 up until 2018. Proceeds to the
keyword selection, the searching of articles began by using a few keywords paired with term
“Industry 4.0”. The keywords are; “Industry 4.0 – human”, “Industry 4.0 – human capital”, “Industry
4.0 – employee”, “Industry 4.0 – workforce”, and “Industry 4.0 – human resource”. The initial
keywords searching resulted to about 560 articles. To refine the result futher, any duplicated papers is
removed and each articles were screened to identify whether it is relavance to the topic in concerns.
The number of articles dropped to 79 for final review.
4.0 Descriptive Statistics
4.1 Contributions by year
Although the interest had started showing in 2014 with 2 papers, the year 2018 has shown the
peak of papers published in the area of Industry 4.0 and human capital (Figure 2) with 33 papers after
a steep upwards from 6 papers in the year 2016. 11 papers are already seen to be published in the
upcoming year 2019. The trend is showing that just within 4 years from 2014, the interest of
researchers and academicians into the new revolution topic had jumped about 30 studies. These huge
numbers of escalation are supposed due to the reasons that people are starting to identify and
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acknowledge the presence of the newly industrial revolution where the automation and robotics can
disrupt the conventional process of how manufacturing is done that leads to massive unemployment.
Figure 2: Year-wise Publication Details
4.2 Contributions by type of paper
Types of paper published as depicted in Figure 3 are dominated with articles and conference
papers which are 36 and 35 respectively. Others are book chapter (4), article in press (2) and review
(2). The finding showed that besides the individual journal website, conferences are also considered
as the most preference platform for the researchers to publish their work on Industry 4.0 and human
capital. It is understood that at the conferences, the key persons from the industry, the government and
also the academia can meet, share, discuss and exchange their thought on a similar topic.

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Figure 3: Types of Papers Published
4.3 Contributions based on type of research
The type of research Figure 4 has indicated that conceptual is a head of others with 45 papers,
followed by case study and survey (9 each), experimentation (8), simulation (3), prototype and survey
and interview (2 each) and lastly experimentation and prototype (1). These statistics reveal that the
discussions and investigation on Industry 4.0 and human capital are still at the infancy stage. A large
number of scholars have started their research interest by proposing and presenting conceptual ideas
in the areas of the fourth industrial revolution, human and robot collaboration and the roles of human
workers. These conceptual ideas however are yet to be proven empirically which bring out the gaps
and open up to more researchers to explore deep into the issues in concerned.

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Figure 4: Types of Research
4.4 Contributions from journals
Journal publication details as illustrated in Figure 5 has depicted that Advances in intelligent
system and Computing has 9 papers; Procedia Manufacturing with 5 papers, AI and Society and
Procedia CIRP (4 each); Manufacturing Letters, Studies in System, Decision and Control and ZWF
Journal of Economics Factory Operation (3 each); and ACM International Conference Proceeding
Series, Computers and Industrial Engineering and MATEC Web of Conferences (2 each). All of other
42 journals had contributed to one paper each.

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Figure 5: Journal Publication Details (≥ two papers)
4.5 Contributions by country
As depicted in Figure 6, Germany has the highest publication (21), followed by Italy (8),
Portugal and United States (5), Poland and Russia (4), while Austria, Estonia, France, Hungary, India,
Malaysia, Netherland, Romania and Sweden (2 each) are at minimum level. Germany has started the
research on the fourth industrial revolution since the country had proposed and plan into the new
industrial wave with the Industrie 4.0 due to the incomparable status of its manufacturing. The new
concept of Industrie 4.0 implicates leading intelligence, connectivity, and much broader
computerization to manufacturing. Malaysia is among other developing countries in moving forward
to embrace the research in new industrial revolution.

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Figure 6: Country-wise Publications Details (≥ two papers)
4.6 High-contributing authors
Figure 7 illustrates the contributing authors with Bauer W, Polak-Sopinska A and Wuest T
represent the top contributors with 3 papers each. Other researchers such as Aziz A.A, Brandi P,
Galeitzke M, Gaspar M.R.C, Gorecky D, Hecklau F, Hirsch-Kreinsen H, Jeschke S, Muller S. L,
Pokorni B, Ramanathan K, Richert A, Romero D, Schroder S and Wisniewski Z contribute 2 papers
each.

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Figure 7: Top Contributing Authors (≥ two papers)
4.7 Distribution by research categories
Research focuses are distributed as shown in Figure 8 in the scope of strategy, implications,
development, technology, assessment, technology application, challenges, policy, comparison,
recommendation and factors. The 11 focuses were derived based from the nature of the discussion,
proposition and findings for every selected papers. Most of the papers were focusing on how the
component of Industry 4.0 become the company’s strategy for competitive advantage. They were
basically concentrating on the manufacturing system, operation, and process improvement. In
technology and technology applications, the authors most probably encouraged to investigate what is
the technologies involve in Industry 4.0 itself and how they will be applied in the industry. Some
scholars had observed on the challenges and implications arisen from the implementation of
intelligence-computerization integration. The challenges are the redesigning of job scope and also the
preparation of companies in terms of human capital in training the skills, education and exposure. The
new revolution has been predicted to restructure the labor market and professional positions.

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Figure 8: Distribution by Research Focus
5.0 Future Research Perspectives
The reviews on literatures of Industry 4.0 and human capital proposed to a few future research
opportunities. First, it is recommended that the future study must focuses deeper in the context of
human capital. There should be a standard or guidelines for the labor workforces which explain more
on how these group of workers are not left behind due to the advancement of automation in
manufacturing. Since Malaysia is a country which heavily reliant on foreign labor, at some point in
the future, the dependency will eventually be reduced and taken over by the machines and robots.
Thus, they should be by now prepared either to go on the career development path or otherwise the
exit plan. The most affected workers will be the low and semi-skilled workers, therefore a future
study must focus more on these classification of skills worker. Next, future research will be benefited
from an enterprises readiness model studies. The development of readiness model to measure the
current capacity of a manufacturer will help the organization, industry and government in designing a
suitable programs or preparation plan for implementing the Industry 4.0. Finally, despite the
importance of planning and strategizing at the company level, future research can be promoted by
looking into how to foster the right knowledge in education level. As it is believed that the future
talents are going to facing through the jobs that have not being created yet. Thus, an investigation on
the academic structure now is expected to be fruitful for tomorrow.

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6.0 Conclusion
The authors believed Industry 4.0 is still at the developing stage and more research studies are
needed to quantify the impacts of Industry 4.0 on human capital. Future research should also consider
the development of a standard for an employee and enterprise readiness model.
Acknowledgement
The authors would like to extend their gratitude to Universiti Tun Hussein Onn Malaysia for
financial support under the TIER 1 research grant Vot H274. All those who contributed direct or
indirectly are thanked.
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Journal for Studies in Management and

Industry 4.0 Implications on Human Capital: A Review

*Corresponding E-mail: nurazwa@uthm.edu.my

Keywords: Industry 4.0; Smart manufacturing; Human capital; Employees readiness

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2.0 Literature Review

2.1 Industry 4.0

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Figure 1: The Vision of Industry 4.0

2.2 Human Capital in the Industry 4.0

In the organisation context, human capital is encompassing a set of education, experience,

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2.3 Human Capital Readiness

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3.0 Review Methodology

4.0 Descriptive Statistics

4.1 Contributions by year

Figure 2: Year-wise Publication Details

4.2 Contributions by type of paper

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Figure 3: Types of Papers Published

4.3 Contributions based on type of research

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Figure 4: Types of Research

4.4 Contributions from journals

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Figure 5: Journal Publication Details (≥ two papers)

4.5 Contributions by country

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Figure 6: Country-wise Publications Details (≥ two papers)

4.6 High-contributing authors

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Figure 7: Top Contributing Authors (≥ two papers)

4.7 Distribution by research categories

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Figure 8: Distribution by Research Focus

5.0 Future Research Perspectives

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