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 shaped 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. Open innovation platforms are emerging where corporations can share R&D requirements for innovators to provide solutions in exchange for compensation. Therefore, new products are designed using an existing digital information base (including schematics), which adds a high level of value in part because it can be replicated and customized.
- 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. Materials as well are subject to innovation when new materials can substitute for conventional materials. Access and connectivity to diversified procurement sources are expanded by more advanced information and communication technologies enabling to add predictability, flexibility, and adaptability to procurement. Environmental considerations, such as certification schemes, impact procurement and 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 (also known as additive manufacturing) as well as robotics are transforming manufacturing, which is becoming less labor-intensive, more scalable, adaptable, and using new materials. These technologies can shorten the design of prototypes and production cycle times, improve productivity, and decrease the footprint of manufacturing. 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 under just-in-time demand fulfillment. This new paradigm has been labeled as distributed manufacturing.
- Distribution. Automation has been an important driver for distribution with a push towards the automation of warehouses and distribution centers to increase their throughput and responsiveness. The same applies to containerization where terminals are being automated to improve gate, yard, and transloading operations. The potential for automated vehicles, particularly for roads, is also a driver that could impact freight distribution dynamics in the coming decades, including last mile and urban logistics.
- Marketing. The conventional retail landscape has been characterized by a strong real estate footprint since direct access to consumers was key. E-commerce 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. The retail landscape is adapting to reduce its footprint (e.g. store closures) and move towards omni facilities where the store is simultaneously a showroom, a distribution center, a pickup point, and even a recreational area.
- Services. The service components of products, particularly electronics, vehicles, and appliances, have 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 are commonly more valuable than the device itself. Due to the growing importance of environmental considerations, service activities related to upgrading, 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, port community systems, and possibly blockchains.
Since most of these drivers were recently introduced, their full impacts are 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. Expectations are for more efficient use of materials, a lower material intensity of goods (including packaging), and a lower environmental footprint for manufacturing and transportation. Many processes are complex and require expertise that cannot easily be automated. The full transformational consequences of the fourth industrial revolution on value chains remain to be seen.