NC’s Assets to Compete in the 4th Industrial Revolution

In the first article in this series, we discussed the critical role Manufacturing plays in North Carolina – through its employment, wages, and contribution to state gross domestic product (GDP). Then we delved into how NC’s Manufacturing sector has evolved over the past three decades – from one based on traditional labor-intensive production and craftsmanship, centered around Textiles, Apparel, and Furniture to sophisticated technical precision and mechanization in growing industries like Chemicals, Metal Fabrication, and Transportation Equipment. That transition not only changed the amount of labor needed, but also the skills and technical processes involved. North Carolina and the world again face another period of industrial change. This next phase of industrialization, commonly referred to as Industry 4.0, will reshape NC’s Manufacturing sector once again – and in ways as significant, or more so, than previous revolutions.

Industrial Revolutions

Merriam-Webster dictionary defines a revolution as “a sudden, radical, or complete change.” While not exactly sudden, prior industrial revolutions have radically changed how Americans, and most of the world’s citizens, work and live. The first industrial revolution is commonly thought of as the period of mechanization in the late 18^th to early 19^th centuries that began to shepherd people from farms into cities and urban factories. The second industrial revolution occurred later in the 19^th and early 20^th centuries utilizing the railroad, telecommunications, electrical power, and process innovations to spawn mass production. The latter half of the 20^th century marked the third wave of industrialization – defined by digital advancements in computing and communicating, enabling robotics, rapid production, and global supply chains. If industry prognosticators, corporations, and economists are right, the coming decade(s) will again change the world as advanced technology and big data infiltrate factories. According to the World Economic Forum, “the speed, breadth and depth of this revolution is forcing us to rethink how countries develop, how organizations create value and even what it means to be human.”

Fortunately, North Carolina has two important assets to help propel Manufacturing into the future and seize the opportunities and promise of Industry 4.0:

• Research and development capacity – to develop new innovations, products, and companies
• Skilled workforce – thousands of existing Industry 4.0-enabling, skilled workers.

Strong R&D investments in NC could help herald Industry 4.0 transition

Research and development efforts at public and private universities play a critical role in supporting the transition of North Carolina Manufacturing to Industry 4.0. Many of the innovations in artificial intelligence, cloud computing, and industrial robotics that are essential to increasing productivity in Manufacturing are borne from academic research. North Carolina universities receive a substantial amount of funding from federal and non-federal sources to pursue R&D activities in the five fields that most closely support the fourth industrial revolution:

• Computer & Information Sciences
• Electrical, Electronic, & Communications Engineering
• Mechanical Engineering
• Mathematics & Statistics
• Industrial & Manufacturing Engineering

Figure 1

In 2021, R&D funding for Industry 4.0 related fields totaled nearly $231 million. Since 2016, R&D funding in these fields has increased by about $49 million, or 27 percent, while funding at the national level has increased by about 33.4 percent.

Figure 2

North Carolina’s national rank in R&D funding in Industry 4.0-related fields has remained consistent since 2016. In both 2016 and 2021, the state received the 14^th largest amount of federal and non-federal funding in the five 4.0-related fields. However, during that same period Virginia moved from the 12^th to 8^th in 4.0 R&D funding, while Georgia gained one spot, rising from 5^th to 4^th. Of course, North Carolina manufacturers will still benefit from innovations from other states’ universities, but more R&D funding elsewhere could translate to companies outside of North Carolina capitalizing on innovation technologies before our local manufacturers.

North Carolina State University receives the most Industry 4.0 R&D funding in North Carolina. In 2021, NC State’s 4.0 R&D funding totaled $99.2 million, or more than 40 percent of all federal and non-federal Industry 4.0-related funding flowing into the state that year. The university consistently tops the list of all North Carolina public and private universities. NC State manufacturing staples such as industrial engineering programs, the Manufacturing Extension Partnership, and Industry Expansion Solutions help cement the university as North Carolina’s leading school in Industry 4.0-related research and development.

Historically, Electrical, Electronics, and Communications Engineering R&D drove research funding that could help herald the fourth industrial revolution. But, in 2021, Computer and Information Sciences R&D surged to the top after finishing just behind electrical engineering for the past several years. Notably, Industrial and Manufacturing Engineering R&D funding has declined in recent years. This field received about $12 million in R&D funding in 2021, down from a high point of $13.4 million in 2017.

Industry 4.0 enabling occupations represent a small but growing share of all Manufacturing jobs

Many of the Industry 4.0 technologies that could enhance production processes have been around for years. A high-level (but incomplete) proxy for Industry 4.0 workers, jobs in Computer and Mathematical; Architecture and Engineering; and Life, Physical, and Social Science Occupations accounted for roughly 34,600 (7.4%) of NC’s Manufacturing sector total in 2022 according to BLS’s Occupational Employment and Wage Statistics (OEWS). This total makes North Carolina the 12^th largest state for the number of Industry 4.0 enabling jobs working in Manufacturing. But as the 9^th largest state in Manufacturing employment, that means NC trails in the percentage of industry employment in these technical positions – lower than the national average of 9.6 percent and ranking 31^st among the states.

Figure 3

Due to the methodology in which OEWS is constructed, comparisons between years can be fraught and are not recommended by BLS. However, the historical data suggests at least modest growth in Manufacturing’s Architecture and Engineering and Life, Physical, and Social Science occupation groups broadly and individual 4.0-related occupations specifically.

Once 4.0 technologies become more widespread, North Carolina Manufacturers will need more of those workers. The faster businesses are able to implement new technologies, seizing advantages over competitors and boosting growth, the more highly-skilled workers we will need. Competition for these workers will likely be intense, as NC’s Architecture and Engineering; Life, Physical, and Social Science; and particularly Computer and Mathematical Occupations are projected to grow faster than the overall rate of employment growth through 2030.

Industry 4.0 transition will require an investment in new skills

Those who currently work in Manufacturing seem like a logical source for Industry 4.0 workers. But while the worksite, environment, and products they’re producing may be the same, the skills needed to fill these jobs can require more than just a short-term training credential. Successful transitions will require time to develop new skills and an interest on the part of workers. Take for instance two similar-sounding occupations:

Aside from the contrasts in manual vs cognitive work activities, those who work as CNC Programmers are more likely to be investigative in nature and enjoy tasks studying and researching problems according to O*NET. While some existing CNC Operators may have an interest in pursuing the training needed to transition to a CNC Programmer role, not all will, as the two occupations are likely to attract workers with different work preferences.  Additional differences exist between the two in the size, projected growth, wages, and education and training requirements. Computer Numerically Controlled Tool Operators, the much larger occupation of the two, is projected to decline and is among the bottom 15 percent in LEAD’s projected growth rate between 2021 and 2030.  Meanwhile, Computer Numerically Controlled Tool Programmers, which could replace Operators, is projected to be among the top 3% of all NC occupations in terms of growth rates.

Other growing occupations such as Biomedical Engineers and Information Security Analysts will require even more education, training, and experience and may not have a natural pathway among existing production jobs in the industry.

Industry 4.0 technologies can unlock untapped growth potential in the Manufacturing sector and position North Carolina industry as a global leader, but there’s also potential for negative disruptions to jobs and competitiveness. To capitalize on Industry 4.0’s positives while minimizing potential negative impacts, a true partnership between industry, government, and education is required. This will better enable Manufacturers to access new technologies, while ensuring industry-aligned training programs are producing the workforce they will need, whether through retraining existing workers for new roles or bringing new workers to the industry. Fortunately, North Carolina has a long history fostering manufacturing partnerships. NC State University’s Industry Expansion Solutions and North Carolina Manufacturing Extension Partnership, the NC Community College System’s Customized Training Program, and the North Carolina Department of Commerce’s Office of Science, Technology, and Innovation are just some of the state’s entities and programs to help companies innovate, modernize, and connect with researchers, capital providers, workforce training, and supply chains. All North Carolina research, workforce, and resource assets, alongside forward-thinking industry policies, will be needed to reshape and grow NC’s Manufacturing sector as a global leader in the fourth industrial revolution.