Communist Review - The ongoing Fourth Industrial Revolution takes place in the era of the Internet of things (IoT), applying digital technology to automate production activities. This Revolution is essentially a trend to digitize traditional production and manufacturing methods.

The Fourth Industrial Revolution and its Impacts on Industry

Up to now, global industry has experienced three industrial revolutions. The first one taking place in the 1980s of the eighteenth century is the process of mechanization with machines powered by hydraulic and steam engines instead of human labor. The second one took place in the 1970s of the nineteenth century, a driving force of this revolution was the internal combustion engine and electricity. The third one took place in the late 1960s and early 1970s of the twentieth century with the application of information technology and electronics to promote the automation of production.

For the previous three revolutions, the gap between the two revolutions lasted nearly a century, while the gap between the 3^rd Industrial Revolution and the 4^th Industrial Revolution was less than half a century. Each revolution is driven by the development of breakthrough technologies that fundamentally change the global production system, completely changing the way people create material wealth.

Previously, only some production stages were automated by the application of information technology, but recently, the trend of production automation is taking place on a much larger scale than what happened during 1970s, the beginning of the 3^rd Industrial Revolution. The application of information and communication technology (ICT) to the manufacturing and operating industries on a large scale is blurring the boundaries between the real and virtual worlds, known as Cyber Physical Production Systems (CPPS) (1). A self-interactive manufacturing system is an online communication network between machines, groups of components, and components. This is the trend of the 4^th Industrial Revolution, which is based on the outstanding developments of ICT and computer science to create products, data and services that allow everyone and everything to connect with each other.

Besides information technology, 3D printing technology, artificial intelligence, robotics, nanotechnology, new material technology are typical technologies that are exponentially developing, creating tremendous impacts on the production process, making industrial production much more flexible. These technologies are not new, even discovered 20 or 30 years ago, but thanks to rapidly growing computing power, decreasing costs, and reduced device size, these allowed such technologies to be applied in industrial production.

The Fourth Industrial Revolution (FIR) has changed segments of the traditional value chain. In fact, with or without FIR, the value chain still includes segments from development research, design to manufacturing, then distribution, logistics and sales, but the application of technology of FIR has changed the operations of these segments. In the traditional value chain model, the research and design stages are performed based on market trend analysis results, often with time lag due to the time-consuming data collection, analysis and processing and limited access to information. Today, with the support of big data, determining market trends becomes easier and faster, much more accurate. In the production and manufacturing stage, in the past, it was merely an activity of creating products and goods, bearing many risks of defective goods, damaged goods due to lack of control over the entire value chain, or the risks of excessive and unsuitable production with the needs of the present market. With the support of CPPS and real-time management technologies, most of these risks are controlled so that the production is optimized without wastefulness. According to the approach of just-in-time (JIT) management, inventory and storage costs are identified as one of the wastes that need to be minimized and zero inventory is business goals.

In the traditional value chain model, the amount of inventory is always regulated at a certain rate, but with the support of the Industrial Revolution4, the amount of inventory is optimized in real time, so that businesses optimize to realize the demand for working capital, cost and improve the efficiency of production and business activities.

Similarly, in the logistics segment, real-time management makes the process of freight control easier, increasing accuracy and cutting costs. The sales stage undergoes the most changes due to the impact of the FIR. Instead of having to maintain a system of large stores with expensive costs to display and sell products, e-commerce and online advertising channels allow manufacturers to significantly reduce the number of stores and reach customers directly. All these changes can only take place in a society where all information and data can be digitized and processed so that big data becomes useful and meaningful to users. Thus, the 4^th Industrial Revolution, or more precisely, digitization has fundamentally changed the global production system, completely changing the way people live, work and connect with others; digitization also creates new businesses and industries, changes traditional business models and reshapes the global economy; big data, real-time, IoTs, e-commerce applications, ... are present on every stage of the value chain. However, it should be emphasized that core activities are still real activities such as design, goods production, logistics, sales to create the foundation for applying information technology across the entire value chain.

The Vietnam Industry White Paper in 2019 overviewed the entire global trend of digital transformation taking place during the 4^th Industrial Revolution. Total digital transformation takes place thanks to Internet connection and the combination of operation technology (OT) with information technology (IT), which creates a virtual world that is replicas of the real world and an entirely new production-consumption model. The combination of OT and IT is the core issue of the digital transformation process. IT creates a supportive environment that allows the realization of digital transformation (enabler), while OT is the basic technology in all fields, production, energy, logistics, healthcare, finance ... is the foundation to put information technology into practical application (adopter). A country that does not have a strong OT development will not create many opportunities and a large environment for IT application, so both OT and IT need to be developed in the context of the 4^th Industrial Revolution, especially in developing countries as OT has not developed as strongly and diversified as in developed countries. This once again shows that the role and importance of IT in particular and the service industries in general since the economy is steadily increasing, but no matter how important IT is, it still cannot replace OT completely, specifically OT is a necessary condition and IT is a sufficient condition. Both are factors to create the 4^th Industrial Revolution.

In the past few years, the concept of Fourth Industrial Revolution or Industry 4.0 has become popular, many countries have their own strategies to maintain competitive advantages and take advantage of opportunities from this Revolution. For countries with a developed OT technology background, the strategy of combining OT and IT is very clear, but for developing countries, the FIR approach seems to focus too much on IT but ignores the fact that the IT application environment must be formed and extended, and a solid and reliable IT system can only be built when it can access a large enough amount of factual data and the real world of OT.

World experience of industrial development in the context of the Fourth Industrial Revolution

Each country has different approaches to the 4^th Industrial Revolution, but basically, the current approach of countries can be classified into different strategic groups and is recognized by the Vietnam Industrial White Paper in 2019.

Singapore and South Korea are two of the many countries around the world to soon announce programs related to Industry 4.0. Despite being an island nation with a limited area and the fact that its economy largely depends on services, Singapore has always been aware of the importance of the manufacturing and processing industries in driving innovation in creativity, from which to replicate those ideas to other industries. In the economic structure of Singapore, the processing and manufacturing industry always maintains the proportion at 20%. Singapore’s i4.0 program focuses on developing future models of factories, enterprises and value chains based on Industry 4.0, using outstanding technologies of the 4^th Industrial Revolution, including Industrial IoT (IIoT), advanced materials, additive manufacturing (3D printing), robotics and automation. The future factory model is studied for Singapore’s key industrial sectors, including chemicals, electronics, pharmaceuticals, precision mechanics, car mechanics... Singapore’s i4.0 program aims to improve the capacity of domestic enterprises and industries to absorb new technologies through 3 strategies of technology capacity building, digital transformation at the industry and enterprise level, and human resources development i4.0. To implement these strategies effectively, Singapore established a tripartite cooperation mechanism for strategies with the participation of public organizations, businesses and universities. Nayang University is an official member involved in formulating and implementing strategies on technological capacity and human resource development.

Korea has implemented the first activities related to Industry 4.0 since 2014. The Presidential Committee for the Fourth Industrial Revolution was established with 20 representatives from businesses, universities, research institutes, and 5 representatives from ministries. Korea’s I-Korea 4.0 program targets four “I” goals - intelligence, innovation, inclusiveness, interaction, and people-centered approach. Kim’s research (in 2019) (2) shows that, initially the Government focused too much on IT, traditional industrial enterprises, mostly small and medium enterprises, felt abandoned and disoriented. In general, the social concept about these industries is 3D (dirt, danger, and difficulty) and they are about to expire. However, Korean Government and organizations have gradually changed their views, understood the importance of operational technologies (OT) for national competitiveness, and since then developed programs to connect and integrate these technologies into policies related to the Fourth Industrial Revolution. Specifically, up to now, Korea has identified 6 source technologies of the manufacturing industry including casting, mold and forming (plastic), welding, heat treatment and surface treatment, and Industry 4.0 policies will be the combination of technology of the Fourth Industrial Revolution with these 6 source technologies to create smart production technologies, improve efficiency and competitiveness. These source technologies are the root of the manufacturing industry, once these technologies and the businesses develop to a certain extent, this will create spillover effects. This is the competitive advantage of enterprises and countries to ensure maintaining the country’s position in the global market. As combined these technologies with the technologies of the 4^th Industrial Revolution, the competitiveness of enterprises and the nation will be strengthened even more.      

Vietnam’s readiness for the Fourth Industrial Revolution in the spirit of “catching up, moving along and surpassing in some fields”

In Vietnam, the concept of FIR or Industry 4.0 has become quite popular in recent years. The Prime Minister of the Socialist Republic of Vietnam has issued Directive No. 16/CT-TTg, dated 4-5-2017 “On strengthening access to the Fourth Industrial Revolution” and the Politburo of the Central Committee of the Communist Party of Vietnam issued Resolution No. 52-NQ/TW, dated September 27, 2019 “On a number of policies to actively participate in the Fourth Industrial Revolution”. This clearly demonstrates the determination of the Communist Party and State of Vietnam in taking advantage of opportunities and responding to the challenges of this revolution. The 13^th National Party Congress of the Party (January 2021) stated its determination to take advantage of the opportunities brought by the Fourth Industrial Revolution in the spirit of “catching up, advancing with and surpassing in some areas compared to the region and the world” (4) in order to bring Vietnam to a fast and sustainable development.

To grasp the status of Vietnamese industrial enterprises in the context of the 4^th Industrial Revolution, the Ministry of Industry and Trade of Vietnam has coordinated with the United Nations Development Program (UNDP) to conduct a survey on the readiness of Vietnam’s industrial businesses. Figure 3 shows the results of the readiness assessment on a 5-point scale, with most industries scoring below 2.5 in all aspects.

The survey process has drawn 9 key points of Vietnamese industrial enterprises. 1- The majority of Vietnamese enterprises are standing outside of the 4^th Industrial Revolution. 2- Vietnamese industrial enterprises have low access to all pillars of a smart manufacturing. 3- Large-sized enterprises have higher availability for all pillars. 4- Advanced technologies are still rarely applied in industrial enterprises in Vietnam. 5- Most Vietnamese enterprises currently do not have a strategy on 4^th Industrial Revolution and organize its implementation. 6- There have not been no smart factory models yet. 7- The level of readiness in intelligent operation at enterprises is higher than that of the remaining pillars, however, these are only the most basic conditions of each enterprise when approaching the 4^th Industrial Revolution. 8- Most Vietnamese enterprises do not have smart products. This is the weakness in approaching the 4^th Industrial Revolution of Vietnamese enterprises. 9- Although there is a higher level of access to the workers, however, the majority of Vietnamese enterprises currently do not provide adequate skills for workers to work in a smart factory.

In the context of the 4^th Industrial Revolution, changes in technology have helped economic sectors, especially service industries, change their traditional modes of operation to develop new services, and this is an opportunity for Vietnam to catch up with the global trend. A legal corridor is required to encourage new methods to develop, bring better services and social welfare to the people, such as digital-based activities of the healthcare, banking, transportation, tourism... However, in the manufacturing sector, the application of technology of the 4^th Industrial Revolution has a certain delay due to the complexity of the technology and the readiness of enterprises, therefore, Vietnamese enterprises faces challenges in all aspects. The main reason is that the production technology of Vietnamese enterprises is still low, leading to the unwillingness to apply the technologies of the 4^th Industrial Revolution in production and business to improve efficiency, productivity, and quality. There is no smart factory model yet so that businesses can orient their strategy on 4^th Industrial Revolution and organize its implementation. Directive No. 16/CT-TTg as well as Resolution No. 52-NQ/TW need to be implemented through specific action programs, with clear objectives, reasonable implementation resources, simple and convenient implementation procedures, and most importantly, a full monitoring and tracking system. These programs need to ensure that advances in science and technology must be associated with enterprises, bringing benefits to businesses in order to strengthen the industrial foundation and domestic production capacity.

The smart factory model of Korea can be suitable for Vietnam to refer to beside the experience of some other countries, such as Germany, Japan and Singapore. An overall framework for the smart factory model needs to be established before making specific policies, because this framework will help stakeholders visualize where each party is and what can be done within this overall framework. The Korean smart factory model sets goals, metrics to measure and evaluate the performance of a department in a company or the performance of a particular company (KPI); linkages between stakeholders, at the management macro level, the enterprise level, and the operational technology level; and the link between production technology (OT) with information technology, new technology of the 4^th Industrial Revolution (IT).

Also in the context of the 4^th Industrial Revolution, data and information play an increasingly important role, possessing and accessing accurate information sources at a fast speed. This will be one of the factors determining competitiveness in industry in the future. For policy makers, accessing and analyzing data and information on the activities of domestic enterprises will provide an overall picture of the status quo and help them make strategic decisions and policies. For enterprises, market information is a decisive factor to their production and business activities. With training institutions, information on labor and employment will help quickly adjust training programs to meet the labor needs of the market. These days, information about the economy in general, about the market, enterprises, labor ... in particular can be obtained through surveys on household living standards of family, labor, employment, business... periodically conducted by the General Statistics Office (Ministry of Planning and Investment). However, access to this data source is very limited. Moreover, the data processing and analysis capacity of civil servants, even at research institutes and universities in Vietnam is not high. In the future, these data sources need to be connected and digitized. These databases also need to be considered to allow research institutions access to the original data on a paid basis for more in-depth, useful research and evaluation. In addition, indicators related to 4^th Industrial Revolution also need to be re-evaluated and added to the questionnaires of these surveys.

The plans of the Communist Party and Government of Vietnam on the 4^th Industrial Revolution, projects on smart city development, start-up issues and national innovation network program, enabled by 4G and 5G networks, IoT, advanced mobile telecommunications, are helping the information technology industry continue to grow and achieve high revenue, creating a solid infrastructure foundation for the 4^th Industrial Revolution. However, the experience of the countries as analyzed above shows that, approaching the 4^th Industrial Revolution is not only from the IT side, but more importantly and more challengingly, is the integration and convergence of IT and OT, and the capacity to take full advantage and opportunities of the 4^th Industrial Revolution into production and daily life to bring a better life to people and businesses to develop more sustainably.

In addition to the development of information technology, the programs and policies of the Government of Vietnam in the coming time still need to focus on the development of physical production activities, if only these material production industries develop, they create new market opportunities for the application of technologies of the 4^th Industrial Revolution. Investment in technology, or technology enterprises, must be linked to the needs of enterprises, especially small and medium-sized enterprises, and the technologies of the 4^th Industrial Revolution must link and support the development of basic technological enterprises in agriculture, industry, construction, banking, healthcare... Technology development can be done by independent technology enterprises, but it can also be done by manufacturing enterprises themselves. Currently, production and business is done by improving research and development (R&D) capacity at enterprises. At the same time, it is innovation in education - training, combining training with practice, and strengthening connections between schools and businesses.

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(1) See: The Fourth Industrial Revolution: What it means, how to respond, Schwab, K. 2016, 114

(3) See: Report “Orientation, policies and key tasks of the industry and trade sector to actively participate in the Fourth Industrial Revolution”, Hanoi, 2018

(4) Documents of the 13^th National Congress of Deputies, Publishing House. National Politics Truth, Hanoi, 2021, t. 2, p. 329

This article was published in the Communist Review No. 963 (April 2021)