How to assess investments in industry 4.0 technologies? A multiple-criteria framework for economic, financial, and sociotechnical factors

Abstract

Companies that want to adopt Industry 4.0 (I4.0) technologies may face difficulties evaluating the return on I4.0 investments. The complexity of implementing such technologies and uncertainties regarding the technological requirements, benefits, and organizational impacts make investment decisions challenging in this context. We propose an investment appraisal framework for I4.0 technologies adoption based on a multiple-criteria decision making (MCDM) approach. Using the Innovation Diffusion and Sociotechnical theories, we build a framework with three main stages (knowledge, persuasion, and decision) to guide practitioners through an analysis of I4.0 investments from three different perspectives: Economic, Financial, and Sociotechnical factors. We provide conceptual criteria for investment appraisal and a methodological approach to combine quantitative and qualitative data for the comparative assessment. We show an empirical application of this framework to assess ten I4.0 technology projects proposed in a multinational company. The application helps to illustrate the use of this tool. It brings new practical insights into how to organize I4.0 investment projects into the following categories: strategic or structuring, value-creating, and side investments. We also show the need to include several qualitative requirements and benefits in the technology evaluation to obtain a more robust view of Industry 4.0 investment priorities.

Keywords:

• Industry 4.0
• investment assessment
• sociotechnical
• economic
• financial

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This project has received research funds from the Brazilian National Council for Scientific and Technological Development (CNPq – Conselho Nacional de Desenvolvimento Científico e Tecnológico) [Process n. 443680/2018–3 and 306034/2018–2], the Research Council of the State of Rio Grande do Sul (FAPERGS, Fundação de Amparo à Pesquisa do Estado do Rio Grande do Sul) [Process n. 17/2551–0001 and 21/2551-0000658-7] and the Research Coordination of the Brazilian Ministry of Education (CAPES) (PhD scholarship).

Notes on contributors

Rodrigo Pessotto Almeida

Rodrigo Pessotto Almeida is a Ph.D. candidate at the Department of Industrial Engineering of the Federal University of Rio Grande do Sul – Brazil. He is member of the Production Economics Group (Núcleo de Economia da Produção – NECOP) at the same university. His research is concerned with the investment assessment in Industry 4.0 technologies, Production costs and Physical Asset Management.

Néstor Fabián Ayala

Néstor Fabián Ayala, Ph.D. is an Associate Professor of Service Engineering at the Federal University of Rio Grande do Sul (UFRGS) – Brazil, and the codirector of the Organizational Engineering Group (NEO – Núcleo de Engenharia Organizacional) also at UFRGS. He has been a visiting scholar at the Institute Polytechnic of Grenoble (Grenoble INP), France. His main research interests include strategic management, and operations management with focus on servitization and Industry 4.0.

Guilherme Brittes Benitez

Guilherme Brittes Benitez is a Ph.D. in Industrial Engineering at the School of Engineering of the Federal University of Rio Grande do Sul (UFRGS). Currently, he is a postdoctoral researcher at UFRGS. He is a Research Fellow from the Organizational Engineering Group (NEO-UFRGS). His main research field is operations management, emphasising Industry 4.0, digital technologies, ecosystems, supply chains, platforms, and business models.

Francisco José Kliemann Neto

Francisco José Kliemann Neto, Ph.D. is an Associate Professor at the Department of Industrial Engineering of the Federal University of Rio Grande do Sul (UFRGS) – Brazil, and the director of the of the Production Economics Group (Núcleo de Economia da Produção – NECOP) at the same university.

Alejandro Germán Frank

Alejandro G. Frank, Ph.D. is an Associate Professor at the Department of Industrial Engineering of the Federal University of Rio Grande do Sul (UFRGS) and a Research Affiliate at the MIT Industrial Performance Centre. At UFRGS, he is the Director of the Organizational Engineering Group. He received Ph.D. (2013) and M.Eng. (2009) degrees in Industrial Engineering from UFRGS, Brazil, and a B.Eng. degree in Industrial Engineering (2007) from the National University of Misiones (UNaM), Argentina. He has been a visiting scholar at the Massachusetts Institute of Technology (USA), and at Politecnico di Milano (Italy). His research is devoted to the interface between operations and technology management, with emphasis on digital transformation, Industry 4.0, and new business models in manufacturing firms.