key: cord-0749320-6g0hd35f authors: Kumar, Ravinder; Singh, Rajesh Kr.; Dwivedi, Yogesh Kr. title: Application of Industry 4.0 technologies in Indian SMEs for sustainable growth: Analysis of challenges date: 2020-09-08 journal: J Clean Prod DOI: 10.1016/j.jclepro.2020.124063 sha: 251973c60ddaa481088483f18bc50a7d319ddc06 doc_id: 749320 cord_uid: 6g0hd35f In the era of Industry 4.0 and circular economy, small and medium enterprises (SMEs) are under huge pressure to make their manufacturing operations ethical and sustainable. Business with ethical and sustainable operations has become the need of the day in the present environment of Industry 4.0 and circular economy. It has been observed that the application of Industry 4.0 technologies may help in achieving the goal of ethical and sustainable operations. Although a lot of research has been done in context to larger enterprises, limited research is available on the application of Industry 4.0 technologies in SMEs for ethical and sustainable operations. The espousal of Industry 4.0 technologies is a challenging task for SMEs due to various operational and financial constraints. The problem is more acute, specifically in context to developing countries like India. Keeping in mind the role of technologies in ethical business and circular economy, we have identified fifteen challenges, impacting the application of Industry 4.0 technologies in SMEs. A questionnaire was designed for collecting the response from industry and academic experts. On the collected data, the DEMATEL approach has been applied to check the degree of influence and interrelationship among challenges. It has also helped in the categorization of factors as cause and effect. Sensitivity analysis is also performed to validate the results obtained from the DEMATEL approach. Authors have observed that lack of motivation from partners and customers on the application of I4.0 technologies is the leading challenge. Fear of failure of I4.0 technologies is the main effect group challenge. The findings of the study will help SMEs in formulating strategies for implementing Industry 4.0 technologies for ethical and sustainable business processes. that industry 4.0 technologies and circular economy approach could give a competitive edge to supply chains. A focus on the social aspects of sustainability can improve performance and job satisfaction (Digalwar et al., 2019) . The efficiency and energy saving of manufacturing processes can be improved by technology adoption (Nascimento et al., 2018) . Manufacturing processes can be made efficient and sustainable by effective use of process digitization and quality control tools (Shivajee et al., 2019) . Ghobakhloo (2020) has observed that by effectuation of Industry 4.0 technologies, production efficiency, process innovations and sustainability can be improved. To survive and excel in the present business scenario, SMEs need to implement emerging technologies for their sustainable growth (Kumar et al., 2015) . SMEs in developing countries like India are not able to ensure sustainable manufacturing operations due to the high cost of sustainable practices, lack of skills and training, lack of standardized metrics, and lack of adoption of emerging technologies (Kumar, 2020 a, b) . The incomplete implementation of sustainable and innovative technical processes may impact the performance of SMEs (Shashi et al., 2019) . Radziwon et al. (2014) have ascertained that Industry 4.0 technologies can help in improving the sustainability and efficiency of operations. By applying emerging technologies, SMEs can increase productivity, flexibility, responsiveness, and environmental performance (Pedersen et al., 2016) . Technologies of Industry 4.0 can be used for resolving sustainability problems (Kumar, 2020a) . Kumar et al. (2014) have found that SMEs face challenges in managing their supply chains due to a lack of effective strategies. In recent times, the application of smart technologies has changed the attention of the manufacturing sector drastically (Jain et al., 2017) . Effectuation of practices of Industry 4.0 in SMEs faces different issues like security, networking, integration of supply chain, etc. Therefore, to fix such types of problems in SMEs, there is a need to analyze different challenges in the effectuation of emerging technologies (Marques et al., 2017) . It is observed that very few studies have holistically examined the challenges coming on the path of new technology adoption by SMEs in developing countries like India . The majority of the studies are done in context to developed countries and larger enterprises. Therefore, authors are trying to solve the following research questions concerning SMEs of developing countries like India. RQ3.Which major challenge should be resolved on a priority basis by SMEs for adopting ethical and sustainable business models. After formulating above research questions and observations from literature, authors feel the need of a study for analyzing challenges in adoption of emerging technologies by SMEs. The remaining part of this study has been organized as follows: Section 2 discourses the literature on the challenges of adopting Industry 4.0 technologies. Section 3 discourses the methodology of the research. Section 4 deals with results and discussion. Section 5 discusses the conclusion with the implications. Section 6 discusses the limitations and future research. Review of related literature has been divided into two sections. The first section (2.1) is on the application of Industry 4.0 technologies for ethical and sustainable operations, and the second is on challenges in implementing technologies of Industry 4.0. Industry 4.0 comprises of different technologies like internet of things (IoT), cloud computing, additive manufacturing, cyber security with blockchain, augmented reality with artificial intelligence (AI), big data, system integration, simulation and autonomous robot (Kerin and Pham 2019; Gurtu and Johny, 2019) ( Figure 1 ). Techniques of Industry 4.0 have capacities to improve the energy, equipment, and human resource utilization (Lasi et al., 2014) . Industry 4.0 is a futuristic construct that nurtures the evolution of autonomous production systems with the application of IoT, CPS, and AI (Pacaux-Lemoine and Trentesaux, 2019). New sensor-based technologies help SMEs in continuously monitoring machine utilization, energy needs, and staff training. By thorough analysis of different Industry 4.0 technologies, data from various IoTs devices can be processed for improving the sustainability of manufacturing operations (Song and Wang, 2017) . For sustainable operations, products need to be manufactured by environment-friendly, socially viable, and economically sound processes. Production systems based on ethical and sustainable manufacturing processes are highly efficient in saving energy and natural resources. Shivajee et al. (2019) have ascertained that manufacturing processes can be made efficient and sustainable by effective use of process digitization and quality control tools. According to Beier et al. (2020) , Industry 4.0 is a sociotechnical construct in which technological, social and organizational prospects interacts. Connect of sustainability with Industry 4.0 needs to be studied in depth. For saving energy, reduction of scrap and its impact on the environment, the industrial value chain ought to be oriented towards sustainability (Fatimah et al., 2020) . Challenges of ethical and sustainable supply chains can be managed by industry 4.0 and CE concepts . According to Garcia-Muina et al. (2018) , innovations lead to ethical and sustainable operations when environmental measures are employed across the products life cycle. Piyathanavong et al. (2019) have observed that knowledge, investment, and training of sustainability concepts are critical requirements for implementing sustainable practices in Thai manufacturing organizations. Efficiency and energy saving of manufacturing processes can be improved by technology adoption (Nascimento et al., 2018) . Make to specifications, efficient energy usage, tractability, and closed-loop SCM can be managed by application of Industry 4.0 technologies (Cezarino et al., 2019) . Fundamentals of the closed supply chain (circular economy) have introduced a new approach to sustainability. It has become essential for easing reuse and Digital practices can contribute significantly to sustainability by reducing carbon footprints, renewable energy usage, and technology solutions suitable for both individuals and society (Kumar, 2020 b) . The evolution of Industry 4.0 helps in the optimal usage of resources in a more transparent manner (Dutta et al., 2020) . By effectuation of Industry 4.0 practices, production efficiency and innovation can be improved, which influence the social and environmental sustainability (Ghobakhloo, 2020; Bag et al., 2021) . Thakur and Mangla (2019) stated that the professionals of developing economies should emphasize on human, operational, and technological aspects of the sustainable supply chains in the home appliances manufacturing organizations. Government rules and support, awareness of environment protection, and information technologies are the decisive constituents for circular economy implementation (Bhatia et al., 2020) . Table 1 . The convenience of data collection from multiple sources on energy, pollution, efficiency, machine utilization, etc.; cost reduction in manufacturing; technology up-gradation as per ethical and sustainable standards; information on product life cycle can be accessed to promote reuse. Negligible scrap generation; environment-friendly process; highly flexible and consistent (intricate designs are easy to produce); testing and prototyping becomes easy, accurate, and affordable for SMEs. Enables smooth integration of the workforce and resources available within the digital environment; it compounds the real world without substituting it; increased versatility, speed, efficiency, and ethical sustainability of processes; even semiskilled workforce can work on high-end technologies. Masood and Egger (2019); Ghobakhloo (2020); ; Guarnieri and Trojan (2019) Cyber-Physical Systems (CPS) Machines utilization will improve; data/information on machine tools can be used to improve overall performance; user-friendly human-machine interaction for sustainable operations; autonomous decision-making; perform a task that is difficult for humans Pater and Gils (2003) In the modern business environment of the circular economy, organizations need to use technology for ethical and sustainable value addition. Organizations should not focus only on profit. They need to make a proper balance among different perspectives of performance. To ensure long term growth, adopted business models need to be ethical, sustainable, and transparent without exploiting human values (Machado et al., 2019) . Technologies of Industry 4.0 can maintain the whole product life cycle from design to delivery of the product (Hofmann and Rusch, 2017) . By IoTs, devices are interconnected via the internet and can share information in the form of commands or data between two or more points (Wollschlaeger et al., 2017) . Alqahtani et al. (2019) stated that the IoTs play a critical role in eradicating equivocality about the present and the persisting lives of any product. 3D printing helps in attaining the cheaper and lighter products (Zhang et al., 2018) . System integration is the combination of different software and hardware to get easy design modification and maximum value creation (Zhou et al., 2020) . By using big data analytics, we can take decisions on future growth and business improvement (Jain et al., 2017) . Virtually augmenting (augmented reality) has multiple applications nowadays like gaming, business, and education (Muller et al., 2018a) . Cyber security makes a safe and Kumar (2020b) has observed that Indian manufacturing SMEs are more influenced by the technologies of the second industrial revolution and lagging to the fourth industrial revolution. On the other side, Germany's manufacturing sector is more advanced on the technology front (Pfohl et al., 2017) . In recent times, the attention on the circular economy has increased, and therefore organizations have started looking for innovative and sustainable technologies . As per increasing global competition on the international manufacturing network, there is a need for investigating the challenges of this sector in the Industry 4.0 era (Mishra et al. 2019) . Organizations should focus on ethical issues also along with social, economic, and environmental measures while managing their operations for sustainable growth (Guarnieri and Trojan, 2019) . Despite many contributions of Industry 4.0 for ethical and sustainable business, many organizations struggle in implementing these technologies in their processes. Fast-changing technological disruptions impose many challenges for SMEs in developing countries (Morrar et al., 2017) . SMEs of developing countries face problems due to poor financial condition, lack of technical skills in workers, and the high cost of sustainable practices (Kumar et al., 2014; Moktadir et al. 2018; Bag et al. 2020b; J o u r n a l P r e -p r o o f Kumar, 2020a) . Apart from it, creating solutions, compatible to environment, culture, and society is also challenging. Lack of awareness about emerging technologies among the workers, the risk of social displacement caused due to unemployment, changes in the market structure due to emerging technologies are other major challenge for sustainable development (Muller et al., 2018b; Satapathy, 2017; Zezulka et al., 2016; Shin et al., 2019; Kumar, 2020b; Cezarino et al., 2019) . Lack of global standards and guidelines on the implementation of sustainable technologies are also found challenging for SMEs in developing economies (Shin et al., 2019; Dawson, 2014; Moktadir et al., 2018) . The 4 th industrial revolution renders a gravid chance to curb these challenges and give a competitive edge in the implementation of sustainable practices Kumar, 2020b) . Machado et al. (2019) have observed that organizations should consider social, environmental, ethical, human rights-related measures while formulating their strategies for sustainable growth. Many developed countries outsource their services to SMEs in developing countries such as India, Bangladesh, Vietnam, etc. to lower the production cost and to avoid restrictive legislation. SMEs are not able to implement technologies efficiently for their sustainable development (Almada-Lobo, 2015) . Support of top management is vital for technological changes in SMEs. Senior management should create awareness among employees about the contributions of these technologies for ethical and sustainable operations (Feng et al., 2018; Luthra and Mangla, 2018) . According to Dawson (2014) , there is a need for knowledge up-gradation on these technologies. of Industry 4.0 technologies. SMEs' philosophy of short term planning needs to be changed in long term planning for a futuristic approach towards technologies and sustainable operations (Feng et al., 2018; Luthra and Mangla, 2018; Kumar,2020a; Hofmann and Rusch, 2017) . SMEs have IT infrastructure related issues (Both software and hardware) in developing economies (Bedekar, 2017; Pfohl et al., 2017 , Subvabrata et al., 2020 Leitao et al., 2016) . SMEs lack in the skilled workforce. There is also need of training about the technologies to upgrade the skills of management and staff (Feng et al., 2018; Sommer, 2015; Luthra and Mangla, 2018; Muller et al., 2018a; Bhatia et al., 2020) . From the review of the literature and discussion with Industrial and academic experts, authors have finalized fifteen key challenges affecting the espousal of Industry 4.0 in SMEs for ethical and sustainable value addition (Table 2) . Decision Making Trial and Evaluation Laboratory (DEMATEL) technique has been used to develop interrelationship among the challenges and for identifying the most influential challenges. Sensitivity analysis is also performed to check the hardiness of DEMATEL analysis. To showcase the general steps adopted for this study, the authors have designed a research model, as shown in Figure 2 . This model discusses all steps followed by the authors during the J o u r n a l P r e -p r o o f study of all concerned issues in this research paper. DEMATEL is a preferred technique over AHP, TISM, ISM, or any MCDM techniques as it divides challenges into cause and effect group and indicates the severity of their effects also . Policymakers can get observations with a quantifiable and ocular kinship among challenges through matrices or diagraphs (Bai & Satir, 2020) . It has a wide range to respond as (0, 1, 2, 3, and 4) to explore the cause-effect relationship among the challenges. The categorization of factors further helps managers in formulating effective strategies to handle them. The DEMATEL is the multiple criteria decision making (MCDM) technique, which helps in developing interrelationship among the challenges or barriers. This tool works as a potent tool for decision making. Rajput and Singh (2019b) have categorized the enablers and challenges of CE and Industry 4.0 using DEMATEL. Yadav and Singh (2020) Figure 2 . The overall method of DEMATEL has been divided into four steps. The step by step procedure to apply the DEMATEL approach is as follows: Step 1: Development of Average Direct-relationship Matrix Experts have given their opinion about the influence of different challenges on each other by analysing the given matrix. Experts' opinions are collected based on the comparison scale of 0 to 4. The score is assigned like "0 for no impact, 1 for low impact, 2 for medium impact, 3 for high impact, and 4 for very high impact". This scale is known as the DEMATEL scale. After collecting the expert's opinion, the average direct-relation matrix is prepared, and it is represented as A ij . Step 2: Normalizing the average Direct-Relation Matrix (X) In this stride, the average Direct-Relation Matrix is further normalized(X = ) (Table 4) . Step 3 Step 4: Obtaining the Total Relation Matrix (T) ………………………………………………………………………………... (3) Eqn. (3) helps in the formation of the total relation matrix in which I represent the Identity matrix. Step 5 In this section, authors have discussed the categorization of challenges into cause and effect groups by DEMATEL technique. Sensitivity analysis has been done to validate the consistency of results. Subsections like 4.1 will explore the results of DEMATEL, subsection 4.2 will explore the finding of sensitivity analysis and subsection 4.3 will focus on conclusive discussion on the findings of this study. An expert team was formed to take the inputs for analyzing the influence of different factors over each other. Each industrial and academic expert has minimum experience ten years in the relevant field of advanced manufacturing systems and research, respectively. All industrial and academic experts were from organizations located in the National capital region ( For the calculation of the DEMATEL approach, first, the average Direct-Relation Matrix A is developed, as shown in Table 3 . After this, the average matrix is normalized to express the values in the range of 0 to 1 (Table 4 ). Then the total relation matrix is obtained (Table 5) . Further calculations are performed as per steps of methodology, and the results are shown in Table 6 and Table 7 , respectively. The obtained values of 'Di', 'Rj', 'Di + Rj', and 'Di -Rj' are shown in Table 6 . These values will help in analyzing the challenges. The magnitude of 'Di -Rj' In this study, it has been observed that lack of motivations from customers/OEMs on adopting I4.0 technologies for ethical and sustainable operations (Chn8) has the highest positive value. Therefore, it is considered as the most critical challenge in the cause category. The exact values for cause and effect challenges are shown in Table 7 Sensitivity analysis can be used to check the hardiness of the optimal solution of any system or model so that it could be applied for effective decision making (Pannell, 1997) . We can use this analysis in two ways, firstly by varying the weight assigned to every challenge and secondly by changing the weight assigned to every expert. Xia et al. (2015) applied sensitivity analysis by changing the weight assigned to every expert to check the robustness of the solution for analyzing the cause and effect relationship. This analysis helps to check biasedness for a specific expert, which may affect the outcome of this study. In this study, the authors used this approach by varying the weight of every expert. In Case-1, every expert was assigned with equal weight, and in Case-2, Case-3, and Case-4, higher weight was assigned to one expert, and the other two J o u r n a l P r e -p r o o f expert's weights remained the same (Table 8 ). Then, for different possible scenarios, calculations are performed for sensitivity analysis. After that, in each case, the cause-effect relationship and causal diagrams are generated (Figure 3-Cases 1-4) . The results found from this sensitivity analysis indicate the consistency of findings (Table 9 ). No considerable change in the results under different conditions confirms the robustness of the model. J o u r n a l P r e -p r o o f J o u r n a l P r e -p r o o f dependent on their partners for economical and other business advancements. Therefore, there is a need of effective coordination among different members of supply chains. Luthra and Mangla (2018) in their study have found challenges related to finance, government policies, and management supports while implementing Industry 4.0 technologies. Chakraborty et al. (2020) in their study on logistics sector have observed that lack of awareness about technologies is a significant concern for implementing new technologies. Liao et al. (2018) (Pannell, 1997; Xia et al., 2015) . In this study, after doing sensitivity analysis, Across the globe, specifically in developing countries, SMEs are considered the backbone of the economy. In developing countries like India, out of a total of 16% contribution of the manufacturing sector to India's GDP, approximately 8% comes from SMEs influence other challenges, so management should prioritize the strategies accordingly. Findings of this study imply that SMEs need to be motivated to adopt ethical and sustainable business models. SMEs should create awareness about these technologies and their contributions within their organizations and for other stakeholders. Management of SMEs should allocate sufficient funds for such initiatives considering it as long term goals. Usually, SMEs take their J o u r n a l P r e -p r o o f decisions based on short term gains. It means overall culture within SMEs needs to be changed. SMEs should integrate these Industry 4.0 technologies with different manufacturing processes for ethical and sustainable operations. As SMEs lack in terms of knowledge and expertise (Kumar, 2020 b) , so consultants should be engaged for effective strategy formulation. Integrating digital technologies with manufacturing processes for ethical and sustainable value addition should be part of the strategies. It will not only help them in resource optimization but will also make them responsive to changing market requirements. Telukdarie et al. (2018) have considered the applications of Industry 4.0 technologies for sustainable operations in planning of long term strategies. Findings of the current study have many theoretical implications too. Government and larger supply chain partners should focus on the need of awareness programs for SMEs in adopting DEMATEL methodology has also got its limitations due to the biasedness of experts' opinions while taking inputs. Therefore, the findings of the study cannot be generalized. For further validation, the study can be extended in context to the other countries and sectors by applying other MCDM tools and case studies. It will help in doing the comparative analysis and in J o u r n a l P r e -p r o o f generalizing the findings of this study. Sensing the importance of automation and Industry4.0 technologies in current scenario, findings of this study could be very helpful for SMEs all over the globe. Influence of pandemic (COVID-19) has affected the functioning of almost all supply chains. Lockdown, isolation, social distancing and migration of labors will lead the companies to rethink about their location and investment strategies. In the future also for resuming production in new normal, findings of this study will be very helpful for SMEs in developing ethical and sustainable operations. 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For example: If you are comparing challenge (C1) "of awareness about I4.0 contributions to ethical and sustainable production Chn2 Lack of management support for I4.0 technologies Chn3 High initial cost of I4.0 technologies for ethical and sustainable operations Chn4 Lack of funds for investment in I4.0 technologies Chn5 Lack of awareness about government policies for I4.0 and sustainability Chn6 Lack of dedicated resources for research & development on I4.0 technologies Chn7 Lack of long term planning on the adoption of I4.0 technologies for ethical and sustainable operations Chn8 Lack of motivations from customers/OEMs on adopting I4 Authors would like to thank reviewers and Editor of the journal for valuable inputs and suggestions for improvements in this paper.