Co-Founder / Chief Strategy Officer

Jun 04, 2020

Just What Is Industry 4.0?

The term “Industry 4.0” seems to be everywhere these days. It’s become a favorite buzzword amongst the big management consultancies, popping up more and more frequently in technology trade publications.

Many of the leading global manufacturing firms have chosen Industry 4.0 as a cornerstone for their own content marketing programs, with thousands of short films being created just in the last year showing the impact of AI, automation and digital interconnectivity in production factories. And, while there seems to be some consensus on what it refers to, there are diverging ideas about which industries it will impact the most and just how it will change how work gets done.

What Does It Mean?

The expression “Industry 1.0” refers to the Industrial Revolution, roughly 1760 – 1840, a time period that was marked by a transition from hand production methods to machines, primarily through the use of steam power and water power.

Industry 2.0 is better known as the technological revolution and is the period between 1870 and 1914 that was facilitated by the extensive railroad networks and the telegraph which allowed for faster transfer of people and ideas. This period was also marked by ever more present electricity which allowed for factory electrification and the modern production line.

Industry 3.0 occurred in the late 20th century, after the end of WWII. It began with more advanced digital applications and continued with the development of communication technologies such as the supercomputer.

The phrase the fourth Industrial Revolution has been around for almost 80 years. In 1940, in a document titled “America’s Last Chance” by Albert Carr, the term was used to refer to “modern communications, merely as an additional manifestation of the industrial revolution—as the beginnings of a new phase, a ‘fourth industrial revolution.’

The earliest use of the term “Industry 4.0” seems to have come in 2011, as part of a high-tech project funded by the German government, and refers to the concept of machines communicating with one another without the involvement of humans. Specifically, machines, in factories, that have been outfitted with wireless connectivity and sensors and connected to a system that can visualize and analyze the entire production line and make decisions on its own.

Is It Real or Just Science Fiction?

A more forward-looking view of Industry 4.0 envisions what has been called a “smart factory”. These are factories that are built using a modular structure, where cyber systems are integrated throughout and constantly monitoring all physical processes occurring within each module. They then create a virtual copy of the physical world and make decentralized decisions in real time without the need for human involvement. In this scenario, a combination of cyber systems and physical systems communicate and cooperate with each other and with humans, both internally and across organizational services offered across the entire value chain.

In preparing for mass adoption of Industry 4.0 in the future a core set of design principles have been established. These principles are intended to support companies in identifying and implementing Industry 4.0 scenarios:

  • Interconnection: The ability of machines, devices, sensors, and people to connect and communicate with each other via the Internet of Things (IoT).
  • Information transparency: The transparency created by Industry 4.0 technology provides operators with vast amounts of useful information that can be used to make fully informed decisions. Inter-connectivity also allows operators to collect data and information from every point in the manufacturing process, which aids functionality and provides insight into key areas that can benefit from innovation and improvement.
  • Technical assistance: Intelligence – The ability of assistance systems to support human decision-making and problem-solving by aggregating and visualizing information comprehensively. Physical –  The ability of cyber physical systems to physically support humans by conducting a range of tasks that are unpleasant, too exhausting, or unsafe for their human co-workers.
  • Decentralized decisions: The ability of cyber physical systems to make decisions on their own and to perform their tasks as autonomously as possible. Only in the case of exceptions, interferences, or conflicting goals, are tasks escalated to a higher level.

How Is It Being Used Now?

While there is some skepticism that Industry 4.0 is nothing more than a marketing buzzword, there are significant changes occurring that are being felt throughout the business world right now. Currently, the majority of the applications for Industry 4.0 are in trial phases and in the process of being approved or adopted, but this is not to say they aren’t widespread and already generating significant benefits for those organizations that are innovating. Here are a few of the more well-known examples:

  • Autonomous vehicles and equipment – By now, most everyone is familiar with self-driving cars, from the much touted Tesla Autopilot to Udelv, a custom-made, public-road autonomous delivery vehicle. But shipping yards are beginning to utilize autonomous cranes at a rapid rate and city planners are even beginning to account for these vehicles and how they will fundamentally change the way cities are designed.
  • Robotics – Perhaps the most widely adopted of all the I4.0 applications, robotics have become available to companies of all sizes. From managing warehouse inventories to picking products for shipping to assembling on the production line, robots are becoming more prevalent across almost every sector, saving costs and increasing uptime.
  • Opportunity Identification – By analyzing the information collected by sensors installed across connected machines, companies are improving their ability to predict performance issues and reduce maintenance issues. By identifying what components will need attention and when, manufacturers are able to optimize their operations and significantly improve productivity.
  • Internet of Things – Connectivity is really the defining characteristic of I4.0 and nowhere is this better demonstrated than with IoT. The ability of devices to communicate with each other has revolutionized operations and with cloud storage insights can be shared with others using the same equipment and smaller organizations can gain access to technology they wouldn’t ordinarily be able to take advantage of.
  • Additive Manufacturing – Better known as “3D Printing,” this technology has become prevalent over the last decade with new applications being tested on an almost daily basis and uses moving from mere prototyping to mass production. The recent advance of metal additive manufacturing has opened up a whole new realm of production possibilities.
  • Supply chain optimization – When the different components of a supply chain can communicate and adjust in real time, based on weather or other interruptions, better decisions can be made regarding manufacturing priorities and productivity increases.

What is the Future of Industry 4.0?

As with any new technology, guessing at future applications and implications has about the same odds as betting on a horse race. There are always a couple of favorites but sometimes it’s more fun, and more rewarding, to go with a long shot. The frontrunner out of the gate seems to be AI and IoT coming together to redefine industrial automation. Sensor-heavy production processes, where every single machine component and process is monitored in real time, will be become entirely automated. Decisions, and more progressively, actions will be controlled by AI, where problems potentially impacting production will be anticipated and remedied before they occur. This concept of “predictive maintenance” will save billions of dollars in prevented downtime and is already well under way.

However, if you’re looking for a bigger risk/reward opportunity you might consider the impact that Industry 4.0 will have on the workforce and the role it will play in facilitating innovation and creativity in other areas of organizations. With process automation and robotic task performance as two large components of I.40, there is justifiable concern that employees are at risk as there current functions are removed from existing processes or replaced by robots. However, there is a growing body of research around the future of the labor market suggesting that I4.0 will be a catalyst for job creation as it frees up employees from administrative and repetitive tasks and allows for more time to be spent on innovation and critical thinking, or to use another popular buzzword, “upskilling.”

While there seems to be little doubt that the most immediate and tangible impact of Industry 4.0 will be on manufacturing, with improvements in production quality and efficiency, this is likely only the beginning of the story. As a subset of digital transformation, I4.0 will certainly benefit industry in many other ways, including creating more data, facilitating better use of data to generate learnings and insights, creating new career opportunities, driving innovation and countless other to-be-discovered applications. Suffice it to say, regardless of what industry you are in or what role you play in your organization, the chances are good you will be impacted by the changes being driven by Industry 4.0 and now is the time to start thinking about where you are going to place your bet.