What does Industry 4.0 mean?

Industry 4.0 - a not so abstract concept

The German Federal Ministry of Education and Research defines Industry 4.0 as "the permanent linking of machines and machine-operated processes in industry with the help of intelligent information and communication technology".

From logistics, production and marketing to service and quality management: in Industry 4.0, intelligent machines, products, storage systems and online platforms of a company organize themselves independently thanks to the exchange of information via IT systems. This process optimization along the entire value chain will make a decisive contribution to increasing efficiency and reducing costs in companies in the future.

However, Industry 4.0 not only increases productivity. It also offers a wide range of opportunities for the development of new products and business models, the development of new customer segments and, all in all, has the potential to turn industries or even entire markets upside down.

Origin of the term Industry 4.0

The way in which goods are produced has always been changing. Innovations have further developed or changed processes and have in turn inspired new developments. Right up to the establishment of industry and the onset of the industrial revolution.

Mechanization through water and steam power (first industrial revolution) was followed by mass production with electrical energy and assembly lines (second industrial revolution) and then the third industrial revolution, which helped to automate production through the use of electronics and IT. The intelligent networking of all company components is now set to usher in the fourth industrial revolution, Industry 4.0.

The term "Industry 4.0" goes back to the research project of the same name for the comprehensive digitalization of industrial production, which was presented at CeBit 2011 under the auspices of the German government's high-tech strategy.

In April 2013, the Industry 4.0 working group chaired by Siegfried Dais (Robert Bosch GmbH) and Henning Kagermann (acatech - the German Academy of Science and Engineering) presented its final report entitled "Implementation recommendations for the future project Industry 4.0".

At the instigation of the Federal Ministry of Education and Research (BMBF), this was to be further elaborated in dialog with trade associations, trade unions, companies, science and politics. The Industry 4.0 platform provided support in this process. The concept of Industry 4.0 was then continuously developed further. Today, the term Industry 4.0 has established itself internationally.

The term "4.0" refers to the version numbering commonly used for software products. If fundamental innovations are introduced in a software solution, the software is published as a new version, i.e. the first digit is incremented and the number after the decimal point starts at zero again. The choice of an expression from software development emphasizes the importance of digitalization for this next industrial revolution.

Basic principles of Industry 4.0

Digital revolution

Industry 4.0 is often equated with a digital revolution in the economy. In contrast to the third industrial revolution, which began in the 1970s with the use of information technology such as PCs, office software and the development of the first computer-aided automation systems, the central technology for Industry 4.0 is not the computer, but rather the Internet.

And that is precisely what makes Industry 4.0 so revolutionary. Thanks to intelligent networking across company and national borders, processes can be made increasingly efficient and autonomous. The digitalization of production processes has thus taken on an unprecedented quality.

The three central technologies of Industry 4.0 are as follows:

Internet of Things - IoT

The Internet of Things is the basis for Industry 4.0 and production in a smart factory. IoT enables products to be intelligently networked with digital solutions via the internet, making them controllable. This technology has already established itself in parts of industry, but will continue to experience strong growth in the future.

Industrial Internet of Things - IIoT

Cloud computing is now essential for almost every company, as it enables them and industry in particular to use many services flexibly and regardless of location. Big data goes hand in hand with this and is seen by many as the key to the successful digitalization of industrial production. This is because the fact that more and more devices and sensors are being networked with each other creates huge amounts of data that can be used to sustainably optimize production areas and processes after suitable analysis and evaluation.

Cloud computing

Cloud computing is now essential for almost every company, as it enables them and industry in particular to use many services flexibly and regardless of location. Big data goes hand in hand with this and is seen by many as the key to the successful digitalization of industrial production. This is because the fact that more and more devices and sensors are being networked with each other creates huge amounts of data that can be used to sustainably optimize production areas and processes after suitable analysis and evaluation.

Factory 4.0 - The factory of tomorrow

At the heart of Industry 4.0 is the intelligent factory (also known as the smart factory). In it, intelligent and networked machines exchange information with each other via digital interfaces. Production systems organize themselves independently and coordinate processes and deadlines with each other, but can also communicate with other IT systems and employees. This not only makes production more flexible, efficient and dynamic, but also guarantees a continuous flow of information in real time.

In the "factory of tomorrow", production lines are modular in design and are therefore more versatile than their predecessors. This means that a product can be manufactured in many different variations on a single production line. Individualized products can also be produced in small quantities at affordable prices. The profitability and productivity of the company increases.

Flexible production

The term "flexible production" refers to the digital networking of the various companies involved in the manufacture of a product.

The digital networking of all players along the value chain enables optimal coordination of the individual production steps and better utilization of the machines. This can significantly increase a company's productivity and reduce costs.

At the same time, production structures within smart factories are made more adaptable by linking people, workpieces, machines and tools using information and communication technologies (ICT). The intelligently networked production instances can communicate with each other and product-related information can be called up at any time in real time and from anywhere and made available for exchange.

This means that small and very small batch sizes can be produced without production costs exploding, and employees at all levels of the company can stay up to date and be fully informed about order data and process plans at all times. The control of the production process can also be viewed at any time.

Customer-centric solutions

In the context of Industry 4.0, consumers and producers are moving ever closer together. The customer is at the center of product development: What do they want? And how can digitalization help to fulfil this wish? By linking machines, workpieces and production employees in the factory of tomorrow using state-of-the-art ICT, they can communicate and cooperate with each other. This enables new forms of production organization and helps to break up rigid production structures. In some cases, products can be individually co-designed by the customer and implemented cost-effectively (e.g. design of sneaker elements). At the same time, smart products that are already with the customer can make it easier for manufacturers to recognize the wishes that the target groups might have by sending data. Products can be optimized more quickly and customers can be offered innovative services (e.g. automatic reordering of detergent for washing machines).

Logistics 4.0: intelligent logistics solutions

Logistics 4.0 in turn describes the intelligent networking and digitalization of logistics processes, supply chain partners and customers using modern information and communication technologies.

Logistics 4.0 works on an interdisciplinary basis: the cross-company availability of data via standardized interfaces means that all members of a value chain (vertical) and several value chains (horizontal) can be connected with each other.

The primary goals of Logistics 4.0 are to increase efficiency through transparency, automation, error reduction, bundling and increased process speed. On the other hand, the increase in effectiveness through flexibility and individualized services, processes and products.

To make Logistics 4.0 a reality, technologies such as GPS, barcodes, sensors for identification, the internet, electronic data interchange (EDI), on-premise and cloud computing as well as algorithms and apps are used to control and organize processes independently. By connecting via a standardized information system, smart objects and processes can communicate with each other, learn from each other and make decisions independently. For example, they report missing production material (procurement, production and distribution logistics), calculate ideal delivery routes and optimize the loading of logistics vehicles (transport logistics), provide real-time information about the whereabouts of goods (information logistics) or manage products fully automatically in the virtual warehouse (warehouse logistics).

Opportunities and challenges

Industry 4.0 offers growth opportunities and competitive advantages for Germany as a business location. Thanks to intelligent networking and control of the entire value chain, production can be individualized and made more efficient. Experts are forecasting productivity increases of up to 30 percent by 2025, while the digitalization of industry is also creating new business models and new prospects for employees.

However, the far-reaching technical changes associated with Industry 4.0 also present companies (especially small and medium-sized ones) with enormous challenges.

Standardization of interfaces

With the advancing digitalization and networking of industry, more and more interfaces are emerging. Almost every company uses different software solutions, which are rarely compatible with each other. However, as all systems must be networkable with each other as part of Industry 4.0, the standardization of interfaces is essential and also represents one of the greatest challenges.

IT security

Another challenge of Industry 4.0 lies in the area of IT security. This is because comprehensive networking and the increasing flow of data also increase the risks of hacker attacks. In Industry 4.0, these can quickly have considerable economic consequences. Therefore, secure solutions in the area of networking and digitalization must be ensured and uniform cross-industry security standards are needed.

Big data and AI

The sensors and chips that make intelligent networking of all machines in the production chain possible collect huge amounts of data. In order to optimize processes sustainably and remain competitive in the long term, these data volumes must be processed and evaluated by experts.

Qualification of employees

Digitization will change the demands placed on companies, but also on individual employees, which is why future-proof employee training is already of central importance today.

High need for investment

Although Industry 4.0 promises to significantly increase the productivity of companies, the acquisition of Industry 4.0 solutions first requires a considerable investment, which is often difficult for small and medium-sized companies in particular to afford.