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Industry 4.0 – How to Profit from the Fourth Industrial Revolution



There is a new wave sweeping across the industrial landscape and manufacturers who recognize it can benefit from the opportunities it holds.  It has been called various things, such as Industry 4.0 or Smart Factory, but whatever name is applied, we are in the midst of a real fourth industrial revolution.

In a study from Deloitte, researchers reviewed how this industrial revolution is affecting 50 Swiss manufacturers.

Industry 1.0 – Water/steam power

The first industrial revolution is well known and took place over two hundred years ago.  Manufacturing had always been the preserve of individual artisans and limited to what human or animal power could achieve.  This limitation was overturned when first water and then steam power was developed.

Powered factories meant that the strength of human and animal power was no longer a factor.  Vastly greater productivity resulted and one man, using steam powered equipment, could produce far more than previously.  At the same time, skills needed to be upgraded, as there was reduced need for pure brawn and more need for trained machine operators.  Factories needed mechanics, whose skills kept these mighty machines operating.

Industry 2.0 – Electric power

The second industrial revolution took place when electricity was developed.  While large steam and water powered factories, with whirring overhead shafts and drivebelts, required machinery to be brought to the massive power plant, electric motors brought power to the machine.  Machines could be smaller, more accurate and more purpose built.  They also needed more highly skilled people to operate them.

The second industrial revolution introduced mass production and the assembly line.  It reached its peak in the automotive industry and during the second world war, when vast quantities of armaments and military equipment had to be produced accurately and quickly.

Industry 3.0 – Computerization

The computer brought about the third industrial revolution.  Programmable Logic Control (PLC) and then Computer Numerical Control (CNC) dramatically changed how things were manufactured and the skills needed.  CNC machines automated many functions in the factory.  Over time it led to adoption of new technologies such as statistical process control and six sigma, which predicted when a failure was going to occur before it occurred, making it possible to achieve close to 100% error-free production.

Computers also led to robotics and lean production, making short runs and Single Minute Exchange of Die (SMED) possible.  Computer tracking of production led to Enterprise Resource Management (ERP).  CNC machines also meant that part design went directly from the engineering office to the CNC machine, calling for machine operators who were familiar with the machine’s technicalities but leaving part production to the engineers, rather than skilled tradesmen.

Industry 4.0 – Smart Networking

Micro UHF RFID stickers from ©Noahcard can be applied to products and communicate data to readers in the production chain.

Micro UHF RFID stickers from ©Noahcard can be applied to all products and communicate data to readers in the production chain, triggering unique actions at each station.

Driven by the need to respond quickly to customer needs while remaining profitable and competitive, the fourth industrial revolution can be summarized as the smart networking of all components of the production value chain.  It is itself a subcomponent of the internet revolution, which brings together the Internet of Things (smart devices), the Internet of Services (cloud computing), the Internet of People (social and business web) and the Internet of Data (smart interfaces).

Coupled with these networks is virtualization of  Cyber-Physical Systems (CPS), through which the entire self-organizing Smart Factory can be visualized virtually, with sensors and communications devices reporting machine status, inventory levels and throughput, maintenance needs, capacity utilization, quality levels and more.

Industry 4.0, as it is sometimes called, will utilize exponential technologies to link machines, products, individuals, logistics and the customer, from product inception to its end-of-life.  The result will be agile and responsive production, with the emphasis on efficient customization closely matched to the unique needs of individual customers at the most competitive price.

With everything in the plant sensed and monitored, lean techniques will become more important than ever, although the traditional kanban cards and other physical manifestations of lean will give way to digital processing.



The increasing rapidity of change through these exponential technologies will mean that the job skills needed today may be obsolete within 10 years and each decade thereafter.  What will be needed are workers who are trainable and who know how to learn, since the skills with which they entered the workforce will change rapidly.

Industry 4.0 Design Principles

There are six design principles to Industry 4.0, as identified by German researchers.  They are:

  • Interoperability
  • Virtualization
  • Decentralization
  • Real-Time capability
  • Service orientation
  • Modularity
Digital simulation of the plant allows for efficient human-machine interaction where needed.

Digital simulation of the plant allows for efficient human-machine interaction.

Interoperability means that all systems within the plant can communicate with each other.  Component carriers, workstations and the products themselves, through embedded electronics, RFID tags and other technologies, are all linked.  This will also mean communication standards for interoperability between the manufacturers of different equipment in the production process.

Virtualization is the means by which the plant and its component parts assist its human operators to understand what is happening.  Through the various sensors and communication networks, a virtual copy of the plant is created, with real time indicators showing the plant’s operators and technicians what they need to know.  Maintenance needs are signaled, bottlenecks identified, order flow reported and safety concerns indicated, where human intervention is needed.

With decentralization, the automation of individual machines and workstations make decisions without requiring intervention from a central control point. The Cyber-Physical Systems in a plant respond to products and parts that carry instructions with them, utilizing RFID and embedded chip technologies, to tell the machines what to do, instead of central command points.  Customization will become the order of the day.  Decentralization will enable greater use of pull-style just-in-time production.  Decentralization will also affect the architecture of control networks.  The traditional client-server architecture, in which a client device calls for data from a device which then serves the requested data, will give way to peer-to-peer architecture, where products, machines and businesses share data seamlessly with one another.

Real-Time Capability is an essential part of Industry 4.0, with processes continually monitored and virtualized in real-time.  A failure or maintenance need will result in immediate rerouting to avoid a bottleneck and eliminate waste.

In Service Orientation, the focus is on the service provided, without regard to how the service is provided.  By providing a service as a “black box”, without the recipient needing to know how it is provided, disparate systems can communicate with each other.  Cloud computing makes use of Service Oriented Architecture, with calls for computing issued over the internet but the response could be generated anywhere in the world.

Modular systems are flexible and can be adapted to changing needs and conditions.  They can be changed to match cyclical or seasonal changes or particular customer requirements.  Standardized interfaces mean that individual modules can be interconnected in a plug and play fashion, providing immediate usability.

Researchers have identified four main characteristics that mark this fourth industrial revolution:

  • Vertical networking of smart production systems
  • Horizontal integration through global value chain networks
  • Through-engineering across the entire value chain and life-cycle
  • Acceleration through exponential technologies

Through vertical networking of the smart factory’s cyber-physical systems, changes in inventory or demand or faults in equipment are responded to quickly.  Both production and maintenance management of the plant can be organised automatically and independently.  With real-time virtualization of everything in the plant, parts and equipment can be located anywhere and workflows self-arranging to the best efficiency.

Horizontal integration brings the efficiency of the network to outside organizations, such as subcontractors, suppliers, logistics service providers, distribution points and the customer.  As products become more tightly integrated with the Internet of Things, through embedded electronics and RFID technology, the link with the manufacturer is maintained throughout its life-cycle.

This also results in through-engineering through the product’s entire value chain and the life-cycles of both products and customers.  With the flexibility of the production processes, development of new products and production systems go hand in hand.  With constant data and information about the product available to the manufacturer at all stages of the products life, product development and improvement is more responsive to customer needs.

Exponential technologies bring customization, flexibility and cost reduction to industrial processes.  The impact of these new developments are only just beginning to be felt.  Self-driving vehicles and drone technologies will bring networking to physical systems.  3D printing will bring production on demand to the point of use.  Artificial intelligence will allow autonomous systems to learn from faults and errors and to avoid their recurrence.  Artificial intelligence will also enable systems to become self-optimizing.

The fourth industrial revolution is bringing about immense changes in manufacturing.  New skills will be needed of workers and a new production paradigm will be implemented.  There are opportunities but there are also risks.

Are you prepared for the changes ahead?



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