Steam power. Henry Ford’s assembly line. Proliferation of coal-based energy. These developments in the evolution of manufacturing fundamentally changed how goods were produced and the way in which manufacturers moved products from the factory to the customer. If these were truly disruptive forces in the industrial economy, today’s producers are currently experiencing just as seismic a change in production processes in the form of Industry 4.0.
Most commonly defined as the movement of the industrial sphere to a more integrated, digital method of managing production and supply processes, Industry 4.0 is built upon the concepts of end-to-end (E2E) visibility, agility, and efficiency across each touch point in the value chain. Given the variant-rich nature of today’s manufacturing landscape, Industry 4.0 answers a common question for today’s manufacturers: How do I reduce overall operational costs while still being nimble enough to respond to unforeseen changes in planning or production programs?
While Industry 4.0 has already made its mark in a number of global industries, some aspects of the manufacturing industry are still playing from behind when it comes to embracing and deploying Industry 4.0 as a core driver of productivity and efficiency. That said, automotive industry analysts and experts believe Industry 4.0 will, like Henry Ford’s assembly line, fundamentally change how the automotive industry creates and moves products from Point A to Point B.
History of Industry 4.0
Often termed in conjunction with the idea of the ‘smart factory’ Industry 4.0 originated in Germany in 2011 as a holistic framework in anticipation of the rise and proliferation of new, digital manufacturing technologies. The concept included has often been dubbed the ‘Fourth Industrial Revolution’ and was essentially cemented as part of the German government’s strategy to streamline and enhance production country-wide in 2013.
A successful implementation or adoption of Industry 4.0 depends on a number of critical variables all designed in conjunction with lean manufacturing and supply principles designed to eliminate waste and underused resources across the supply chain. Some of the most critical elements of Industry 4.0 include:
Information transparency: Industry 4.0 systems create a “cyber-physical system,” where the physical world is quantified into contextual, accessible data. Systems seamlessly and instantly share that data as required, ensuring that all systems cooperate using real-time information.
Interoperability: In an Industry 4.0 system, it’s possible for people, machines, sensors and devices to connect and communicate with one another. This facet of Industry 4.0 generally requires supply chain managers to take a broader perspective on compatibility requirements for software, machines and other devices.
Decentralized decision making: Currently most supply chains operate using centralized decision-making. But Industry 4.0 has brought a new level of autonomy, where systems will be able to make simple decisions on their own. This has the potential to increase efficiency by reducing time and resources allocated for centralized oversight.
Technical assistance: Automation and robotics already provide vital support in environments that are too treacherous for humans. The next phase is building a system that can support humans in decision-making and problem-solving. This interdependence of systems and humans is a hallmark of Industry 4.0.
While Industry 4.0 may be a German initiative, it has already stretched far beyond Germany; indeed, supply chain managers all around the world regard Industry 4.0 as the new standard by which to measure their own supply chain operations and systems.
Industry 4.0 and the evolution of manufacturing
Manufacturing leaders around the world are already moving to create more flexible, efficient, productive supply chains that embody these Industry 4.0 principles. As we discussed a few moments ago, Industry 4.0 and its widespread adoption by the automotive industry has the potential to transform common production processes into more effective and efficient platforms for success and growth. In the short-term, supply chain managers will need to look closely at critical domains like demand planning and supply network design, and in the long-term supply chain managers must consider annual planning strategies and production network management.
Facilitating an evolution to the Industry 4.0 framework could potentially alter automotive production by:
Creating direct cost savings: Increased technological integration increases efficiency, while predictive analytics ensure fewer supply chain disruptions. In addition, Industry 4.0 and its alignment with lean manufacturing strategies will help reduce waste and increase ROI (return on investment) at each touch point of the value stream.
Increasing profitability: Industry 4.0 systems allows automotive companies to offer more customized products, which generally yield a higher profit margin. This also means automotive manufacturers can expand their customer base and offer a greater range of products and services to clients and partners.
Enhancing competitiveness in the global market: The interdependence of the global economy means Industry 4.0 will eventually be the standard practice, rather than the exception. Manufacturing companies who embrace Industry 4.0 as a core technological platform will be able to leverage a critical competitive advantage in an increasingly global industry.
Increased employee productivity: Improved user experience in operating systems will reduce training time and improve operation speed.
While the sweeping impact of Industry 4.0 may not be obvious for five to ten years, the impact on supply chain management is already visible today. As supply chain managers look to the future, they should look to Industry 4.0 as the foundation.