Is Industry 4.0 the Next Big Thing in Manufacturing?

The next phase of industry represents not a revolution, but an evolution: Industry 4.0, as it’s been named, is truly a new vision for an industrial economy that’s both seamlessly digital and self-conscious.

The Origin of Industry 4.0

Unlike previous revolutions, which were predicated on the introduction of a single invention, Industry 4.0 is a deliberate framework launched in 2011 in anticipation of new technology. Seeking to capitalize on Germany’s competencies in engineering, logistics and IT, the German federal government finalized the concept in 2013.

Today, Industry 4.0 acts as a sort of roadmap for high-tech, industrial digitization. Its foundation is a digital convergence of operations, where process and data can be integrated across multiple supply chains and product life cycles. Ultimately, however, Industry 4.0 will likely have an impact far beyond the supply chain, even undergirding the development of smart cities.

Key Characteristics of Industry 4.0-Ready Systems

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. For a factory or system to fit into Industry 4.0, it must have four key characteristics:

1. 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.
2. 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.
3. 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.
4. 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.

Benefits of Implementing the Industry 4.0 Framework

Manufacturing leaders around the world are already moving to create more flexible, efficient, productive supply chains that embody these Industry 4.0 principles. In the short-term, supply chain managers will need to look closely at critical domains like demand planning and supply network design. Facilitating an evolution to the Industry 4.0 framework has multiple benefits:

• Direct cost savings: Increased technological integration increases efficiency, while predictive analytics ensure fewer supply chain disruptions.
• Increased profitability: Industry 4.0 systems allow you to offer more customized products, which generally yield a higher profit margin.
• Competitiveness in the global market: The interdependence of the global economy means that Industry 4.0 will eventually be the standard practice, rather than the exception.
• 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.