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Industry 4.0: A New Era In Manufacturing

For most, the term “Industrial Revolution” invokes images of steam engines, textile mills and gas lighting. However, this was but the first of many landmark transformations in the world of manufacturing. With mass electrification came a second revolution, marked by mass production and assembly lines, laid the groundwork for a globalized economy. In the postwar era, the third, “digital” revolution allowed for increased automation of production, as well as the use of software to better keep track of resources as well as manufacturing processes. Today, though these systems have been augmented by more nimble computing systems, as well as advances in telecommunications and logistics, many “best of breed” practices are based upon now decades-old principles. However, many believe that we are at the threshold of yet another transformational period in the world of manufacturing.

Enter “Industry 4.0”. The term, coined by the German government, describes the next phase of digitization in the manufacturing sector, driven primarily by the integration of computation, networking and physical processes into what are known as cyber-physical systems (CPS). Such systems form the basis for technologies like smart grids and autonomous automobiles, which, by collecting and computing large amounts of physical data, can make more informed decisions in real time, leading to greater precision and efficiency. In the context of Industry 4.0, this means that machinery, software and even the goods themselves are connected, exchanging data that can be analyzed to yield productivity gains and lower costs. All of this will be driven by a number of disruptive technologies which, though already in use today, will see increased importance as this new era in manufacturing comes into being.

With the potential applications and impacts of big data analytics so wide ranging, it is unsurprising that big data figures so heavily into Industry 4.0. While large data sets are already being used by some manufacturers to monitor and improve specific functions, such as quality control or equipment maintenance, the use of big data is likely to have a more comprehensive impact in the future. Data will come from sources throughout the supply chain, as well as from enterprise and customer management software, and it will be analyzed in real-time to maximize efficiencies throughout the manufacturing process.

Until a short time ago, the collection of all of this data would have been impossible. Yet with the increased sophistication of sensor technologies, both the breadth and depth of data available has increased.  Though sensors have played a role in industrial automation systems for some time now, their outputs have been rudimentary, and by and large isolated to process-management systems. In the future however, sensors will not only be able to provide an increased volume of high quality data, but also improve its dispersion. This industrial spin on the Internet of Things, where pieces of machinery can communicate with one another, as well as with companywide systems, allows for more flexible, decentralized production processes.

While the collection and analysis of data plays a big role in what defines Industry 4.0, equally important are the changes seen in production methods. The increased use of robots, long used in production operations, will not only be more independent, but flexible to the ever-changing needs of a manufacturer. The tasks they accomplish will be increasingly complex, and the same time will more often perform them directly alongside human “co-workers”.  Elsewhere, the use of additive manufacturing techniques, such as 3D printing, will go beyond prototypes and be used in small-batch, on-demand production. Such innovations, which allow production to keep up with data-driven decision making, represent the seamless connections between physical and digital in an Industry 4.0 world.

Industry 4.0 will likely not only change the face of industrial production, but allow for benefits to accrue across economies. Naturally, manufacturers see a growth in productivity, with cost savings potentially passed on to the consumer. Yet even if prices were to remain the same, thanks to greater ease of customization, the variety of goods will likely be wider, and decentralization will make their availability even greater. In the not too distant future, custom clothing, electronics and even automobiles could be purchased and received at the same speed as an Amazon order today. What’s more, Industry 4.0 may be able to reinvigorate manufacturing in many parts of the developed world, as automation makes manufacturing more feasible in countries with high labor costs, while at the same time spurring demand for highly skilled labor. Germany, a leader in the adoption of these manufacturing trends, stands as a compelling example of the potential impact of Industry 4.0. In a study by the Boston Consulting Group, it was estimated that over the next 10 years, employment growth attributable to Industry 4.0 would amount to 6%. What’s more, German companies adopting these new manufacturing technologies could collectively stand to see revenue growth of €30 billion per year, nearly 1% of Germany’s GDP. Undoubtedly, statistics such as these illustrate the compelling opportunity Industry 4.0 creates, and its potential impact upon the global economy.

However, such gains will not come without significant investment from both the public and private sector alike. Significant improvements in telecommunications infrastructure will be necessary, given the need for reliable, secure connectivity plays such an important role in the “smart factory” of tomorrow. In addition, governments, companies and universities will have to work together in developing training and curricula to meet demand for the highly skilled, technologically savvy type of workers that will operate these factories. These long-term investments, though costly, will drive a transformation that will not only keep manufacturing competitive in many countries, but have lasting positive impacts on labor markets, consumers and economies.


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