What is Industry 4.0?

At its heart, Industry 4.0 is digital transformation applied to manufacturing – bringing with it all the change, opportunities and challenges that represents.

Industry 4.0 connects the supply chain and the ERP system directly to the production line to form an integrated, automated and, potentially, autonomous manufacturing processes that make better use of capital, raw materials, and human resources.

At the moment, Industry 4.0 is a bit of a fuzzy concept because it goes well beyond just connecting machines to other machines or automating another step in a production line with a robot, said Ned Hill, an economist at The Ohio State University who focuses on manufacturing and economic development.

“Everything that takes place currently within the ERP, you’re going to need to … understand how that ends up feeding into your production process itself,” said Hill. “All of [a manufacturer’s] equipment has to be integrated into their supply chain. So there is everything from purchasing to delivery to the way in which stuff gets stacked to go into the plant. All of that is going to be tied-in wirelessly. And traceability across the entire process to finished goods is also going to be part of this.”

Industry 4.0 will empower manufacturers to redesign their operations and processes so they can be reconfigured as needed to produce multiple variants of a product like the sole of a running shoe or a cup of yogurt, or to produce one-off bespoke products without the need for manual intervention.

According to a Boston Consulting Group (BCG) bcg.perspectives blog post: “Industry 4.0 technologies represent a paradigm shift in industrial manufacturing that is comparable to the introduction of computer-aided design (CAD) systems that replaced analog technical drawing in the 1990s and the integrated CAD systems that subsequently combined the mechanical and electrical design of systems. Companies that failed to be among the early adopters of CAD systems could not keep pace with their competitors’ productivity increases.”

Industry 4.0 also ushers in a whole new way for manufacturers to improve operations and morph into services providers using data. Like making multiple products on the same assembly line, in of itself this is not new. Companies often turn internal data into services. But Industry 4.0 extends this potential to products like electric motors that power cranes that, in the past, were never considered endpoints on a network that could generate saleable data.

“So I think what’s happening is a lot of companies, manufacturers are looking at new business models with this technology,” said Robert McCutcheon, PwC’s Pittsburgh Managing Partner. “How do they shift away from just the production of a product and move more downstream in the value chain to providing a solution that includes service components? Because it’s more value-add in that it allows the use of the technology and the data in ways that just simply producing a product doesn’t.”

Allen Bernard is a veteran freelance business and technology writer, former managing editor and entrepreneur. He can be reached at 614-937-2316 or abernie182 @ gmail.com or on Twitter @allen_bernard1, and on Linked In.