Industry 4.0: insights into the Fourth Industrial Revolution

Industry 4.0 is a concept that every year increases in popularity- globally. The fourth industrial revolution shapes global economies, impacts their automatization, the process of implementing new technologies and the IoTbased processes (machine- based learning, digitization as well as the intertwining of the digital and analog worlds).

Find out what Industry 4.0 actually means: the pitfalls and the opportunities it poses, and how the digital transformations are implemented into the structures of manufacturing companies.

Three industrial revolutions are already behind us- now is the time for the fourth one

The genesis and concept of Industry 4.0 originates in the year 2011. That is when the name Industry 4.0 was first coined- at an expo in Hannover, while presenting the high- technology strategy for the German government. In 2012, the group responsible for the project presented to the federal government the implementing objectives, and in 2013- it presented the final report.

Why Industry 4.0? Because this is already the fourth industrial revolution which has transformed the way world economies work.

Industry 1.0
The first revolution was based on the mechanization – the economies entered the era of industrialization thanks to the invention of a steam engine.

Industry 2.0
The second revolution was based on electrification which pushed the steam engines out and greatly increased the production and the overall efficiency.

Industry 3.0
The third revolution was the digitization. In other words, implementing computers and digital solutions which allowed for a more effective way of data processing. It increased immensely the effectiveness, precision, flexibility and the information flow at manufacturing facilities. That was the first time when the planning and control systems were put to work- to coordinate the production processes and management strategies.

Industry 4.0
The fourth revolution is happening right now, before our very own eyes and as we speak. Contemporary businesses have been working on integrating new systems: combining machines, devices and computing clouds as well as employees into one ecosystem as a whole, working within the information technology and the IT- based solutions. Industry 4.0 also means a stratified information flow between the elements of the system and the IT actions, as well as between the machines and the manufacturing system of the company.

Why is the fourth industrial revolution unavoidable?

Contemporary manufacturing businesses have been experiencing an increased competition and facing the constant need to manage an enormous amount of data. At the same time, they need to retain the flexibility of the manufacturing process and keep the decision making at a high speed- both in terms of business and operations.

One of the key aspects of a manufacturing company working efficiently is a flexible manufacturing system. Often times, its character is not shaped by the paradigm of switching from mass to lean production, or to individual manufacturing adjusted to each clientʼs needs.

Adjusting to the clientsʼ expectations often times drastically decreases the life cycle of the products and additionally, it creates a surplus. Moreover, It limits the manufacturing efficiency which is directly related to the necessity of readjusting the machines which in turn, intensifies the maintenance service and generates longer outages.

Manufacturing companies facing the current market requirements, need to continue developing the production and technological processes; and to increase process complexity among all the aspects within the company. It determines an increased demand for innovation: new technology and new materials, management strategy and business models as well as innovative production processes. Along with the evolution and modernization of a company, there is an increase in the amount of data, hence the growing need for an efficient Information flow among all subjects and elements participating in each process. It is undoubtedly one of the biggest growth barriers in the case of contemporary manufacturers. In order to defeat it, there is a unavoidable need for a technological jump, through implementing innovative platforms, tools and systems. It is thanks to the concept of Innovation 4.0 and its solutions, that it possible to actually live up to the current and future complexity of the production, management and business systems.

Industry 4.0: advantages and challenges

The aim of Industry 4.0 is the unification of manufacturing machines, digital technologies and computing clouds together with the IT- based technologies.
That way the entire ecosystem of the company, consisting of employees, machines and digital systems, can share key information at ever stage of the production. The information flow can cover the entire value chain- from the moment of placing an order to sending it to the end customer.

The environmentof Industry 4.0 allows for an access to almost every significant information at any given place and time which in turn, allows for increased manufacturing economy, individualized products of a low expenditure.

Income increase and cost reduction

One of the key advantages of the digital transformation process is integrating the value chain. That way manufacturing companies can gain a significant advantage over their competitors, experiencing a significant income increase and cost reduction simultaneously. According to the PWC report: “Industry 4.0: challenging contemporary manufacturers”, 27% of the companies after a successful digital transformation can count on a 30% increase in income and at the same time, a 30% drop in costs. Moreover, those companies which underwent the fourth industrial revolution, were actually expecting only a 10% income increase.

A significant increase in effectiveness

Based upon the report above, the expected drop in operational costs among the responders up until the year 2020, was on average 3,6%, which translated into USD 321 billion in savings. The biggest expectations in terms of effectiveness increase had the companies in the following industries: paper, automotive, chemical and general industrial manufactures.

Companies participating in the PWC survey, were basing their expectations on the effects of the planning and scheduling systems that have already been implemented. The result was an improved information flow within the entire value chain and algorithms optimizing the maintenance and upkeep work of the machines and manufacturing devices. The increased effectiveness was also the result of a more intensive integration with deliverers; based on cloud solutions; track & trace technology enabling a more efficient management of delivery processes; developing more effective end- to- end systems; and working in real time thus simplifying supply planning at every stage of the manufacturing process.

A deeper relation with the client

Correlated solutions within Industry 4.0 allow companies to transition from the push model to the pull model, whereas the production is based upon the factual demand.
That way manufactures can form an attachment between their clients and the products thus developing a deeper and more beneficial relation.
Individualized manufacturing allows to create a product that fits the clientʼs needs better. It allows you to make use of the data analysis to meet your clientʼs expectations, conduct direct marketing aimed at a specific target group or provide much better customer service. 72% of manufacturing companies are currently using data analysing systems, in order to improve relations with their
customers throughout the entire life cycle (customer intelligence).

The evolution of organizational culture

By implementing digital transformation within the corporate and/or organizational structures, modernization is forced upon, especially when it comes to the organizational culture, information flow and the employeeʼs role.

According to the survey, the biggest challenge on the path to the smooth transition during the fourth industrial revolution was, adjusting the internal organizational culture to the newest technologies. 50% of responders have not worked out the proper organizational culture, trainings and the information flow within the employee structure.

Implementing the concept of Industry 4.0

The concept of Industry 4.0. assumes that all aspects of the contemporary manufacturing industry must be strongly integrated, well communicated, correlated and configurable. Only a strong and multi- level connection can guarantee an effective integration level and an ability to rip all the benefits of the digital transformation.

It is important to keep in mind the immense fragmentation of the technology advancement; the business and production models of management companies within the industry sector. Which is the reason why it is impossible to offer only one size fits all scenario of implementing the Industry 4.0 concept into the company structure. Every implementation must be planned and conducted in a highly individualized manner, in accordance with the companyʼs spirit.

Nevertheless, there are certain systemized regulations on how to implement Industry 4.0. Among them are the following aspects:.

• interaction: interacting allows different areas within the company to
  coordinate and cooperate
• decentralisation: decision making that is hierarchical and centralized
  prolongs the system reacting time and hinders its control. Decentralization
  on the decision- making level allows for immediate decision taking, thanks
  to the cyber- physical systems. The concept of Industry 4.0 redirects the
  decision making to the higher hierarchy level only if a critical decision is
  required
• visualization: visualizing the processes within the company allows for a
  clearer reflection of physical processes and their stimulation which in turn,
  guarantees transparency and simplifies the control and decision processes
• working in real time: accumulating and analyzing data in real time raises the processing speed of crucial information and data; it reduces the narrow
  communication channel within the company
• modularity: modularity of the production system is a feature very much in
  demand, leaving room for flexibility in the context of ever- changing
  production demands

Summary

Implementing Industry 4.0 introduces manufacturing companies to increased efficiency, flexibility and production precision, which translated into cost reduction, increased income, increased decision speed as well as product adjustment on many levels and in accordance with the clientʼs preferences.