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.
The first revolution was based on the mechanization – the economies entered
the era of industrialization thanks to the invention of a steam engine.
The second revolution was based on electrification which pushed the steam
engines out and greatly increased the production and the overall efficiency.
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.
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%
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
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
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
- 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
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.