Today’s smart factory looks very different than factories a decade ago. Repeated shocks and business disruptions have encouraged many companies to rethink their supply chains and operating models, with a new focus on technology, resilience and agility. Advances in data collection, analytics, artificial intelligence, and machine learning—often referred to as the Fourth Industrial Revolution or Industry 4.0—allow manufacturers to make more empowered decisions based on valuable real-time insights directly from embedded sensors on the factory floor. 

The National Institute of Standards and Technology (NIST) refers to this shift as smart manufacturing, using "fully integrated manufacturing systems to collaborate and respond in real-time to meet changing demands and conditions in the factory, supply network and customer needs." When implemented successfully, these technology solutions can deliver incredible returns. According to McKinsey, it’s not uncommon to see up to 50 percent reductions in machine downtime, 30 percent increases in productivity and 85 percent more accurate forecasting. However, Industry 4.0 and smart manufacturing technologies can bring unique challenges as organizations now receive enormous amounts of data across processes, products and people. As organizations weigh the benefits and challenges of adopting Industry 4.0 and smart manufacturing processes, here are some important considerations.

The Evolution of Industry 4.0

To fully grasp how Industry 4.0 is changing the business world, it’s essential to understand how the first three industrial revolutions reshaped the way we lived, worked, traveled and interacted with the world.

In the late 1700s, automation from steam and waterpower helped shift the manufacturing industry from manual labor marking the start of the First Industrial Revolution. Then the introduction of electricity, mass production and assembly lines at the beginning of the 20th century began the Second Industrial Revolution. The Third Industrial Revolution, also known as the Digital Revolution, started in the 1970s when computers helped further automate machines and production processes.

The Fourth Industrial Revolution, or Industry 4.0, is often described as an extension of the Third Industrial Revolution. While the Third Industrial Revolution, or Industry 3.0, brought computers into the manufacturing process, Industry 4.0 focuses on creating interconnected computer networks, enabling digital manufacturing and the creation of smart factories. All these systems work together to help achieve new levels of automation that weren’t previously possible.   

According to the World Economic Forum, the Fourth Industrial Revolution is characterized by new technologies helping merge the physical, digital and biological worlds. As the previous three industrial revolutions brought new sources of power, made mass production possible and helped bring computing power to billions of people worldwide, the technological advances of the Fourth Industrial Revolution are reshaping business models and entire economies. 

Industry 4.0 Technologies 

Industry 4.0 combines technologies like the Internet of Things (IoT), artificial intelligence (AI) and machine learning, augmented reality and 3D printing to accelerate and help optimize business processes. However, the data provided by sensors and IoT systems is too large for humans to analyze.

AI and machine learning algorithms can help analyze and filter large amounts of data, flag anomalies and make specific recommendations. Another technology that is rapidly changing manufacturing is augmented or mixed reality. For example, mixed reality technologies can give repair personnel the ability to see inside a machine needing repair or see through walls to know exactly where to drill or cut. Combining those features with the predictive maintenance IoT and AI provides enhanced visibility into critical operations and assets. For example, suppose the data suggests a machine is starting to overheat. Machine-learning algorithms can flag it and dispatch maintenance, while workers use mixed reality to see which components are affected. But what happens if the maintenance person diagnosing an affected machine finds a problem but doesn’t have the expertise to fix it? Mixed reality devices can also connect to a third party with the proper knowledge to help the person onsite learn how to perform the repairs with step-by-step instructions using digital overlays.

Key Technologies Driving Industry 4.0

According to NIST, the following computing technologies enable increased automation, predictive maintenance and self-optimization, leading to a new level of efficiencies and responsiveness to customer needs:

Industrial Internet of Things (IIoT) refers to factory machines equipped with sensors to connect to other devices. This connectivity allows large amounts of real-time data to be collected, analyzed and exchanged.

Cloud computing makes it possible to connect and integrate engineering, supply chain, production, sales and distribution and customer service. 

AI and machine learning help create insights to improve visibility, predictability and automation of operations and business processes. Data collected from assets can help businesses perform predictive maintenance based on machine learning algorithms, resulting in more uptime and higher efficiency.

Big data represents the overwhelming amount of data and information collected through the IoT using smart sensors, RFID, machines, computers, software and more. Big data is usually stored in the cloud and managed through AI and analytics.

Collaborative robots (Cobots) Collaborative robots help workers safely interact with machines that do repetitive, hazardous and physically demanding tasks leading to improved worker safety and reduced lost-time costs.

Augmented reality or virtual reality technology uses special electronic equipment like helmets with screens or gloves fitted with sensors to add a layer of extra information to the natural environment. These tools enable users to make better and more informed design and production decisions.

Additive manufacturing, including 3D printing, involves adding layers of material (plastic, metal, concrete or wood) to create a product. Additive manufacturing has become popular because of its many benefits and applications, including rapid prototyping, repairs, waste reduction, design alternatives, increased innovation and flexibility.

Digital twin simulations are virtual replicas of processes, production lines, factories and supply chains. Manufacturers can use digital twins to help increase productivity, improve workflows and design new products.

Industry 4.0 Considerations 

Although the number of manufacturing IoT connections is expected to double from 2020 to 2025, significant barriers remain on the best ways to use the vast amounts of data. Many manufacturers face expensive and time-consuming platform and software integrations to upgrade legacy machine networks, apply advanced automation systems or use predictive analytics. According to Manufacturing USA, making Industry 4.0 technology more accessible for all is essential to helping achieve the ongoing collaboration and innovation needed to advance technical manufacturing. Greater accessibility is critical for rebuilding the supply chain, workforce education and ensuring small and medium-sized manufacturers continue to play a vital role in the U.S. economy.

The Covid-19 pandemic also highlighted the growing importance of the Industry 4.0 business model. A McKinsey global survey found companies that adopted Industry 4.0 practices fared better at the onset of the global COVID-19 pandemic thanks to the increased visibility and flexibility these technologies can provide. While increased digitalization allows industrial manufacturers to mass produce higher-quality goods at lower costs, there are some drawbacks to consider. According to an article in the International Journal of Supply and Operations Management, some challenges and benefits of implementing Industry 4.0 technologies include:

Challenges:  

• Concerns about financial benefits justifying the significant upfront investment
• Lack of strategy and coordinated efforts across different business departments
• Shortage of technical knowledge required to implement Industry 4.0 technology
• Cybersecurity concerns with new technologies and third-party providers

 Benefits: 

• Advanced planning, visibility and control from relevant, real-time data
• Ability to rapidly react to market factors
• Higher quality, flexible production   
• Greater customization and personalization of products   
• Increased productivity    
• Improved customer satisfaction    
• Lower costs and waste reduction   
• Safer work conditions    
• New business models    
• Increased revenue

The opportunities created by Industry 4.0 are not without concerns, noted the World Economic Forum. Chief among them is the ability of people – in both the private and public sectors – to recognize and adapt to the power and velocity of the new technology. Partnership across industries and around the world is seen as critical to success.