Daily Management Review

Industry 4.0: the fourth industrial revolution


Three years ago, the Germans predicted fourth industrial revolution that promises to finally make the world of objects spin around you.

Christoph Roser at AllAboutLean.com
Christoph Roser at AllAboutLean.com
Fourth Industrial Revolution, better known as "Industry 4.0", got its name from an initiative taken in 2011. It was headed by businessmen, politicians and scientists, who defined Industry 4.0 as means of improving competitiveness of the German manufacturing industry through enhanced integration of cyberphysical systems (CPS), in factories’ processes.

CPS is essentially a catch-all term used when talking about integration of small Internet-connected machines and human labor. Heads of enterprises are rethinking not just the very principle of assembly line. They are also actively creating a network of machines, which will not only produce products with fewer errors, but can autonomously change production patterns in accordance with the need still remaining highly efficient.

In other words, Industry 4.0 is all about production, an equivalent of consumer-oriented "Internet of Things" on which everyday objects, from cars to toasters, will be connected to the Internet.

Industrie 4.0 Working Group, a conglomerate of big industrialists, experts in the field of artificial intelligence, economists and academics said it must be a "completely new approach to production". The German government supports this idea and takes the "high-tech strategy" to prepare for the nation. In time, Industry 4.0 is going to gradually capture the whole world, whether we like it or not. United States, for example, followed the example of Germany, and created a non-profit consortium Industrial Internet in 2014, run by industry leaders such as General Electric, AT&T, IBM and Intel.

One of the most tangible aspects of Industry 4.0 is the idea of "service-oriented design." It can range from a user using the factory default settings for the manufacture of its own products, to companies that supply customized products to individual consumers. 

This production type holds a huge potential in itself. For example, connection between smart "Internet of Things" products and intelligent machines that produce them, the "Industrial Internet", mean they will be able to create themselves independently and determine target production.

From clothing to shampoos and soaps, all can be placed on stream at no additional costs of individual services designers. Objects will be produced individually and directly for user. We will no longer have to choose among several pre-defined colors, calling it a personalization.

In addition, the growing integration of smart factories in industrial infrastructure would mean a substantial reduction of energy costs. Many factories are spending a lot of energy during breaks in production such as weekends and holidays. An intelligent plant, in turn, could avoid it.

According to supporters of this type of integrated production, Industry 4.0 can change the very definition of human labor. Since machines can perform repetitive, routine tasks much more efficiently than people, this sphere will be largely automated. Futurists say that people then can perform creative tasks, rather than be engaged in rough work. Simply put, smart plants will be managed through the Internet. 

Companies who would benefit from the onset of Industry 4.0 the most, such as Cisco, Siemens or ThyssenKrupp, argue that the introduction of CPS has a great demand than any other corporate agenda.

However, despite this rhetoric, further research shows that the industrialization is triggered not only by prospective benefits for customers, but also by some gaining for multinational manufacturers, who were the first to take Industry 4.0 up.

The fourth industrial revolution promises to place Germany at the forefront of industrial restructuring. As the Working Group notes in its report, the very existence of production in Germany may depend on the Industry 4.0. "If German industry wants to survive and thrive, it will have to play an active role in the formation of the fourth industrial revolution." The previous three revolutions brought equal conditions for all market players, so why the fourth should be different? 

German industry will be annually investing 40 billion in commercial Internet infrastructure until 2020, according to consulting firm Strategy &. This is a significant piece of European investments in Industry 4.0, which is expected to amount to EUR 140 billion per year. Of the 278 companies surveyed in Germany, 131 said that they are already "involved in Industry 4.0". 

However, the vast majority of these companies are bold in word only. Just one-fifth of the surveyed is implementing CPS components at their plants. Of these are Wittenstein (electric), Bosch (hydraulics) and BASF SE, which is a pioneer in the field of fully customizable shampoos and soaps, and aims to demonstrate the capabilities of Industry 4.0.

Meanwhile, there are some problems with both the new revolution’s technical side.

Maximizing the advantages of Industry 4.0 requires massive collaborations that go beyond corporate boundaries, especially when it comes to that all machines have to speak the same language. If an unfinished product arrives to machine not able to process its RFID-chip, the production process will turn into chaos. Thus, definition of common platforms and languages that will help machines of different corporations communicate freely, remains one of the major challenges for now. 

On the other hand, excessive uniformity can also be dangerous. Following the example of Google, a handful of powerful companies can seize an unnatural advantage in Industry 4.0.

"Big data necessary for Industry 4.0 are gathered not by domestic firms, but four companies from Silicon Valley" - said German Economy Minister Sigmar Gabriel last year. 
Another serious issue is security: creation of a secure network is a difficult task, and integration of physical systems to the Internet makes them more vulnerable to cyber-attacks. As Industry 4.0 is gaining momentum, production processes can be remotely terrorized by manipulating production protocol or simply paralyzing the process. The smart factories are becoming more common, but their security is a crucial issue already now.