The term "Industry 4.0" signifies the computerization of manufacturing as the “Fourth Industrial Revolution.” Coined in Germany, the term has quickly gained traction across the manufacturing industry as the primary descriptor for the increased digitization of manufacturing—also known as the rise of the “digital factory."

Industry 4.0 has six key design principles:

• Interoperability — The ability of cyber-physical systems, humans and digital factories to connect and communicate with each other via the Internet

• Virtualization — Monitoring actual processes that take place in the physical factory will be used to create virtual models or simulations. This results in a virtual copy of the digital factory, which will be used by producers in the setup of Industry 4.0.

• Decentralization — The ability of systems within digital factories to make decisions on their own, with no human intervention.

• Real-Time Capability — The gathering of data in each step of the process and even the feedback and monitoring stage are performed in real time. This is in sharp contrast to legacy systems which tend to “batch process” data, and which produce reports that are hours or days old when first read.

• Service Orientation — Offering of services of cyber-physical systems, humans or digital factories via the “Internet of Services”

• Modularity — The new digital factories can easily adapt to changing circumstances and requirements.

Why Is Industry 4.0 So Important?

According to a survey by PWC, German manufacturers will invest €140 Billion annually in Industrial Internet/Industry 4.0 applications. Why are they making this heavy investment? And what does it mean for other manufacturers? Some advantages include:

Increased competitiveness:  For an industry that has relied heavily on low-wage regions for manufacturing cost reduction, investments in digital technology enable higher wage countries such as Germany to compete with offshore manufacturing hubs for the first time in a generation. This will enable manufacturers to select production locations according to technical capabilities and proximity to consumer demand, rather than decisions driven primarily by wages.

Increased productivity: With the increased use in automation and in AI systems that can make autonomous decisions, output is projected to increase greatly. In one example of a factory embracing digitization and Industry 4.0 principles, a complex operation that at one time required 17 fulltime operators was reduced to just six – with zero loss in output, and an increase in quality metrics.

Increased revenue and profitability: Although the implementation of Industry 4.0 is predicted to require heavy investment by manufacturers, the seamless integration of pre-production (i.e., engineering and design), production, and post-production (e.g., field performance and service) data is predicted to give rise to new revenue opportunities for companies. Additionally, the closed-loop feedback created by this data integration is forecast to increase quality, reduce waste, and increase the bottom line at companies who invest.

Manufacturing Process Optimization: Real-time process control is one of the drivers to streamline processes; at the same time, M2M communications and integrated systems will drive opportunities for greater collaboration among producers, suppliers, and other stakeholders along the value chain.

Seamless record-keeping and traceability: Unlike traditional relationships where feedback on products and services takes time to gather, the automated closed-feedback loop is an inherent component of Industry 4.0. This, coupled with the seamless record-keeping enabled by digital systems, will speed traceability, while limiting liabilities, warranty costs, and quarantines and recalls.

The first hints of the power of Industry 4.0 can be seen in the increased automation of various industrial processes in fully digital factories. The first fully digital factories have been implemented by companies who have integrated software platforms that link all aspects of manufacturing, from initial product design to factory layout and manufacturing process optimization to customer feedback after delivery. This integration ties together each aspect of the manufacturing process, including computer-aided manufacturing (CAM), computer-integrated manufacturing (CIM) and shop floor data collection systems.

These software systems do more than trade data. They eliminate much of the mistake-prone human intervention that goes with managing production. This next generation of automation is one of the most important drivers behind digital manufacturing and Industry 4.0, along with data analytics and artificial intelligence.

Industry 4.0, a Real World Example: Eliminating 17 Days of Factory Downtime

Consider this example from 42Q, a cloud manufacturing execution system with a presence in electronics manufacturing. Advanced MES solutions, when properly deployed can automate material handling and disposition processes that have previously relied on a large number of factory personnel.

For example, in many factories today, components, work-in-process (WIP) and finished sub-assemblies have been physically managed on a production floor by supervisors.  Production planners, component buyers and customer service personnel need information about the quantity and location of components, work-in-process and finished sub-assemblies. Typically they get this data from a material requirements planning (MRP) system.  As mentioned above, most MRP systems “consume” or decrement inventory at discreet points in a manufacturing process and these transactions are completed by production personnel. 

Using the older MRP model in a batch manufacturing environment, components are issued to production and are consumed as products are manufactured. The warehouse operators provide individual components to the production team for specific work orders. As the work order progresses through the sub-assembly build the production planners consume the components and integrate their value into the built sub-assemblies and finished product. (Notice the large number of people this process is dependent upon.) 

In traditional batch manufacturing environments, once components are consumed in production, an operator, supervisor or scheduler has to “consume” them in the MRP system, online. This consumption is part of a process called “backflushing.” It is a critical step in the conversion of component value and labour value into the price of finished product. Financial statements use the data from this critical step and production and materials teams depend on the information to manage the production and material supply process.

A common problem is that these “backflush” transactions can be late, because of the large number of people involved.  In a factory with a thousand employees and 25 production lines, communications can be a complex issue. One of the problems this can cause is that production schedulers and planners may think they have enough components to meet production schedules that day, but they are looking at “pre-backflush” data. The impact of this is that in the worst case, dozens of production operators may have to be sent home for the day, and production lines stand idle due to lack of visibility of inventory levels among the production planners.

Using 42Q, however, this factory has dramatically automated the backflushing operation and removes the dependency on people, while moving to a real-time data consumption and reporting model. Under the new system, when a product completes automatic optical inspection (AOI), its serial number is sent by the AOI machine to MRP for backflushing, immediately. This eliminates the previous manual communication from the shop floor to the planner (and the associated delay an inevitable errors) and consumes material product by product as each is completed. In the year before this automated system was implemented, the factory had lost the equivalent of 17 days of production due to inaccurate inventory and WIP data.

For many manufacturers, change equals risk. Disrupting their supply chain or factory lines can cost millions, with untold damage to a brand and a company’s reputation. Given this, many manufacturers are reluctant to embrace far-reaching changes to industrial infrastructures and processes, understandably. However, changes are coming, and the widespread adoption of systems and technologies that implement Industry 4.0 is already happening among forward thinking manufacturers.