Industry 4.0 - Another type of revolution

16 Oct 2014

We know about web 2.0, the social internet, and some speak about web 3.0. In the finance sector we have talked about finance 2.0 that is a more online and lesser middlemen -model. Now we are learning about industry 4.0. Is it one more fancy number, catchy marketing or something bigger?

Industry 4.0 is a project that forms part of the high-tech strategy of the German government. It is a program and marketing concept to promote the computerization of the manufacturing industry. The name also refers to the fourth industrial revolution.

Its target is to establish intellectual factories, not only have connected devices, like Internet of Things, but also more intelligence to optimize resource efficiency, product customization and integration in many systems like logistics and finance. For example, a client far away could send specifications of a product he needs for a machine (3D printer or more traditional machine) that finalizes products and then information automatically gets transmitted to delivery systems and invoicing.

It impacts not only factories and manufacturing process, but also for example value chains, management structures and all company processes. In some cases clients could send their requirements and get required products almost without human interaction. This then, of course, raises many questions, what would be the influence on the job market, what labor unions think, and is this the point when machines make people useless.

Although Industry 4.0 is a German project of sorts, similar things happen around the world. There is an initiative called the Smart Manufacturing Leadership Coalition in the US. The coalition defines its role as “a non-profit organization committed to overcome barriers to the development and deployment of Smart Manufacturing Systems through an implementation agenda for building a scaled, shared infrastructure called the Smart Manufacturing Platform.”

There are probably many other names for this development. The common components in these activities are to combine communications technology (IoT), smart algorithms and machines, integrate several systems to work together, remove unnecessary human interaction and really integrate information technology into industry machines. Germany sees this will happen in the next ten to twenty years.

This development is very important for many Asian companies and countries. Asia is the place for manufacturing. Low labor costs have been an important driver to choose manufacturing locations, but this new model can change fundamentals and cost structures of the entire manufacturing industry. Integration to a customer’s system, computerized factories, the right algorithms and effective logistics become crucial. And as before, new machines and automation doesn’t make people useless, but roles and the needed competence of human beings change.

It can take at least ten years until we see a full scale Industry 4.0 in action. But many of its components are developed now and it has already started to influence the manufacturing industry. This is an opportunity for companies in the ICT industry. IoT, 5G, machine learning, data analytics, cloud and fog computing; probably all of these fancy concepts will have a real and important role to play in the future of industry. This industry revolution together with smart consumer serving machines (e.g. driverless cars, cleaning robots and personal drones) will be the biggest technology revolution we see in our lifetimes.

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