Enterprise Resource Planning Blogs by SAP
Get insights and updates about cloud ERP and RISE with SAP, SAP S/4HANA and SAP S/4HANA Cloud, and more enterprise management capabilities with SAP blog posts.
Showing results for 
Search instead for 
Did you mean: 

It’s a high-tech project started by the German government, which promotes the computerization of manufacturing. Before moving onto Industry 4.0, let us see in brief about what Industry 1.0, 2.0 & 3.0 were.

The first industrial revolution (1.0) was the mechanization of production using water and steam power. The second industrial revolution (2.0) then introduced mass production with the help of electric power, followed by the third industrial revolution (3.0) digital revolution and the use of electronics and IT to further automate production. Now Fourth industrial revolution (4.0):-

Industry 4.0 is a collective term for technologies and concepts of value chain organization. Based on the technological concepts of cyber-physical systems, the Internet of Things and the Internet of Services, it facilitates the vision of the Smart Factory. Within the modular structured Smart Factories of Industry 4.0, cyber-physical systems monitor physical processes, create a virtual copy of the physical world and make decentralized decisions. Over the Internet of Things, Cyber-physical systems communicate and cooperate with each other and humans in real time. Via the Internet of Services, both internal and cross-organizational services are offered and utilized by participants of the value chain.

Similar to Germany, in the United States an initiative known as the Smart Manufacturing Leadership Coalition (SMLC) is also working on the future of manufacturing. Their aim is to enable stakeholders in the manufacturing industry to form collaborative R & D, implementation and advocacy groups for development of the approaches, standards, platforms and shared infrastructure that facilitate the broad adoption of manufacturing intelligence.

On these lines, GE has been working on an initiative called 'The Industrial Internet'. It aims to bring together the advances of two transformative revolutions:

(a) The myriad machines, facilities, fleets and networks that arose from the Industrial Revolution, and

(b) The more recent powerful advances in computing, information and communication systems brought to the fore by the Internet Revolution.

Industry 4.0 is based on six design principles. These principles support companies in identifying and implementing Industry 4.0 scenarios.

  • Interoperability: the ability of cyber-physical systems (i.e. work piece carriers, assembly stations and products), humans and Smart Factories to connect and communicate with each other via the Internet of Things and the Internet of Services
  • Virtualization: a virtual copy of the Smart Factory which is created by linking sensor data (from monitoring physical processes) with virtual plant models and simulation models
  • Decentralization: the ability of cyber-physical systems within Smart Factories to make decisions on their own
  • Real-Time Capability: the capability to collect and analyze data and provide the insights immediately
  • Service Orientation: offering of services (of cyber-physical systems, humans and Smart Factories) via the Internet of Services
  • Modularity: flexible adaptation of Smart Factories for changing requirements of individual modules

In the above mentioned design principles we have read “Cyber Physical Systems” a lot of times. Let’s understand what are Cyber-Physical Systems (CPS)?

A cyber-physical system (CPS) is a system of collaborating computational elements controlling physical entities. CPS are physical and engineered systems whose operations are monitored, coordinated, controlled and integrated by a computing and communication core. They allow us to add capabilities to physical systems by merging computing and communication with physical processes.

CPS benefits:

• Safer and more efficient systems

• Reduce the cost of building and operating the systems

• Build complex systems that provide new capabilities

• Reduced cost of computation, networking, and sensing

• Enables national or global scale CPS's

In the manufacturing environment, these Cyber-Physical Systems comprise smart machines, storage systems and production facilities capable of autonomously exchanging information, triggering actions and controlling each other independently.

Smart factories allow individual customer requirements to be met i.e. even one-off items can be manufactured profitably. In Industry 4.0, dynamic business and engineering processes enable last-minute changes to production and deliver the ability to respond flexibly to disruptions and failures on behalf of suppliers. For example, end-to-end transparency is provided over the manufacturing process, facilitating optimized decision-making.

Differences between a typical factory today and an Industry 4.0 factory:

In the current industry environment, providing high-end quality service or product with the least cost is the key to success and industrial factories are trying to achieve as much performance as possible to increase their profit. In this way, various data sources are available to provide worthwhile information about different aspects of the factory. In this stage, the utilization of data for understanding the current condition and detecting faults and failures is an important topic to research. For instance, in production, there are various commercial tools available to provide OEE (Overall Equipment Effectiveness) information to factory management in order to highlight root cause of problems and possible faults in the system.

In comparison, in an Industry 4.0 factory, in addition to condition monitoring and fault diagnosis, components and systems are able to gain self-awareness and self-prediction, which will provide management with more insight on the status of the factory. Furthermore, peer-to-peer comparison and fusion of health information from various components provides a precise health prediction in component and system levels and force factory management to trigger required maintenance at the best possible time to reach just-in time maintenance and gain near zero downtime.

Modern information and communication technologies like Cyber-Physical Systems, Big Data and Cloud Computing will help predict the possibility to increase productivity, quality and flexibility within the manufacturing industry and thus to understand advantages within the competition.

Let us see a basic manufacturing example : Supporting custom manufacturing

How an individual customer’s requirements can be met? The dynamic value chains of Industry 4.0 enable customer- and product-specific coordination of design, configuration, ordering, planning, production and logistics. This also provides the opportunity to incorporate last-minute requests for changes immediately prior to or even during production.


Today’s automotive industry is characterized by static production lines (with predefined sequences) which are hard to reconfigure to make new product variants. Software-supported Manufacturing Execution Systems (MES) are normally designed with narrowly defined functionality based on the production line’s hardware and are therefore equally static. Individuality is not encouraged. As a result, it is not possible to incorporate individual customer requests to include an element from another product group made by the same company, for example to fit a Volkswagen with Porsche seats.


Industry 4.0 results in the emergence of dynamic production lines. Vehicles become smart products that move autonomously through the assembly shop from one CPS-enabled processing module to another. The dynamic reconfiguration of production lines makes it possible to mix and match the equipment with which vehicles are fitted; furthermore, individual variations (e.g. fitting a seat from another vehicle series) can be implemented at any time in response to logistics issues (such as bottlenecks) without being constrained by centrally prescribed timings. It is simple to execute this type of reconfiguration and the cars move autonomously to the relevant workstation.


  1. Recommendations for implementing the strategic initiative INDUSTRIE 4.0 (Final Report of the Industrie 4.0 working Group)
  2. Wikipedia (https://en.wikipedia.org/wiki/)