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The Fourth Industrial Revolution, or Industry 4.0, refers to machines, industrial equipment, work pieces and system components that will soon be capable of exchanging data in real-time. Experts believe that this will significantly boost efficiency, safety and resource sustainability in production and logistics. But of course, there are also challenges coming along with this.

The Fourth Industrial Revolution -- What is it?

The Fourth Industrial Revolution is based on cyber-physical systems and integrated IT.

Experts use different terms to describe the technology-driven changes for manufacturing that are underway to seize on the business model changes required to meet new customer demand, provide advanced work environments, and reach new levels of sustainability. Some use “advanced manufacturing” to highlight the increased efficiency that new technologies, processes and materials will bring. Others use “industrial Internet” to emphasize a new level of connectedness among people, machines, and systems.

In Germany, the term “Industry 4.0” combines these trends and highlights the fundamental changes at hand (see figure to the right), especially the breadth and force of an upcoming transformation in manufacturing. And it may best capture the sea change that will fundamentally alter the role of humans in production.

Changing Our Work and Daily Lives

Industrial revolutions are turning points in economic, social and political history when people interact with new technologies that reshape their work and daily lives:

  • First: At the end of the 18th Century, steam power and mechanical production replaced manual production
  • Second: In the early 20th Century, electricity and mass production brought the assembly line
  • Third: During the 1970s, electric engineering and automation helped manufacturers optimize money, labor and other resources as they globalized their operations
  • Fourth: Now technology is merging physical and digital worlds throughout all layers of production, enabling smaller lot sizes tailored to specific local markets and customers -- increasing the importance of service offerings over products

Industry 4.0 will see products, machines and resources communicate where they come from and how they should be handled. All products and processes will have digital properties that provide essential information (e.g., product design and recycling) and help manufacturers improve products and processes or offer new services.

As Industry 4.0 eliminates traditional data silos spread across the value chain, manufacturers will be able to integrate individual customer requirements in real time for global planning, quickly implementing those requirements in local production. Rigid preplanning processes will become obsolete.

Manufacturing a Revolution

A new level of transparency will allow manufacturers to identify supply chain and production problems in real time -- and address them without delay. Predictive analysis will even help companies solve problems before they occur.

Manufacturers will continue to engage in long-term business relationships, but increasingly do business through short-term networks. They will negotiate value-adding processes dynamically -- taking into account quality, time, price, viability, sustainability and other dimensions.Machine-to-machine communication will let manufacturers add sensors and microchips to tools, machines, vehicles, buildings and even raw materials to make products “smarter.”

Big data can help manufacturers better understand their products, be more competitive, optimize production and lower delivery costs. Leading companies are exploring the proactive triggering of service activities based upon predictive algorithms, as well as interactive routings of parts through a production plant based on order priorities, machine capacity and real-time data from enterprise resource planning systems.

National Strategies for a New Industrial Landscape

Governments and industry associations see clear opportunities for using a new manufacturing environment to support long-term job creation and economic growth. A good example is the United States, where experts expect labor price equalization and greater energy independence to bring manufacturing back from overseas. In 2012 the U.S. government launched the Advanced Manufacturing Partnership, which will install regional centers of manufacturing excellence that leverage university-created technology.

The German government has similar technology initiatives. After funding research programs across business and academia, the government asked acatech, the National Academy of Science and Engineering, to make recommendations for German businesses and public authorities on taking advantage of Industry 4.0. A central office now helps companies collaborate on future manufacturing scenarios.

SAP’s whitepaper "Maximizing Opportunity in a New Industrial Revolution" explains the Fourth Industrial Revolution with its challenges and opportunities. And it goes even further.

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