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You may have heard the terms the Internet of Things (IoT) and Industry 4.0 used interchangeably. But they are not the same: Industry 4.0 is a subset of the IoT. The IoT uses the Internet to connect physical devices to one another, and Industry 4.0 describes the application of IoT to the manufacturing environment. In essence, Industry 4.0 is the Fourth Industrial Revolution, characterized by embedded machine intelligence and it is poised to change the nature of manufacturing forever.

The trends behind Industry 4.0

Two key factors make Industry 4.0 possible:

  • Growing availability and proliferation of smart actuators and sensors that can be embedded or attached to anything-Sensors and microchips can be added to almost every product (e.g., tools, machines, vehicles, buildings, or even raw material), in turn making the products ‘smart.’ These technologies merge physical and digital worlds by tightly integrating IT with all layers of production including machines, production facilities, and warehouse systems.
  • Easier, affordable data storage and transport – As telecommunications networks become more widespread and faster, it’s less expensive to transport data over them. At the same time, technologies like Hadoop and platforms like SAP HANA make it possible to store and harness Big Data in real time. All this makes it possible to upload and download instructions and information to and from any device just about anywhere in the

Manufacturers should take a hard look at the exciting opportunities offered by this “Fourth Industrial Revolution

Here’s how manufacturers can improve their business by taking advantage of Industry 4.0:


1)    Embed a product with IoT capabilities. Manufacturers can add sensors and intelligence to their products or components to add additional value.  For example, a maker of hydraulic lifts used in service shops can enable its machines to help track usage, service technician activity, service bay efficiency, etc. and then offer a system at a much higher value than just the lifts themselves.  Another example would be closing the gap between the time it takes to discover and fix a faulty component. The longer it takes, the more expensive the problem becomes. With embedded sensors, automotive components can now sense or even predict their own failure and send this information to the quality control teams before the vehicle even gets to the end of the production line.  This would eliminate the need for extensive manual testing that currently takes place at the end of most production lines. 

2)   Improve performance of the company’s own manufacturing operations or extended ecosystem. One example of this is predictive maintenance. Companies use sensors and actuators in shop floor equipment so the equipment can predict its imminent breakdown and diagnose problems. The sensors send this information automatically to the factory service department for attention. Based on this information, the service technician knows the nature of the problem and the spare parts required to address it, and can access service instructions virtually through smart glasses or a mobile device. As a result, manufacturers avoid breakdowns and production downtime, and improve machine productivity as well as service technician efficiency.

Another example is smart logistics. Using embedded sensors that communicate either passively or actively, companies can achieve greater visibility across extended value chains for parts, components, and modules. This applies whether the parts, components, or modules are in transit around the world, on-site in inventory, or on the factory floor. Companies can integrate this location and movement information with systems for material requirements planning, manufacturing execution, and more to optimize the supply chain.

In yet another example, a module or component on an assembly line could direct itself to the appropriate workstation to get the next set of components added to it based on the unique characteristics of a particular order. This is sometimes called a “lot of one or “mass customization”.

3)    Develop new business models. Pirelli is one company changing its business as a result of Industry 4.0. This global tire manufacturer has embedded smart sensors in its tires to collect usage data, such as number of miles driven, when a tire is replaced, and how much heat and vibration the tire is sustaining. By capturing and aggregating this data, Pirelli can better understand driving patterns, tire wear and more and in turn develop better tires. It can also use that data when customers make warranty claims. Moreover, Pirelli could share or sell this data, such as to insurance companies or any auto manufacturer that wants to understand the relationship between those tires and their vehicle’s performance and longevity.

Industry 4.0: a real-world example


As Industry 4.0 technology becomes more available, business processes will evolve. Imagine a company with complex industrial equipment deployed around the world at customer installations. Such businesses often have no idea where their equipment is being used at any given time, and as a result must react to customer requests for repair or replacement. Their operations are built around this model, usually at quite a cost. That was the situation for Kaeser Compressors, which supplies the air systems that drive many core manufacturing processes for companies around the world. However, Kaeser Compressors evolved its business by taking advantage of Industry 4.0 capabilities to enable predictive maintenance globally.

While Kaeser builds its products to last a lifetime, proper maintenance is needed to get optimal performance and longevity. To help its customers achieve nearly 100% reliability, Kaeser embedded sensors on its compressors, which upload data to satellites, allowing Kaeser to track its compressors. The company now knows where its equipment is deployed and operating around the world and what is likely to malfunction.  As a result, it can plan ahead, better manage its parts inventory, and help its customers minimize the likelihood of downtime.

As Kaeser sees it, today’s technologies enable it to evolve from a product company to a service-based business model driven by real-time business information and remote customer systems.

How will Industry 4.0 change the way your company runs its business? Please share your thoughts by leaving a comment below or tweeting me @tobinalex.

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