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SAP Smart Factory

Executives Summary

In order for smart factories to be successful, manufacturers must be able to respond quickly to technological advancements, transforming manufacturing and transforming their businesses.
They will also need to provide smart factory technology that fits their business realities.
Forward-thinking manufacturers understand the need to drive digital transformation in a smarter way.
Despite the upfront investment costs, smart factories can be a key solution to address an uncertain future.
As a mainstay of economic development, innovation in manufacturing is essential for companies to survive and prepare for the future.
I hope this white paper will help you to innovate in manufacturing and develop the smart factory industry.

The following topics describe SAP Smart Factory.


  • Smart Factory Definition
  • Smart Factory Scope
  • Smart Factory Objective
  • Smart Factory Technical Components
  • SAP Smart Factory Architecture
  • Smart Factory Adoption Process
  • Smart factory Adoption Case
  • Conclusion

Smart Factory Definition

Also known as an 『Intelligent factory』 Detlef Zühlke, a German engineer and professor who first proposed the concept of a smart factory in 2004, defined it as a factory that digitizes and networks all processes, products, and production factors. In other words, it is a factory that uses information and communication technologies such as the Internet of Things to collect data on the design, development, and production process of products, finished products, parts, and raw materials, and then digitizes them, shares and exchanges data in all processes, and connects them so that they can be organically linked.

After the severe economic downturn caused by the global financial crisis in 2008, the value of manufacturing was rediscovered as the economies of countries with stronger manufacturing industries than services recovered quickly. In response, advanced economies have sought to revitalize their own manufacturing industries through manufacturing innovation, and smart factories have emerged as an innovation in this process. The birthplace of the concept and the country that tried to materialize it most systematically was Germany, and in 2011, the proposed industrial policy called “Industry 4.0” with smart factories as its core content became the official national strategy of Germany. As such, smart factories were introduced to improve the competitiveness of the manufacturing industry by overcoming the limitations of existing production methods and acquiring new growth engines.

If factory automation is the automation of production by unit processes by replacing human labor with machines, factory smartization is the organic linkage of unit processes using data collected and analyzed from automated factory equipment and machines for integrated management and efficient operation. In particular, in the case of advanced smart factories, organic linkage is not limited to the production process, but is carried out in the entire process of product value creation from planning, design, production, distribution, and sales.

The technologies required to build a smart factory include the Internet of Things (IoT), cyber physical systems (CPS), big data, artificial intelligence (AI), cloud computing, virtual and augmented reality (VR-AR), 5G, smart machines, and 3D printing, which are the information and communication technologies of the Fourth Industrial Revolution. The Internet of Things (IoT) is a technology that enables objects to connect, communicate, and control each other through the Internet, and enables data to be exchanged in real time through sensors installed on objects such as facilities and machines, and enables autonomous process optimization.

When a smart factory is implemented, factories are connected and all processes are visible at a glance. With a data-driven operating system in place, it is possible to diagnose the status of factory facilities in real time, identify and prevent and resolve the causes of problems such as defects and failures, improve productivity and quality, reduce costs, and secure workplace safety. Furthermore, it is possible to predict possible future situations such as future demand, link with integrated information systems for management such as enterprise resource planning (ERP), and produce customized orders through customer data analysis.

Smart Factory Scope

A smart factory covers all tasks performed in a manufacturing plant, and the intelligentization of these tasks is the core of a smart factory. Intelligence is realized by collecting and analyzing data using the latest digital technology and connecting with related tasks.


smart factory scope


Smart Factory Objective

The purpose of a smart factory is to enhance manufacturing competitiveness. By strengthening manufacturing competitiveness, we can improve business performance and secure the company’s sustainability and resilience. Building a smart factory should not be an end in itself.

Smart Factory Technical Components

 The Smart Factory is to establish a sustainable company foundation through ‘management performance improvement‘ linked to ‘manufacturing competitiveness enhancement’. ‘Manufacturing competitiveness enhancement’ aims to optimize field operations on the shop floor, and ‘management performance improvement’ aims to streamline company operations on the top floor. The technical components to support the achievement of goals in these areas are as follows.


SAP Smart Factory Architecture

The basis of SAP’s Smart Factory Platform is organized along the lines of the RAMI4.0 concept of Germany’s Industry 4.0.



When the Layer configuration from the Smart Factory perspective is detailed, it can be represented as shown in the figure below.


Smart Factory Adoption Process

To bring smart factories to the enterprise, you need to prepare for the six steps below.

  1. Establish a Smart Factory Structure
  2. Selecting processes to apply smart factory
  3. IoT application: sensor installation and data collection
  4. Data analysis and AI application
  5. Effect analysis
  6. Establishment of knowledge base

The first step, 『Establishing the Smart Factory Structure』 is to organize a conceptual architecture of the overall smart factory structure and the IT structure required for it. Important points to consider here are sensors, IoT, data backbone network, virtual database, level of digital twins, platform structure, connection to the cloud, UI/UX, and security.

Considering this, you should establish a smart factory structure that suits your company..

The second step, 『Selecting Processes to Apply Smart Factory』is based on the architecture established earlier, and selects priority tasks that can benefit from applying smart factory. It is not easy to achieve success by applying smart factories to all processes from the beginning, so it is desirable to apply smart factories to achieve great effects and then gradually expand the experience of success. The important thing is not only to select a process, but also to reason about how to apply smart factory to the selected process and what effect it will have. The better the reasoning, the greater the hassle of applying the smart factory. In addition, the more accurate and analytical the inference, the more accurately the financial cost of implementing it into a smart factory can be calculated, and the effectiveness of the investment in financial terms can be calculated clearly.


The third step, 『Apply IoT: Installing sensors and collecting data』 stage, data is collected directly from the equipment to obtain the necessary data based on inferences, or additional sensors are installed to collect the necessary data. The collected data is delivered to the virtual database of the smart factory platform through the data backbone network. At the same time, data cleaning and data standardization of the collected data must be considered.

In the fourth step, 『data analysis and AI application』 is that the data collected is analyzed to gain new insights that were not previously known, and AI is applied to improve the process. Depending on the complexity and speed of response, the actual data analysis and AI application may take place on edge computers or in the cloud where the platform is located. These analytics, insights, and control situations are interacted with on-site experts on the platform through a UI/UX designed by Doeming experts. When interpreting data and applying AI, it is important not to try to reach the final stage of the desired smart factory all at once. In the early stages of smart factory implementation, there is a lack of experience with big data and AI, and there can be a lot of waste in jumping in at the deep end. The best approach is to start by applying small data and small AI to unit processes and gain experience with success. From there, you can gradually move to higher levels of success, and when you have enough confidence and experience, you can move to your intended level.

In the fifth step, 『effectiveness analysis』 is that each item of the reasoning used to select the process should be analyzed by both technical and financial experts to establish evaluation criteria to measure its performance, so that the results of the implementation can be evaluated. Depending on the results of this effectiveness analysis, the smart factory can be expanded, developed into a more complex process, or abandoned.

In the last step, 『Establishing a knowledge base』 is that new and valuable knowledge is accumulated and improved throughout the company as a result of the previous five steps to build a smart factory. The database for this already exists, so it doesn’t require much additional cost to build a knowledge base. What you need to do behind the scenes is to collect and update knowledge in one place, and make it easily accessible and utilized by everyone in the company. If they all have access to the knowledge base, the company and its employees will improve. This will give you a digital transformation advantage over companies that don’t have a knowledge base, giving you a clear competitive advantage.

Smart factory Adoption Case  



Smart Press Shop: Digitalizing Core Manufacturing Processes for Smart, Automated Operations

Smart Press Shop GmbH & Co. KG, a joint venture between Porsche and Schuler, aims to set a new milestone in automotive production by establishing a greenfield plant that showcases the art of the possible for automotive component manufacturing. The objectives for the new facility, located between Halle and Leipzig in Germany, are to enable fully paperless production and a completely automated process for configuring production line machinery to press automotive body parts – enabling the company to deliver small-batch orders cost-effectively. To turn this vision into reality, Smart Press Shop adopted a cloud-first development strategy, building core enterprise resource planning (ERP) and manufacturing execution systems (MES) that help to digitalize production from start to finish – and run entirely in the cloud, using 100% green energy.

Before: Challenges and Opportunities

  • Put Industry 4.0 principles into practice by creating a state-of-the-art, automated manufacturing plant
  • Build a complete IT solution to support digitalization at every stage in the manufacturing process
  • Keep operations lean by minimizing the need for in-house IT resources
  • Prioritize environmental sustainability by harnessing green sources of energy

Why SAP and Syntax

  • Ability to run all business-critical IT systems in the cloud with SAP S/4HANA® Cloud and SAP® Digital Manufacturing Cloud as well as SAP Self-Billing Cockpit, an industry cloud solution
  • Integration between on-premise production line machinery and cloud systems via the SAP Integration Suite and the SAP Digital Manufacturing Cloud for execution of a complete, end-to-end track and trace capability
  • Mobile apps leveraging services from SAP Extension Suite enable paperless processes and supplier access
  • Comprehensive application maintenance services for cloud systems from SAP Partner Syntax

After: Value-Driven Results

  • Automated setup process for production line machinery, enabling more efficient and cost-effective production of small batches of automotive body parts
  • Paperless production processes with traceability throughout all stages of manufacturing
  • Zero IT hardware installed at the manufacturing site, simplifying maintenance and operations
  • Convenient software-as-a-service model supports future scaling, and makes introducing new features easier and much faster than ever before
  • Single source of support from Syntax helps keep IT maintenance simple

                                    [Smart Press Shop : Smart Factory Architecture]

Featured Solutions

Smart Press Shop chose to work with SAP and Syntax because the company believed that Syntax’s comprehensive expertise in the automotive supply chain, combined with state-of-the-art cloud-based MES solutions from SAP, would deliver the consistent, integrated, and transparent system that the company needed to set a new standard in automotive manufacturing. The complete solution includes: • SAP® Digital Manufacturing Cloud for execution

  • SAP Extension Suite
  • SAP Integration Suite
  • SAP S/4HANA® Cloud
  • SAP Self-Billing Cockpit



In the future, it will be less about manufacturing itself and more about providing digital services that combine relevant data and knowledge to create new value for customers. To achieve this, we need to be ahead of the curve in the smart factory and digital transformation phase, so that we can be competitive in the future.

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