Everywhere you look, information technology now plays a major role. Major industries nowadays are suddenly finding themselves dependent, in large part, on information technology. This approach of combining industry and the latest advancements in technology – particularly information technology – is sometimes referred to as the “fourth Industrial Revolution”, alluding to that significant era in history when the fields of agriculture, manufacturing, and transportation, among others, transitioned to adapting new processes, policies, techniques and practices. Today, it is simply called Industry 4.0.

If we were to look at historical records, it would appear that they were right in tagging Industry 4.0 as the fourth Industrial Revolution. It started with the Victorian industrial revolution in the 19th century, when factory production was introduced in what was predominantly a farming economy in England. The second industrial revolution, which took place in the middle of the 1800s all the way up to World War I, mass production took root, spurred further by the introduction of steel and electricity to power up manufacturing plants. In the middle of the 1900s, digital technology started to make its presence felt, slowly replacing the old (analog and mechanical) way of doing things. We now see a move towards complete digitization of processes, and that is what Industry 4.0 is all about. Hence, the term “Industry 4.0”.

Industry 4.0: Everything You Need To Know

© Shutterstock.com | Monkey Business Images

In particular, we will explore 1) the industry 4.0 fundamentals, 2) design principles, 3) building blocks in industry 4.0, and 4) challenges and the future of industry 4.0.


Some dub it as “making the manufacturing industry fully computerized”. Others say it is a way to “make industrial production online”. In the United States, the term “industrial internet” has been coined by industrial giant General Electric, but there is another term that is gaining more popularity: “the internet of things”. In others’ opinion, it is a way for businesses to keep up with the rapid pace of changes driven by the evolution of information technology.

All these have grains of truth in them.

What, exactly, is Industry 4.0? Many people are treating it as if it is a new concept, utilizing newly developed technology and teaching new “tricks”. In a way, that is true. To be more precise, Industry 4.0 is essentially a new approach in manufacturing that makes use of the latest technological inventions and innovations, particularly in information and communication technology.

Industry 4.0 involves the use of advancements in communication and information technology to increase the degree of automation and digitization of production, manufacturing and industrial processes. The ultimate goal is to manage the entire value chain process, by improving efficiencies in the production process and coming up with products and services that are of superior quality. Thus, what we have is the factory of the future, aptly named “Smart Factory”. This factory of the future is envisioned to be one that operates with quiet efficiency, where all processes are performed and conducted seamlessly and smoothly.

The “internet of things” term used by many experts may be quite limiting, especially when you consider the fact that the industry 4.0 environment has four aspects: the internet of things, the internet of data, the internet of services, and the internet of people. That is probably the reason why there is a greater preference for the phrase “internet of everything”, instead of just the “internet of things”.

But what gave rise to this fourth industrial revolution? Experts narrowed down four drivers that spurred this transition to further digitization of the manufacturing industry.

  • The drastic and rapid increase in data volumes, computing power and connectivity. This is especially seen in new wide-area networks with low power utilization. Industries find themselves facing the prospect of having to use new data in their manufacturing operations.
  • The advancement of analytics capabilities. Product development requires analysis for it to be successful, and the stronger and solid the analysis is, the higher would be the quality of the end product. A lot of analysis is also required to improve efficiencies of business operations.
  • The introduction of new form of human and machine interactions. These include the development of augmented-reality systems, and systems that make full use of touch interfaces and other hands-free operating systems.
  • The innovations in easing the transfer of digital data to something physically usable. Examples include the improvements in advanced robotics and the onset of 3D printing technology as well as rapid prototyping.

With these drivers at work, industries are finding it increasingly imperative to keep up with the times, especially if they plan to remain competitive.

Four Main Characteristics of Industry 4.0

Proponents of Industry 4.0 named four main and distinct characteristics:

1. Vertical integration of smart production systems

Smart factories, which are essentially the core of Industry 4.0, cannot work on a standalone basis. There is a need for the networking of smart factories, smart products, and other smart production systems. The essence of vertical networking stems from the use of cyber-physical production systems (CPPSs) which lets factories and manufacturing plants react quickly and appropriately to variables, such as demand levels, stock levels, machine defects and unforeseen delays.

Similarly, networking and integration also involve the smart logistics and marketing services of an organization, as well as its smart services, since production is customized in such a way that it is individualized and targeted specifically to customers.

2. Horizontal Integration through global value chain networks

Integration will facilitate the establishment and maintenance of networks that create and add value. The first relationship that would come to mind when we talk of horizontal integration would be the one between the business partners and the customers. However, it could also mean the integration of new business models across countries and even across continents, making for a global network.

3. Through-engineering across the entire value chain

The whole value chain is subjected to through-engineering, where the complete product life cycle is highlighted. Under other circumstances, focus would be on the manufacturing process alone, with little to no regard of the output. Industry 4.0 covers both the production process and the end product.

4. Acceleration through exponential technologies

Business operations, particularly those involved in manufacturing, entail the use of many technologies, most of them already existing and operational for a long time. However, technologies are evolving by the day, becoming bigger and better. Soon enough, these technologies have become capable of being applied on a mass-market basis, becoming more accessible by more and more businesses and industries.

Benefits of Industry 4.0

You might think that Industry 4.0, once it fully rolls out, will benefit only the manufacturing industries. You would be wrong.

Industry 4.0’s impact is more far-reaching than that. It affects the entire value chain, including the producers and manufacturers, suppliers, and workers. The education sector will have to step up to produce more talent equipped with the skill sets and competencies required in Industry 4.0. Software and technology developers will also have to look into newer, better and bigger offerings. Governments, on the other hand, are expected to do their share, particularly when it comes to the infrastructure required for systems to operate successfully and smoothly. Of particular note are smart infrastructures, which include those that involve smart mobility and smart logistics.

All these players ask, “The current system is working; why should we make the switch to Industry 4.0? What’s in it for us?”

  • Increased competitiveness of businesses: In fact, Industry 4.0 is expected to enhance global competitiveness. In this vision, even countries known to have low labor costs and wages will be eyed by large industries as their production areas.
  • Increased productivity: With the increase in efficiencies will also come improvements in productivity levels in the manufacturing sectors. Feasibility studies conducted in Germany show that productivity in the manufacturing sector will increase by more than 60%. In fact, in the automotive industry, productivity is expected to increases by 10 to 20 percent, once Industry 4.0 is fully implemented.
  • Increased revenue: Naturally, the manufacturing sector will also see an increase in its revenues. Industry 4.0 is seen as one of the major drivers for the growth of revenue levels, even as its implementation will also require significant investments by businesses. Cost-benefit analysis will show later on that revenue will increase faster and higher than the costs incurred to automate or digitize the manufacturing process.
  • Increased employment opportunities and enhanced human and IT resources management: Employment rates will also increase as the demand for talent and manpower, particularly in the fields of engineering and mechanical work, will also rise. But it will not be limited to the mechanical-engineering pool alone since, depending on the industry or manufacturing sector, many types of skills will be required.
  • Optimization of manufacturing processes: Having integrated IT systems within the production process will certainly make the most out of the resources at hand. Processes will be streamlined, and there will be increased collaboration between and among producers, suppliers, and other stakeholders along the value chain. The usual time that it takes to produce one unit will be visibly shortened since the process is simplified without compromising quality and decision-making is done in real-time. Similarly, business segments are allowed to develop their full potential as they are individualized. Each segment has their own – and often better – understanding of the needs of their customers or the groups that they serve, so they are given more power or authority in making the decisions.
  • Development of exponential technologies: Industry 4.0 will serve as an impetus or basis for further technologies to be developed. Suppliers and developers of manufacturing systems and technologies will use them as basis on what to develop next. For example, more companies are adapting the use of 3D printing technology. Already, developers are looking into technologies that will be an improvement on the current 3D printing technology.
  • Delivery of better customer service: Monitoring and feedback mechanisms, traditionally, also take time. With Industry 4.0 concepts and methods applied, logistics and stats are generated and collected in an automated manner, so response is faster. The business immediately knows if an adjustment has to be made, what adjustments are required, and respond faster to the needs of customers.


One of the basic principles of Industry 4.0 is connecting systems, machines and work units in order to create intelligent networks along the value chain that can work separately and control each other autonomously but in a cohesive manner.

Industry 4.0 has six identified design principles that manufacturers or producers use in their automation or digitization efforts for their production processes.

  1. Interoperability: The production process does not pertain to simply a set of methods or steps and involve only the people directly involved in them. It is an entire environment where all factors play a role. Assembly stations are not considered completely separate from the products that are being created, or the people that are working on them. Interoperability refers to the capability of all components to connect, communicate and operate with each other through the Internet of Things. This includes the humans, the Smart Factories, and the technologies in use.
  2. Virtualization: The monitoring of the actual processes that take place in the physical production chain will turn up sensor data, which will then be linked to virtual models or models created via simulation. This linkage will result in a virtual copy of the Smart Factory and this, in turn, will be used by producers in the setup of Industry 4.0.
  3. Decentralization: As mentioned repeatedly, Industry 4.0 supports faster decision-making, cutting through the bureaucratic red-tape that many businesses find too bothersome and time-consuming. Industry 4.0 supports decentralization, which enables the different systems within the Smart Factory to make decisions separately, without deviating from the path towards the single, ultimate organizational goal.
  4. Real-Time Capability: Industry 4.0 efforts are also centered towards making everything real-time: the gathering or collecting of data in each step of the process and even the feedback and monitoring stage. Assessing the weaknesses of each stage of the production process can be done quickly – almost immediately – allows management to make decisions just as fast.
  5. Service Orientation: Just because the Internet of Things is in use does not mean all the work is already done once the major players are interconnected. Services are still going to be required by the Smart Factories, and that is where the Internet of Services of Industry 4.0 comes in.
  6. Modularity: Flexibility is also another design principle of Industry 4.0, so that Smart Factories can easily adapt to changing circumstances and requirements. The individual models must be designed in such a way that they can be replaced, expanded, or improved on.


There are nine identified technological trends that are said to be primarily instrumental in shaping industrial production.

  1. Big Data and analytics: These days, the manufacturing sector is finding itself inundated with increasing amount of data from various sources, and there is a need to gather all that data, collate and organize them in a coherent manner, and use the analytics provided by these data sets to support management’s decision-making. Business cannot afford to ignore the data coming in, as they might prove to be very useful when it comes to optimization of production quality and service, reduce energy consumption, and improve efficiencies in the production process.

For example, data can be collected from the various phases of the production process. These large amounts of data will be analyzed in correlation with each other in order to identify phases with redundant processes that may be streamlined.

To sum it up, there are 6 C’s in big data and analytics with respect to the Industry 4.0 environment. They are:

  • Connection, which pertains to sensors and networks;
  • Cloud computing;
  • Cyber, which involves model and memory;
  • Content/Context;
  • Community, or sharing and collaboration between and among stakeholders; and
  • Customization.
  1. Autonomous robots: The use of robots in the manufacturing process is no longer new; however, robots, too, are subject to improvements and evolution. Creators of these robots are designing them to be more autonomous and interactive, such that they are no longer simply tools used by humans, but they are already integral work units that function alongside humans.
  2. Simulation: In the past, if manufacturers wanted to test if a process is working efficiently and effectively or not, trial and error is required. Soon, they learned the process of simple simulation to cut down on setup times. With another industrial revolution looming, simulations will become more advanced and extensive, such that they will play more major roles in the optimization of production, as well as product, quality.
  3. Horizontal and vertical system integration: Linkages are essential in any business for it to flourish, and the concept of having fully integrated IT systems is something that Industry 4.0 aims for. Imagine a manufacturing sector where engineering, production, marketing and after-sales are closely linked together. Similarly, companies will also be more integrated, giving rise to data integration networks and value chains that are fully automated. Collaboration among companies and industries will surely be facilitated.
  4. The industrial Internet of Things (IoT): Embedded computing and networking are seen to be requirements if a manufacturer wants its processes to be fully integrated and automated. The industrial Internet of Things will make this possible, since field devices will be designed and equipped for networking, so that they are able to interact and communicate with each other, while also becoming connected with a control center or command.
  5. Cyber security: As more and more companies are going online, there is an increasing demand for higher security, considering the amount and nature of data or information that are uploaded or shared in networks. Industrial systems are becoming increasingly vulnerable to threats. To address this, cyber security measures have to be put in place.
  6. The cloud: The large data sets involved in Industry 4.0 means data sharing will have a broader reach or range. The usual cloud-based software that a manufacturing company has been using in the past may no longer be enough to hold all that data. Thanks to the continuous efforts of developers, cloud technologies are improving, becoming more enabled for manufacturing and production systems.
  7. Additive manufacturing: Customization of products is one way for manufacturers to improve product quality. Fortunately, additive manufacturing is making this possible. It enables manufacturers to come up with small batches of products that are customized in ways that offer more value to end users, while reducing cost and time inefficiencies for the manufacturer.
  8. Augmented reality: Businesses are increasingly relying on mobile technologies to carry out its business processes, from production to marketing and after-sales support. In order to carry them out, they are turning more and more towards the use of augmented-reality-based systems.

One advantage of these augmented reality-based systems is providing real-time data or information, resulting to decision-making that is also performed in real time.


A simple automation process is not without its obstacles or stumbling blocks that it must overcome in order for it to be fully implemented, operational and successful. The same goes for Industry 4.0. It, too, is subject to several key challenges that must be addressed if it is to be fully adapted by the manufacturing sectors all over the globe.

Industry 4.0 implementation requires large amounts of investment

It costs money to automate a single part of a process; automating an entire production process or value chain will definitely cost more than a lot of money, it requires huge sums. In Germany, for example, the manufacturers are expected to invest €250 billion in the next ten years as they adapt manufacturing process to be incorporated with Industry 4.0 concepts.

Demand for an upgraded workforce

Producers and other businesses in the manufacturing sectors will have to look into their workforces more closely, particularly with their competencies. Long-term or strategic workforce planning is called for, and they are likely to focus on a workforce with superior IT skills and competencies.

Calling for an upgraded workforce is not as easy as it seems since, as things stand, there are several concerns that are appended to this challenge:

  • Lack of skill sets or competencies needed for Industry 4.0 implementation: There is no lack when it comes to talent, but it is a fact that the talent that we currently have are not necessarily up to par with the expectations for the full implementation of Industry 4.0. As things stand today, there is a lack of the adequate competencies or skill sets. Hopefully, in the near future, this inadequacy will be filled, thanks in large part to educational institutions revamping their curriculum to address this issue.
  • Displacement of low-skilled workers and laborers: This is another challenge that is an offshoot of upgrading the workforce. There is a constant worry in economies that automation will put greater emphasis on information technology professionals and those that are directly engaged in the mechanical-engineering aspect of things, completely displacing the workers who belong to the low-skilled group.

The demand for Industry 4.0-capable systems and machines

Suppliers and developers of manufacturing systems need to step their game up in order to keep up with the demand for machines and systems that are Industry 4.0-capable. This means that the current suppliers and developers have to delve more into information technology and how it will be incorporated in the manufacturing systems that they come up with. In short, they have to reconfigure their own production processes. If they already have software-development capabilities in place, they still have to do more, because Industry 4.0 requirements are certainly going to be much higher.

Standardization across industries

While it is true that not all industries are the same, there is still a need for some degree of standardization. Industry 4.0 does not happen in Europe alone, or in the United States. Connectivity is now on a global scale, and industries have to be covered by international standards in order for their interaction to be more defined and have a semblance of order.

The first steps towards standardization have already been undertaken by Germany with its Plattform Industrie 4.0, followed by the Dialogplattform Industrie 4.0. The United States is not far behind, with the formation of the Industrial Internet Consortium or IIC, which gathered telecommunication and IT companies, manufacturers, producers and manufacturing systems suppliers. Another organization, the Smart Manufacturing Leadership Coalition, was also formed by government agencies, manufacturers/producers, suppliers, technology companies and educational institutions to further sow the seeds of Industry 4.0 in the US.

Data Security risks

As a greater portion of the global manufacturing sector is finding its way to using the Internet of Things, there are definitely greater risks to data security. Cyber security providers will also have to increase their vigilance and develop better security systems to protect Industry 4.0 from caving under the pressure and threat from potential viruses and other cyber attacks.

General reluctance to change

Not everyone is quick or easy to adapt to change, even if said changes are geared towards higher profits or greater productivity. Some stakeholders are ingrained to be resistant to change, preferring to stick to what is familiar and, to them, reliable.

Convincing everyone in the manufacturing sectors to automate their production processes is not going to be easy. Advocates of Industry 4.0 have their work cut out for them as they hope to get everyone on board, and that is not just limited to manufacturers and producers. They also have to get government units and agencies, technology firms, infrastructure providers, suppliers and even the general public, to get on with the program.

Comments are closed.