Industry 4.0 seems to confuse even the biggest of companies, so what does it all mean?

Written by: Justin Cunningham | Published:
Justin, I think your summary of Industry 4.0 is a perfect description of the industry end game of ...

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Talk to any sales or marketing person and they will tell you that digitisation is vital. They will talk about visibility and business insight, the likes of which you can barely imagine. But, what exactly does that mean? The concern is this is just hyperbole to sell industry new stuff.

Predictive maintenance was putting sensors on machines and gathering data over a decade ago, so nothing ‘new’ there. For others it’s about bringing the manufacturing IT infrastructure up-to-date. OK, so new stuff tends to work better, but it’s not exactly the revolution we’ve been promised. Well, maybe it’s more about allowing systems to connect with one another… you mean like the internet?! Isn’t there more here, rather than just, what seems to be, evolution of existing systems and practices?

For many Industry 4.0 is uncertain, undefined and misunderstood. And, the fact is, implementation continues to be limited because of it. Sure, many larger manufacturers are committing to spending millions on putting a strategy in place, but is this more of a business move or the outline of a technology roadmap? It’s murky. For most in the supply chain they just want to know, ‘what’s the point?’

Speaking at the FT’s (Financial Times’) Future of Manufacturing Summit was Hamid Mughal, the director of global manufacturing at Rolls-Royce. He says we shouldn’t dismiss the potential of Industry 4.0 because of corresponding marketing speak and its current undefined an intangible nature.

“Industry 4.0 is not something that’s going to come in the future, it’s here already,” he says. “There’s a level of smartness in everything that we do already.

“But, knowing and understanding what that point is is absolutely crucial for the future of industry because we could all bankrupt our companies and organisations without understanding the value. If you only get to ‘Smartness Level II’, for example, rather than ‘Level V’, but that gives you everything you want, I’d say stop. You don’t go for what my worry is, which is digitisation. It almost becomes an end to itself. Everybody talks about the need to digitise. Why? What for? What value are you going to generate for your company and what value can you generate for your customer?”

This is one of the biggest complexities that engineers are grappling with when it comes to the technology, as it has the potential to impact every department and function, from quality control to procurement to design to research.

In a nutshell

Industry 4.0 is essentially about putting sensors on assets, gathering data and then using analytics to figure out what is going on.

Perhaps it’s that productivity on the shop floor drops after lunch, so the insight might be to serve more salads in the canteen rather than stodge? Perhaps it’s that equipment is not being used properly, meaning a need for greater training or indeed a redesign.

Taking this base-philosophy through an organisation will bring a lot of hidden value and there will no doubt be a lot of low hanging fruit that’s easy to implement, which will offer improvements. But the real opportunity is selling that insight on.

Rolls-Royce has famously been adopting a ‘servitisation’ business model for years, selling power-by-the-hour. As a business model, servitisation seems to lend itself to Industry 4.0-capable businesses as data and analytics can enable other services to be added to a product’s offering.

“It’s the evolution from selling products to moving on to sell product support, knowledge, services and self-services,” says Mughal. “If you can tangibly describe it in today’s terms and the customer is prepared to appreciate it, that’s value. And by ‘appreciate’ I mean there’s money coming back to you in terms of profitability and additional revenue.”

Industry 4.0 might therefore be interpreted as a broad shift in the business model of industrial companies generally, rather than what we tend to think of it as; a technology revolution. Perhaps, it signals the end of ownership to a more lease based system where manufacturers sell function, rather than components to do the function, in the way Rolls-Royce has done with power-by-the-hour.

The problem here is the inherent potential to shy away from engineering innovation in favour of business ‘innovation’, meaning there is more focus on service arrangements that could eventually see product design outsourced as it becomes a lower value non-core activity. For Mughal, his message is clear, leave product development behind at your peril.

“You have no company without a product,” he says. “The product is your DNA. Everything flows from your product.

“The most exciting prospect is when we have a product feeding back live information all the way to the design intent. When a product operates, it continuously feeds back exactly the way customers are using it and operating it.”

Industry 4.0 will create vast pools of data from, potentially, every aspect of a business, both internally and externally. While this has been happening for more than a decade, the real revolution is the cost of doing so, the ease of implementation, and the amount of data that will be logged.

“If you generate quality information, you then have intimate knowledge you’re able to pass on that says, ‘if you did this, you use less fuel, you improve availability, you’ll get better utilisation of the asset, and you’ll make more money’. That information is going to enable new relationships, new sources of intelligence, new services and new long-term agreements. That’s what we should be aiming to do with Industry 4.0.”

Industry 4.0 has the potential to revolutionise efficiencies throughout a business. All this talk of value, ‘-isations’, and visibility is ultimately about driving efficiency not just through an organisation, but through an entire industry and between industries.

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Rolls-Royce plc
Justin, I think your summary of Industry 4.0 is a perfect description of the industry end game of 3.0 - highly automated digitized production lines.
What 4.0 marks is a much more major shift, a disruption on how we design and produce products altogether. Over the past 2 decades we've seen how digitisation has disrupted the publishing, music, radio, photography, television, and film industries. When a product is digitised, it is democratized. For a window the authority dramatically shifts. The slow moving major players take a hit and loses control of the market. The smaller fast moving ones reinvent the industry, until a new model dominates (think tge shift from napster to spotify or netflix etc.).
Apply this reincarnation to the shift we're seeing from industry 3.0 to 4.0.
As physical products are digitised, small crowdfunded fabricators, prosumers, hackers and makers reinvent the manufacturing industry, until new 'hardware as a service' offerings begin to dominate. In the future of industry 4.0, products won't be made on large production lines or sold in stores, and product brands will not ship or hold stock, instead they will license digital files.
Thats the revolution of 4.0.

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