Industry 4.0 – The Next Industrial Revolution

Bridges vol. 41, October 2014 / Feature

By Natalie Plewa

The industry sector is undergoing significant changes and the new buzzword is Industry 4.0. The steady shift towards digitization and linking production units in an economy has revolutionized the industry sector. This is affecting everything from manufacturing, company structure, and customer demand to the workplace of the future.

And that is why this years opening plenary at the Alpbach Tech Forum was entirely dedicated to “Industry 4.0 – the next industrial revolution.” An industry summit on Technology and Innovation, hosted by Austrian Minister Doris Bures in Alpbach, also focused on the impact of Industry 4.0 on Austrian companies.

But what exactly is Industry 4.0?

The simplest way to describe the new industrial movement is probably as a fusion of production and communication technologies. In order to understand what this “fusion” implies, it is important to take a closer look at the two technology trends industry 4.0 is founded on, namely the Internet of Things and Cyber Physical Systems.

The Internet of Things is based on the idea that everyday physical objects are being connected to the Internet and are able to identify themselves to other devices. These objects can then autonomously exchange information and communicate with each other without being controlled by humans. Typical examples would be office equipment knowing when it is running low on supplies and automatically ordering more, or an alarm clock that goes off in the morning, thus notifying the coffee maker to start brewing coffee. Not to forget your car having access to your calendar, defining the smartest route to take for your next appointment, even sending a text message to the other party if you are late due to traffic.

Cyber Physical Systems, on the other hand, is a term used to define the penetration of physical-mechanical systems with information technology systems – put more simply, mechanical objects being controlled by a computing core.

An everyday example for engineered systems whose operations are being monitored, coordinated, controlled, and integrated by a computing and communication element is found in adaptive cruise control for vehicles. In the future, the examples are likely to be energy-aware buildings and perpetual-life assistants for older or disabled people.

Still, IT systems have been at the core of production systems for years without introducing new industry eras. So, why is industry changing just now?

The answer lies in the big picture

In the framework of industry 4.0, IT systems will be more strongly connected to production subsystems, processes, internal and external objects, and to suppliers and customers. These will be entirely interlinked while monitoring takes place in real time, entailing much higher data complexity and allowing more sophisticated marketplace offerings.

At the same time, these technology changes are about to strongly influence organizational and socio-economic parameters. Vertical integration in an industrial company, for instance, must ensure that the right information is made available to the right machine at the right time. Horizontal integration – the evolution of value-creation networks – enables division of labor along the production line, even beyond company borders. Thus, information and communication technologies will transform company structures as a whole and ultimately change the nature of production.

The workplace of the future is likewise shaped by the two previously described technologies and the new industry trend. Automation is increasingly replacing human labor. Consequently, the job profile of the future is far more focused on controlling, planning, maintenance, and process management than on manual labor. Knowledge and manufacturing work will grow together, offering new opportunities while demanding considerable creativity and new skills. 

If successfully conducted, these arising opportunities could offer high potential for visionary start-ups: knowing how to make use of technology trends made possible by customized solutions. 

Which leads us to a question: What is the role of the future customer in the production process? The “individualization of products” has become a popular idea – create your own cereals, your own shoes, and your own car. By integrating the customer into the production process, the manufacturer can perfectly meet the demands of each and every client. New production technologies will enable fast and qualitative manufacturing on site, which makes this individualization affordable. In the world of Industry 4.0, mass production and custom-made solutions are no longer a contradiction.

Why focus on production at all?

But why is a changing industry particularly important to an already industrialized nation such as Austria? In recent decades, leading industrial nations have pooled their efforts towards the creation of a strong service sector. Now the same nations are trying to slow or even reverse this process, with reindustrialization becoming a new guiding principle. 

The reason for these efforts is that the manufacturing sector proved to be a stabilizing force for western industrial nations during the recent economic crisis. Economies characterized by strong production – especially those with a considerable focus on technology – managed to keep their growth slumps and revenue drops relatively low and employment rates fairly high.

Hence, industry is a core element in the value chain. In the United States, manufacturing contributes more than $2.08 trillion annually to the nation’s economy, while directly supporting over 12.1 million high-wage US jobs. When indirect jobs are taken into consideration, manufacturing even supports an estimated 17.4 million jobs in the US. Besides, the production sector accounts for 67 percent of business R&D in the United States. The Information Technology and Innovation Foundation states that manufacturing even is America’s principal source of exports, R&D, and innovation activity, and is now a key contributor to national security.

As far as Austria is concerned, a recent study published by the Austrian Institute of Economic Research (WiFo) illustrates that the country's industrial potential should not be underestimate. On an international scale, Austria scores high due to premiere Austrian manufacturing companies in the fields of engineering, automotive industry, high-tech metal products, materials and environmental technologies.

According to Karl Aiginger, head of WiFo, Austria could still significantly improve its competitiveness by further developing its industrial technologies. This, in turn, implies the need for considerable investment in production but not in traditional manufacturing. The new industrial era entails considerable challenges, all derived from an immense pressure to innovate. Innovation is a necessity in order to stay flexible, make efficient use of resources, be perfectly organized, fast, and (above all) customer-oriented.

Effective investment in production is consequently a way of investing in innovation. Based on this idea, for 2014 and 2015 the Austrian Federal Ministry for Transport, Innovation and Technology (bmvit) decided to dedicate €250 million for R&D projects associated with Industry 4.0.

Together with a €30 million investment by the Austrian Federal Ministry for Science, Research, and Economy (bmwfw) this sums up to a total of €280 funding for Industry 4.0 projects until the end of next year. 

Initiatives to be supported by that funding include the pilot plant on Industry 4.0. This joint project of bmvit and the Vienna University of Technology enables the development and testing of new production techniques and prototypes and is said to provide a platform for analyzing and improving the interaction between man and machine. The realistic model of a “factory of the future” should commence operation in early 2015, with more pilot plants intended to follow in 2016. 

Like many other industrialized nations, Austria is currently in a position to strongly influence whether, and to what extent, it will be able to benefit from the rising opportunities while channeling the partially disruptive effects of these innovation trends knowing that, after all, the only constant in life is change.

Natalie Plewa is currently visiting expert at OSTA Washington from the Ministry for Transport, Innovation and Technology. In BMVIT she is responsible for bilateral technology transfer activities, focusing on establishing and developing Austrian technology cooperation with the CIS region.