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What is industry 4.0?

Since the 1800s, we have experienced three industrial revolutions. Each was powered by a disruptive new technology: the mechanics of the steam engine, the innovation of the assembly line, and the speed of the computer. The reason they were called industrial “revolutions” was because the innovation that drove them didn’t just improve productivity and efficiency a little bit – it completely revolutionized how goods were produced and how work was done.


We are now in the Fourth Industrial Revolution, aka Industry 4.0, which revolutionizes the automation, monitoring, and analysis of supply chains through smart technology. Industry 4.0 is powered by the Industrial Internet of Things (IIoT) and cyber-physical systems – smart, autonomous systems that use computer-based algorithms to monitor and control physical things like machinery, robots, and vehicles. Industry 4.0 makes everything in your supply chain “smart” – from smart manufacturing and factories to smart warehousing and logistics. But Industry 4.0 doesn’t stop at the supply chain. It inter-connects with back-end systems, like enterprise resource planning (ERP), to give companies an unprecedented level of visibility and control. Ultimately, Industry 4.0 is a major part of any company’s digital transformation.

Graphic describing what Industry 4.0 is

The general definition of Industry 4.0 is the rise of digital industrial technology … Industry 4.0 transformations allow us to work alongside machines in new, highly productive ways.

– Daniel Burrus

Industry 4.0 technologies

Industry 4.0 is built on nine technology pillars. These innovations bridge the physical and digital worlds and make smart and autonomous systems possible. Businesses and supply chains already use some of these advanced technologies, but the full potential of Industry 4.0 comes to life when they’re used together.

Graphic showing the nine technology pillars that Industry 4.0 is built on

Industry 4.0 technologies

  1. Big Data and AI analytics: In Industry 4.0, Big Data is collected from a wide range of sources, from factory equipment and Internet of Things (IoT) devices, to ERP and CRM systems, to weather and traffic apps. Analytics powered by artificial intelligence (AI) and machine learning are applied to the data in real time – and insights are leveraged to improve decision-making and automation in every area of supply chain management: supply chain planning, logistics management, manufacturing, R&D and engineering, enterprise asset management (EAM), and procurement.
  2. Horizontal and vertical integration: The backbone of Industry 4.0 is horizontal and vertical integration. With horizontal integration, processes are tightly integrated at the “field level” – on the production floor, across multiple production facilities, and across the entire supply chain. With vertical integration, all the layers of an organization are tied together – and data flows freely from the shop floor to the top floor and back down again. In other words, production is tightly integrated with business processes like R&D, quality assurance, sales and marketing, and other departments – and data and knowledge silos are a thing of the past.  
  3. Cloud computing: Cloud computing is the “great enabler” of Industry 4.0 and digital transformation. Today’s cloud technology goes way beyond speed, scalability, storage, and cost efficiencies. It provides the foundation for most advanced technologies – from AI and machine learning to the Internet of Things – and gives businesses the means to innovate. The data that fuels Industry 4.0 technologies resides in the cloud, and the cyber-physical systems at the core of Industry 4.0 use the cloud to communicate and coordinate.  
  4. Augmented reality (AR): Augmented reality, which overlays digital content on a real environment, is a core concept of Industry 4.0. With an AR system, employees use smart glasses or mobile devices to visualize real-time IoT data, digitized parts, repair or assembly instructions, training content, and more when looking at a physical thing – like a piece of equipment or a product. AR is still emerging but has major implications for maintenance, service, and quality assurance as well as technician training and safety.  
  5. Industrial Internet of Things (IIoT): The Internet of Things (IoT) – more specifically, the Industrial Internet of Things – is so central to Industry 4.0 that the two terms are often used interchangeably. Most physical things in Industry 4.0 – devices, robots, machinery, equipment, products – use sensors and RFID tags to provide real-time data about their condition, performance, or location. This technology lets companies run smoother supply chains, rapidly design and modify products, prevent equipment downtime, stay on top of consumer preferences, track products and inventory, and much more. 
  6. Additive manufacturing/3D printing: Additive manufacturing, or 3D printing, is another key technology driving Industry 4.0. 3D printing was initially used to as a rapid prototyping tool but now offers a broader range of applications, from mass customization to distributed manufacturing. With 3D printing, for example, parts and products can be stored as design files in virtual inventories and printed on demand at the point of need – reducing both transportation distances and costs.  
  7. Autonomous robots: With Industry 4.0, a new generation of autonomous robots is emerging. Programmed to perform tasks with minimal human intervention, autonomous robots vary greatly in size and function, from inventory scanning drones to autonomous mobile robots for pick and place operations. Equipped with cutting-edge software, AI, sensors, and machine vision, these robots are capable of performing difficult and delicate tasks – and can recognize, analyze, and act on information they receive from their surroundings.   
  8. Simulation/digital twins: A digital twin is a virtual simulation of a real-world machine, product, process, or system based on IoT sensor data. This core component of Industry 4.0 allows businesses to better understand, analyze, and improve the performance and maintenance of industrial systems and products. An asset operator, for example, can use a digital twin to identify a specific malfunctioning part, predict potential issues, and improve uptime.  
  9. Cybersecurity: With the increased connectivity and use of Big Data in Industry 4.0, effective cybersecurity is paramount. By implementing a Zero Trust architecture and technologies like machine learning and blockchain, companies can automate threat detection, prevention, and response – and minimize the risk of data breaches and production delays across their networks.  

Industry 4.0 in industrial manufacturing

Learn how to build a robust business case to benefit most from Industry 4.0. 

Benefits of Industry 4.0

Intelligent products

Develop connected, self-aware products that are capable of sharing information about their health, location, usage level, storage conditions, and more. The data these smart products share can help you improve everything from product quality and customer service to logistics and R&D. They can also anticipate service needs, receive remote upgrades, and open the door to new, service-based business models.


Intelligent factories

Run smart factories – highly digitized, largely autonomous facilities that take full advantage of advanced technologies like Big Data, artificial intelligence, robotics, analytics, and the IoT. Also called Factory 4.0, these plants are self-correcting, employ smart manufacturing 4.0 processes, and make it possible to deliver customized products cost efficiently and at scale.


Intelligent assets

Almost every physical asset deployed today has built-in sensors – which, when connected to the IoT and analytics, are game changers for enterprise asset management. With intelligent assets, technicians can monitor asset performance in real time, anticipate and prevent downtime, employ dynamic and predictive maintenance, take advantage of digital twins, and tightly integrate assets and business processes. 


Empowered people

No matter how autonomous your systems get, you will always need people. Empower them with technologies like AI and access to live sensor data – so they know what’s happening on the shop floor and are ready to make quick decisions and handle issues as they spring up. Wearable devices and augmented reality apps can also help them solve problems, monitor their health, and keep them safe.

Learn how industry 4.0 technology can revolutionize your company's industrial processes from end-to-end.

Companies are experiencing the benefits of Industry 4.0

There’s a broad portfolio of Industry 4.0 solutions in the market, helping thousands of companies transform their digital supply chain – reinventing production, focusing on customers, and connecting their entire organization.

Here are some benefits companies are experiencing:

  • Radical improvements in productivity and automation: Businesses are making data-driven decisions across their operations, improving forecast accuracy, supporting on-time delivery, and building profit-optimized plans.
  • Resiliency and agility no matter what the market or economy bring: Companies are shaping the future digital supply chain based on state-of-the-art planning.
  • Confidence to explore new business models and seize opportunities quickly: Thanks to Industry 4.0 solutions, businesses are reducing costs, improving market efficiency, and connecting supply chains by sea, land, and air.
  • Green and sustainable solutions without sacrificing profitability: Customers are becoming more efficient and cost-effective by going digital – while meeting their environmental objectives without compromising on other business goals, such as profitability and scalability.

Explore SAP Industry 4.0 solutions

Experience the benefits of digital supply chain transformation.

Frequently asked questions about Industry 4.0

Before you can determine a route, you need to know your starting point. A good first step is to audit and analyze existing processes, assets, and business systems. This will tell you where you are, help establish priorities, and even identify quick wins. Industry 4.0 solutions will result in significant benefit and impact across every area of your business. It is more than just an IT upgrade, so you should also ensure that you have executive buy-in and engagement. 

The simple answer is yes. IoT gateway devices can often be retrofitted to older machinery. These devices empower IoT sensors to transmit performance data. In some cases, video cameras and heat sensors can be also be fitted and connected to provide a more robust picture. The age and function of the machinery will determine the best solution – and an audit and analysis can help determine the long-term value of retrofitting versus replacing legacy assets.

A robust  ERP system is the “brains” behind an Industry 4.0 technology stack. The ERP of the past largely ran office-based processes whereas today an intelligent ERP system is the hub for connected processes across manufacturing, logistics, engineering, and many other areas of the business. Part of your digital transformation will be to determine if your existing ERP system is equal to the task. 

Legacy ERP systems running on outdated, disk-based databases are being pushed to the limits of what they can do. The ability to leverage the data you receive from connected factories, assets, products, and people will be dependent upon the capabilities of your ERP. Is it intelligent? Does it offer embedded technologies like AI, machine learning, and analytics? How fast is its database? If you are running an older system, it might be time to upgrade in order to take advantage of Industry 4.0.

Which technologies you start with will depend on which processes are the most critical to your core business model – and which areas of your company stand to benefit the most from transformation. When getting started, companies often focus on one core technology at a time. By their design, Industry 4.0 solutions deliver a lot of robust Big Data and insights that can help you accurately assess their ROI and benefits.  This makes it increasingly smooth to integrate subsequent areas of the business.

Unlike many major foundational changes, digital transformation can be undertaken incrementally, without significant disruption to the business. Starting with a robust ERP system and digital transformation roadmap, many Industry 4.0 solutions can be rolled out almost immediately. 

Change is hard. We get that. When companies switched to computers from typewriters, it was met with resistance by a workforce that felt overwhelmed by their complexity. But unlike those early technological transformations, Industry 4.0 solutions actually reduce complexity for the user, rather than add to it. Workflows are streamlined, manual and repetitive tasks are automated, and the interfaces are more intuitive.  Furthermore, many 4.0 technologies facilitate training, such as AR wearables and mobile-optimized experiences. 

If 2020 has taught us anything, it’s that we can’t always see what’s coming. And while we can’t predict the future, we can take steps to ensure that we’re more resilient and better prepared for it.  The best in-memory ERP systems are scalable and support unlimited workloads, and Industry 4.0 technologies are developed specifically to ramp up to support future growth and adapt to unexpected change.

Some of the most fundamental elements of Industry 4.0 software solutions are built-in scalability and the capacity for agility and resilience. If your business or production model has to radically change to meet market demands, your Industry 4.0 systems will give you the insights and confidence you need to adapt and implement change quickly across.

There is no question that the fourth industrial revolution will change the workforce. But it’s not repetitive labor that leads to innovation – it’s ideas and creative thinking. A digitally augmented workforce is freed up to use their heads instead of just their muscles. In 1980, there were only a few thousand computer programmers in the whole world. Today there are over 20 million. While many physical tasks will be taken over by robots, many more tasks will be created to run a digitally enhanced business.

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