Industry 4.0 is a hot topic recently in Asia following latest China’s “Made in China 2025” initiative (http://news.xinhuanet.com/english/2015-05/19/c_134252230.htm). Germany starts this idea to retain its manufacturing leading position by applying information technology further in manufacturing. It is not only simply to “automate” manufacturing, but add the secret ingredient, intelligence, into manufacturing.
Industry 3.0 includes Computer Integrated Manufacturing (CIM) and enterprise business applications such as ERP, CRM, SRM and SCM. Following the rapid development and wide use of computers, enterprise is able to enjoy the operation efficiency improvement, quality management, cost control…with data from shop floor, enterprise and even across enterprises. Early 2000, SCM was the hype at that time and enterprises were talking about collaboration, data exchange, supply chain visibility. Companies like Wal-Mart, Dell grew rapidly because of adaption of SCM in their business models. OBMs from US, Europe could offload capital-intensive manufacturing to Asia, Taiwan, China and south Asia by integrating supply chain information through business applications. On the other hand, manufacturing in US, Europe lost the competitorion edge because of cost, and German thinks about how to move manufacturing back to Europe. Furthermore, Industry 4.0 not only aims to improve operational efficiency, reduce cost, but also energy usage (consume energy, material more efficiently and intelligent), operation safety (adapt automation, robots with self-detect intelligence in hazardous environment or operations).
I would say that Industry 4.0 is more like a strategic framework about how to get manufacturing in Europe as competitive as Asia. Industry 4.0 is built upon few key technology inventions: internet of things, cloud and big data.
Internet of Things
In the age of Industry 3.0, shop floor automation is limited to the technology to interact with SCADA, PLC…(Level 1 and Level 2 from ISA-95 standard). MES (manufacturing execution system) needs to develop communication with Level 1/2 devices which requires vast effort. Only industries of semiconductor, TFT-LCD…are able to enter “full automation” because of standardized protocol defined by SEMI (semiconductor equipment and material international). However, IoT is going to make the change. With IoT technology, MES could communicate with Level 1/2 much easier, which could close the automation gap quickly.
Cloud
Using cloud technology, information is easier to be shared and accessed by interested parties. Cloud enables further collaboration among supply chain partners with low set up cost comparing with data exchange approaches used in Industry 3.0 age which might be only available for large enterprises. With Cloud, the small/mid size companies could hook up to the platform to enjoy the benefit with very low cost/effort and faster and this could enable global visibility across the supply chain.
Big Data
This is the jewel in the crown. IoT and Cloud bring the mass data (big data) from sensors, PLC…and analytics is applied to extract intelligence from these data. For example, production planners could use optimization models to analyze material and/or capacity constraints and derive next best actions to cope with these constraints. Another example is to analyze sales history, inventory levels across the supply chain and decide how much to be produced, what to be produced. And the material purchase orders could automatically triggered and sent to suppliers based on shop floor production schedule.
Another key point of Industry 4.0 is to de-centrailize decisions to shop floor,“execution autonomy”. Comparing with Industry 3.0 where data are integrated, analyzed centrally and decisions are sent to shop floor for execution. Execution autonomy means an event in shop floor triggers analytics and decision is made locally to respond to the specific event. Therefore, there is some “analytics” to support execution which does not require sending data back, analyzing, sending decisions to shop floor, shop floor can respond faster and even without human involvement.
Leveraging these three key technologies, concept of Industry 4.0 can be realized and implemented. But is it so easy to be “Industry 4.0” simply adapting these three technologies? The answer is obviously “No”.
Because of many enterprise puts their focus on business applications, ERP, CRM, SRM, SCM in Industry 3.0 age, they turn their heads to execution automation, sensors, SCADA, robots, “factory automation” per se. Some hardware vendors (such as industrial computers, sensor makers, robot vendors) promote their products by claiming to enable Industry 4.0. Even with some level of analytics on top of factory automation, it reaches only “smart factory” not completely Industry 4.0.
We think the key to Industry 4.0 is IT/OT integration (http://www.gartner.com/it-glossary/it-ot-integration). IT (information technology) means all business applications from Industry 3.0 (ERP, CRM, SRM, SCM) which facilitates enterprise business operations internally and externally. OT (operation technology), no the other hand, includes SCADA, PLC, MES… related to manufacturing execution. Without IT/OT integration, enterprise cannot benefit from Industry 4.0 transformation.
Some enterprises have highly automated factories which rely on very few operators to keep factories working after “automating the factory”. However, customers’ orders are not directly linked to production. Planners need to work on Excel spreadsheets or adapt Advanced Planning Solution to come up with master production schedule (MPS) based on customer orders/demands then release to factories for production. Here is the gap between IT and OT, and enterprise is not really “Industry 4.0”.
To better understanding of the concept of IT/OT integration, let’s take the example of BMW Z4 manufacturing. National Geography produced a film to introduce the making of BMW Z4. Consumers are able to select any color of leather seats and body color in the dealer site. The sales order (demand signal) will be sent to the factory and factory schedules the production based on material and capacity availability. With BOM (bill of materials) explosion, request for seats of specific color will be sent to suppliers with the time of request (when the production reaches the stage of seat assembly). Along the engine assembly, body painting, assembly, requirement of seat will be updated to the seat supplier to synchronize the production of seats/car. In this example, IT (order configuration, response, supplier collaboration) is fully integrated with OT (shop floor execution status/schedule) so that BMW can provide high customer service to its consumers.
Many enterprises ask the question: “How can I know if I am already Industry 4.0?” or “How is my maturity of Industry 4.0?” This is not an easy answer, nor standard one. We think Industry 4.0 is a strategic framework but there is no clear stick yard yet.
With Industry 4.0, enterprise can not only improve current operations but also has the possibility to innovate new business models. By applying Industry 4.0, it can make some impossible become possible, and this could introduce new service models, new business approaches.
IoT, Cloud, Big Data alone have been the source of business model innovation. For example, Trane changes their business model by charging their clients with operational hours of air conditioners. It analyzes data of the equipment availability and keeps to maintain high service level to be profitable. Another example is Royce Rolls charges its client by operational hours of aircraft engines instead of selling engines. (http://bluecanyonpartners.com/taking-flight-how-data-is-being-used-to-create-new-business-models-and-drive-profitable-growth/) With Industry 4.0 of integrating three elements, enterprises are able to develop more innovative models.
After framing new business models, enterprise can then identity the gap between as-is state and to-be state: does factory need to be 100% fully automated? What kind of data should be collected? via what kind of sensors? What intelligence needs to be extracted to support business model? How to link customer service to manufacturing shop floor? Not only CIO, but CEO, COO, CFO all need to think about this to achieve desired state. The most interesting part of Industry 4.0 is to bring customer requirement directly into manufacturing execution and promise back to the customer, it requires integration and collaboration inside and outside enterprise. Without seeing the big picture, enterprise will not receive the full benefit of Industry 4.0.
Some colleagues ask me: “If industry 4.0 is just another bubble?” I will say, We believe there will be a long journey ahead for Industry 4.0. And the journey is full of uncertainty, but also all kinds of potential and possibility.
