Why the Time for Industry 4.0 Is Now

In an era of increasing business volatility, supply chain resiliency is not an option, it’s an urgent imperative.

Today, companies need to be able to respond to volatile demand, uncertain supply, and constrained capacity. But as we look beyond the COVID-19 pandemic, companies must also be able to respond to demanding customers that will look for individualized and sustainable products.

If anything, this volatility has highlighted the need for digital transformation and industry 4.0.

We need agile and resilient supply chain and manufacturing processes to help manage and mitigate supply chain disruptions in the tough times and maximize business opportunities in the good times.

Industry 4.0 Is Coming to the Forefront

Industry 4.0 started with smart manufacturing, but it is much more than that.

As the cost of sensors reduce and ecosystems mature, companies are developing intelligent products and assets that can capture more information and integrate more deeply into horizontal business processes. This has given industry 4.0 the potential to move from a factory-focused initiative to a company-wide business strategy.

We can now create and capture a digital thread of these products and assets throughout their entire life cycle. Intelligent products and assets can now provide real-time insights back into the business processes, from design to operate. This intelligence can empower users through embedded analytics and prescriptive capabilities, significantly increase productivity, reduce cost, and drive entirely new business models and revenue streams.

Intelligent Products Become Personalized, Connected, Intelligent

Customers are increasingly demanding individualized and intelligent products that can capture, share, and even remotely control information with their personal devices.

This all starts in the design phase, where organizations need this level of connection to monitor market trends and innovate to deliver on customers’ unique desires. Increasingly, organizations want to design smarter, industry 4.0-enabled products and assets that have built-in sensors to capture real-time data once they are in use in a live environment.

We also need to digitize the product life cycle from design to decommission to improve and automate innovation, design, production engineering, and assembly processes. Only then can information be shared seamlessly across engineering, manufacturing, and asset operations.

Intelligent products are designed in such a flexible way that last-minute engineering changes can immediately be handed over to manufacturing operations. This allows a significantly higher agility to cater to changing customer requirements between the time of an initial order and the completion of an actual production process. Change impacts are automatically identified and managed, and open production orders or purchase orders for raw materials are automatically adjusted.

Intelligent Assets Can Improve Productivity, Drive New Business Models

By building intelligence into assets we use or manufacture, we can now capture and leverage data across the end-to-end supply chain. By creating this digital twin of a physical asset, you can monitor, analyze, optimize, and maintain it throughout its life cycle, from design to decommission. It allows for achieving the balancing act among profitability, asset health, and availability.

Intelligent assets provide useful information, such as:

  • How they are performing
  • How are they being used and for how long
  • What maintenance strategies make the most sense
  • If they are operating in a sustainable way with regards to emissions
  • If they require maintenance
  • If they have broken down

Highly complex machines designed with tens or even hundreds of thousands of parts in sophisticated engineering bills of materials can have life cycles of decades. Along their life cycle, these assets will be disassembled and assembled multiple times, for example, for transportation purposes and to be installed on-site. Or, parts may get regularly replaced with newer variants. Managing the entire life cycle of a machine is what we call the digital thread.

Having full visibility into this digital thread can enable operators to:

  • Minimize asset on-boarding time and cost
  • Reduce downtime
  • Drive predictive and prescriptive maintenance processes
  • Increase overall equipment efficiency (OEE)
  • Extend the life of expensive equipment
  • Increase customer service levels

Intelligent Factories Are More Flexible, Agile, Responsive

When it comes to manufacturing, sophisticated digital supply chain capabilities and greater connectedness can help organizations increase shop floor visibility, identify process bottlenecks, and manage operations with greater agility. This, in turn, facilitates smart factory capabilities in which rigid production lines are transformed into flexible manufacturing cells, making it possible to shift from mass production to mass customization.

Intelligence is often driven by device connectivity, the vertical integration of sensor or machine data into a horizontal business process. This IT/OT convergence allows to further automate manufacturing operations. Machine-triggered demand signals are responded to by automatic, guided vehicles to supply the right materials directly from the warehouse to each manufacturing station. In-line, visual quality inspections are automated based on artificial intelligence (AI), helping manufacturing companies identify defects early in the production process, at a lower cost, and with reduced human errors to speed up the inspection process.

An intelligent factory is agile, adaptable, and ready to support different production scenarios. It is also elastic and able to deal with varying production volumes and manufacturing technologies. This enables intelligent factories to use manufacturing operations management with both predictive and prescriptive capabilities, along with real-time data, engineering and enterprise resource planning (ERP) feedback loops, and network capabilities for design collaboration.

Empowered People Are More Productive, Make Better Decisions

No matter how far automation goes, manufacturers will always need people. Operators will fill roles that cannot be automated, completing complex tasks and making intuitive decisions. The key is to realize what can be automated and what requires human intervention. The goal is to augment humans with AI and robotics, not replace them.

AI doesn’t take the person out of the process. It takes the robot out of the person. People are and will continue to be your most important resource, and giving them the tools they need to do their jobs safely and effectively will be your most important task. The key is to give them the data to make quick, but informed decisions so they can manage unforeseen events in near-real time. Connected devices guide operators with working instructions in virtual reality or 3D overlays and warn employees when environmental conditions become unsafe to work.

And as the degree of automation increases so does the complexity of the decisions they need to make. If components are not available at the expected level of quality, for instance, the production sequence must be changed without impacting the most critical customer orders. The same is true for an unplanned machine breakdown. Your people will need the information to solve the problem.

Why SAP and Why Now?

As companies look to adapt to changing market conditions and deliver on the increasing need for “batch of one” production, they must increase productivity and resiliency. Automation through intelligent technologies, like the Internet of Things (IoT), AI, and edge computing, can enable a digital mirror of your supply chain, helping to:

  • Allow the highest levels of flexibility to cater to customer demands
  • Optimize and automate production lines for increased throughput
  • Significantly reduce supply chain costs while increasing customer service levels
  • Gain accurate inventory levels in warehouses as well as in transit and production materials
  • Track and trace goods across the entire logistics network
  • Achieve the balancing act among profitability, asset health, and availability
  • Increase safety and the empowerment of employees
  • Provide real-time information and analytics to all users
  • Change the paradigm of how operators work with machine manufacturers

SAP has announced Industry 4.Now, a strategic investment to help customers transform their manufacturing business. Recent investments include more than 100 new innovations SAP plans to deliver in 2020:

Intelligent Products

  • Manufacturing engineering to help effectively manage new product innovations and product design changes
  • Partner integrations to industry leading engineering software

Intelligent Factories

  • Distributed edge computing for SAP Digital Manufacturing Cloud
  • Digital supply-to-line processes for production logistics
  • Intelligent factory innovations, such as factory insights
  • Visual inspection and quality management based on AI

Intelligent Assets

  • Flexible access to hyperscaler agnostic data lakes and data historians
  • Simplified and standardized asset onboarding

Empowered People

  • Data-driven shop floor operations
  • Ad-hoc decision support to respond to unforeseen changes

The SAP Digital Supply Chain portfolio supports industry 4.0, enables the digitalization of engineering, manufacturing, and asset operation processes, connects and automates machines and devices, and brings intelligence via AI and advanced analytics to an entire production process. This can help to continuously improve production performance, lower cost, and increase the agility and resiliency of your supply chain.


Richard Howells is vice president of Thought Leadership and Awareness for SAP Digital Supply Chain.