Industry 4.0: Everything talks

Industry 4.0. Even the words conjure images of networking. Of a revolution. Of the connection between production facilities and the Internet. It describes a far-reaching structural change, both for the economy and our working conditions. The term Industry 4.0 represents a fourth industrial revolution for Germany, one of a networked future; a future whose arrival has been largely overlooked by the wider population.


At their facility in Neckarsulm, Audi tests the cooperation between humans and robots. Instead of the customary fencing-off of the machines, symbols projected onto the ground and the robot’s own sensors provide the necessary safety. (Picture:DEKRA)

This fourth revolution is commonly understood to have been preceded by three previous revolutions. The first mechanical revolution introduced the steam engine and the weaving loom, the second brought electricity and the conveyor belt, and the third is associated with automation and the computer. The upcoming fourth revolution involves fully networked industrial processes, 3D printers, and the Internet of Things. According to historians, before these industrial revolutions, which began in the 18th and 19th centuries, there was only one new era with similarly cataclysmic eff ects. This was the start of the Neolithic age when hunter-gatherers settled down to become arable and livestock farmers and the foundations of the division of labor were laid. What can we expect to happen now?

Industry 4.0, the digitization of the economy, will totally transform our working and living conditions. In future everything will be networked with everything else. The term smart factories is widely used. In this type of production facility, components communicate with the robot that is processing them. Machines and parts manage themselves. A blank fitted with a chip “knows” what it will be turned into and gives the necessary instructions. The finished product can ask the accounting system to send an invoice to the customer and organize its own transport to the customer’s site. It retains its identity in the form of digital information and can behave intelligently in the event of a fault, for example.

The world’s first Industry 4.0 production plant involving several manufacturers and known as SmartFactoryKL has been set up in Kaiserslautern by the German Research Center for Artificial Intelligence (DFKI). This demonstration and research platform for innovative factory technologies shows what digitally networked production processes can look like in practice and includes a miniature digital production line. The focus is on individual manufacturing with a large number of variants and small batch sizes, as well as on increasing the flexibility of machines and processes. The DFKI is currently the world’s largest research center in the fi eld of artificial intelligence and its applications. The projects cover the entire spectrum of manufacturing technology from applied research through to the market- and customer-focused development of product functions. More than 450 scientists and around 350 students from 60 countries are currently working on 180 research projects. In October, Google acquired a share in the DFKI and became its latest industry partner. This is the first investment of its kind that the US company has made in Europe.

The German machinery manufacturer Festo also has a smart factory model. The machine tool “knows” where it is being used and when it needs maintenance. It triggers the maintenance process itself to avoid costly production downtime. The use of algorithms allows robots to develop, learn, and improve. Omnipresent sensors prevent them from getting in each other’s way or interfering with what people are doing. Independent processes of this kind have been in use for years, but the completely new level involves the links between them and the opportunity to process and store unimaginable volumes of data using the Internet.

Customization gets cheaper The benefits of networking are obvious. Entire factories can be created in advance as virtual 3D models and workfl ows can be tested. Self-improving machines save time and resources and prevent faults from occurring. Products can be developed more quickly if all the processes are digitally coordinated. It will be possible to manufacture customized products for the same price as massproduced goods. And customers will be able to intervene in the production process right up to the point when their order is completed and specify new requirements. Although we can already configure our new car on the manufacturer’s website or put together a personalized muesli mix, this represents only a very modest beginning. The amount of hard physical work carried out by employees is falling. However, that is not true of sick leave, because the pressure on workers is increasing. A report produced by the EU Occupational Safety and Health Administration (OSHA) shows that a quarter of employees in Europe feel that they are always or mostly exposed to work-related stress during working hours. In the case of managers, the figure is almost 80 percent.

“Significant changes that are taking place in the world of work … can lead to serious deterioration of mental and physical health,” says the agency in the European Survey of Enterprises on New and Emerging Risks (Esener 2014). According to experts, the ongoing increase in digitization is contributing to this. First of all, it has made it possible for employees to be contacted almost 24 hours a day. In addition, people are now having to compete with machines. Wilhelm Bauer, head of the Fraunhofer Institute for Industrial Engineering (IAO) in Stuttgart, refers to the boundaries of work being blurred in terms of time, space, and structure. This means that it can be an advantage to be able to organize your work yourself at home. One thing is clear for Bauer: “In future there will be many diff erent work models that require new regulations and a new legal framework.”

The reorganized production processes will increase productivity and competitiveness. A total of 51 percent of industrial firms that use Industry 4.0 applications or plan to do so expect an increase in sales. A study carried out on behalf of Bitkom, the association of the German information and telecommunications industry, showed that one in every eleven of these companies believes that its sales will increase by more than ten percent. The survey covered 400 companies with 100 or more employees from the automotive, mechanical engineering, chemical, and electrical industries. The hope is that digitization will keep the value creation process in high-wage countries like Germany and perhaps even bring it back there from elsewhere. That will be good for companies. But will their employees be pushed out by machines?

The answers given by experts to this question vary widely. Some believe that large numbers of jobs will disappear, while others think that they will move to other areas. Only few are of the opinion that additional jobs will be created. A British study comes to the conclusion that in the USA 50 percent of people currently work in a job that could be automated in the next 20 years. Highly skilled positions for engineers and IT specialists will be created. Lower skilled workers, such as waiters or janitors, will also be needed for the service sector. In between these two areas the work will be carried out by robots.

Economists Carl Benedikt Frey and Michael A. Osborne from Oxford University have used a complex algorithm to determine that almost every second worker in the USA has a job that could be automated in the next 10 to 20 years. This not only affects low-skilled employees, but also some tasks performed by lawyers and doctors, such as diagnoses. The decreasing importance of people in the digital world of work is under critical assessment in the USA in particular. Scientists from prestigious research institutions such as the Massachusetts Institute of Technology (MIT) are coming to the conclusion that the same technologies that make work simpler, safer, and more productive are also resulting in a whole range of human workers no longer being needed. In order to compensate for this, a guaranteed basic income is being proposed, among other things.

The mechanical and electrical engineering industries in Germany believe that thousands of new jobs could be created as a result of digitization. Professor Detlef Zühlke, who has been working on smart factories in Kaiserslautern for more than ten years, also thinks that new jobs will emerge in Germany. “But there won’t be a lot of them,” he says. However, any company that intends to sell its products on the world market cannot aff ord to ignore digitization. Customers want products that can be networked sooner rather than later. The external pressure is increasing and competitors in the USA, Korea, China, and Japan are already making progress. This is why German companies need to get moving quickly. There has been an increasing focus on this issue in recent months and it has been given priority by the German Ministries of Economic Affairs, Labor, and Education and Research.

According to a study carried out by Roland Berger on behalf of the Federation of German Industries (BDI): “The digital transformation of industry is creating tremendous opportunities for Europe – and confronting it with huge challenges. The possibilities opened up by connected, more efficient production and new business models are highly promising, yet the risks are equally dramatic. By 2025, Europe could see its manufacturing industry add gross value worth 1.25 trillion euros – or suffer the loss of 605 billion euros in foregone value added.” Another study for Bitkom by the Fraunhofer Institute for Industrial Engineering (IAO) states: “In six industries alone – mechanical engineering and plant construction, electrical engineering, car manufacturing, chemicals, agriculture, and information and communication technology – Industry 4.0 technologies are expected to lead to an increased value creation potential of 78 billion euros (1.7 percent annual growth) by 2025.”

It is not only German Chancellor Angela Merkel who is concerned that Germany and Europe could be missing the bandwagon. At a conference in Paris in October she said that production processes must be digitized, “otherwise we will be left behind and we will not be part of this new future.” Minister for Economic Aff airs Sigmar Gabriel is aware of the importance of mediumsized companies in this respect: “The digital transformation in Germany will only succeed if we can introduce Industry 4.0 into the medium-sized companies that form the foundation of the German economy,” he said at the fi rst Industry 4.0 day for medium-sized enterprises in Kaiserslautern.

There is still plenty of room for improvement. The market research organization IDC has discovered that companies are still underestimating the urgency of digitizing. A study published in mid October shows that IT managers from more than 200 companies recognize the challenge they are facing, but the production departments have failed to understand the extent of the changes brought about by technological developments. The survey indicated that machinery and plant manufacturers were keen to digitize their processes, but that manufacturing companies must be roused from their lethargy if they want to remain successful in the long term.

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