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Updated Mar 28, 2024

Industry 4.0: How Technology Is Revolutionizing the Manufacturing Industry

Industry 4.0 might sound like a SimCity-style tycoon game, but it's really the biggest shift to hit global manufacturing since automation.

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Written By: Adam UzialkoBusiness Strategy Insider and Senior Editor
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Centered on advanced robotics and automation, new modes of human-machine interaction, and vast troves of data and increased connectivity, Industry 4.0 is modernizing manufacturing and boosting western industrial competitiveness. Coupled with the Internet of Things (IoT), Industry 4.0 offers manufacturers the ability to collect, analyze, and act on immense stockpiles of data like never before, and then set those actions in motion with highly efficient, automated robotics. The result for business owners? A higher-quality product at a lower operating expense. [Related article: 8 Ways the Internet of Things Will Change the Way We Work]

What is Industry 4.0?

Industry 4.0, also called Manufacturing 4.0, is the marriage of IT and manufacturing operations – the maturation of digital technology in the manufacturing industry. Mark Holleran, former CEO of Xplore Technologies, told us that it represents a “holistic shift from centralized to decentralized manufacturing,” which requires the adaptation of processes, talent, business structure and technology.

“Technology, including advanced robotics and artificial intelligence, sophisticated sensors, cloud computing, IoT, data capture and analytics, and digital fabrication … are all coalescing into the ushering in of this next industrial revolution,” Holleran said.

Here’s a look at some of the major components paving the way for manufacturing 4.0 and how they work. Together, they create a high-tech ecosystem of smart devices in the workplace that optimize business processes and achieve efficiency.

Internet of Things

As the number of smart devices and amount of data captured, analyzed, and stored grow, connectivity and communication will become more important. Both within an enterprise and with third-party partners, companies need their data to be shareable and compatible to enable a higher level of operations.

Declan Keir-Saks, senior sales manager at Square, said that IoT is the bridge that allows the granular insights provided by high-tech solutions to join together to form a coherent, enterprise-level picture for modern manufacturers.

“IoT manufacturing enables virtual tracking of capital assets, processes, resources and products,” Keir-Saks said. “This gives enterprises full visibility, which streamlines business processes and optimizes supply and demand.”

When implemented correctly, decision-makers will be equipped with more and better information, workplace automation and the ability to intervene on a predictive or preventive basis to avoid downtime or any other issues that might ding production output.

Artificial intelligence and machine learning

The information delivered by sensors and IoT-driven systems is too vast for humans to reasonably analyze. Fortunately, artificial intelligence and machine learning algorithms can contextualize the data and flag anomalies or make recommendations. [Related article: What’s the Difference Between Machine Learning and Automation?]

“[AI and machine learning] can help detect early warning signals of assets [becoming] unhealthy,” said Derick Jose, co-founder of Flutura Decision Sciences & Analytics. “For example, top-drive RPM temperature anomalies could be [the] signature of an impending breakdown.”

Did You Know?Did you know
Machine learning, a subset of artificial intelligence, has applications well beyond manufacturing. For example, machine learning can power insurance underwriting.

Moreover, AI serves efficiency in the overall operation, Jose said. By quickly returning predictions on the impact of minor changes, business owners can understand the effects before they implement something new.

AI is specifically beneficial for digesting the massive flows of information captured by sensors and IoT-enabled devices. Those extensive troves of data would be nearly impossible for a human operator to contextualize, so allowing computers to do it actually makes that captured data valuable.   

Mixed reality

Mixed reality is another significant component of Industry 4.0. Big companies are already issuing mixed-reality devices like helmets and glasses to employees in hopes that the increased communication and visualization of contextualized data will boost productivity and intelligent decision-making.

“Mixed reality is a real game-changer in manufacturing,” said Tim Lynch, owner of computer hardware manufacturer Psychsoftpc. “For repair personnel, it allows them to ‘see inside’ the machine that needs repair or ‘see through walls’ to the cables and pipes behind to know exactly where to drill or cut.”

Couple those capabilities with the predictive maintenance enabled by IoT and AI, and you’ve got a recipe for high-tech success. If the data suggests a machine is overheating, for example, and the machine-learning algorithms flag it as anomalous enough to warrant dispatching maintenance, workers can employ mixed reality to determine whether a machine is beginning to overheat and precisely which components are affected.

To take it a step further, imagine the maintenance person diagnosing the affected machine recognizes a problem but doesn’t have the expertise to fix it. Mixed reality devices can connect a third party with the proper expertise to the person onsite so that they can learn step by step, through digital overlays, how to perform the repairs.

Mixed reality creates an environment where team members can experience virtual situations relevant to their job for employee training purposes without risking actual equipment or manufacturing uptime.

“In training, workers can practice on virtual products to gain experience that will carry over to the real world,” Lynch said. “They can be put in simulated situations that they could face in doing their job and learn how to handle them virtually before being exposed to them at work.”

Key TakeawayKey takeaway
Mixed reality is a useful industrial and business technology because it combines the fully digital spaces of virtual reality with the hybrid digital-real environments of augmented reality.

3D printing

3D printers for businesses have existed since 1983, though often only in large companies. Back then, the practice was known as “rapid prototyping,” and businesses certainly continue to do that today. But it’s not just prototyping anymore: 3D printers are also employed in low-volume manufacturing, sometimes to test products or bring samples to trade shows.

“When small companies develop new products and need to make 50 parts to test, or just to bring to a trade show, tooling up for traditional manufacturing can be very expensive,” said Doug Collins, global 3DP business development director at Avid Product Development. “They might not have the capital to tackle [traditional manufacturing]. 3D printers allow low-volume production without as much investment so they can save that capital for the other important stuff, like marketing.”

As this technology continues to improve, it’s more common to find 3D-printed parts within larger projects. One example is GE Aviation’s 3D-printed fuel nozzle, which is part of the CFM LEAP airplane engine. Manufacturers can save time and money by printing certain components to create the same final product. These are just a few of the various business applications for 3D printing

What are the advantages of Industry 4.0?

With such immense promise and cutting-edge technology, Industry 4.0 requires a significant upfront investment. For larger businesses, the cost would inevitably be higher. But the expected payoff – connected, smart devices and an automated production process – promises a major return on investment.

“These software systems do more than trade data,” said Srivats Ramaswami, head of application engineering at Google. “They eliminate much of the human intervention that goes with managing them. This next generation of automation – utilizing big data, analytics and artificial intelligence – is one of the most important drivers behind digital manufacturing and Industry 4.0.” [Check out these eight big data solutions for small businesses.]

Manufacturers stand to reap many advantages from implementing these technologies.

  • Increased competitiveness: Outsourcing to low-wage regions of the world was previously an imperative for manufacturers wanting to remain competitive. However, investments in technology are now enabling wealthier countries to compete once again. As a result, Ramaswami said, manufacturers can now choose locations based on “technical capabilities and proximity to consumer demand, rather than decisions driven primarily by wages.”
  • Increased productivity: Automation, analytics and machine-learning algorithms have taken much of the step-by-step work out of the hands of human operators. That means quicker, more efficient production around the clock, with human operators primarily monitoring and maintaining systems.
  • Increased revenue and profitability: Industry 4.0 not only creates a more efficient and higher quality production process, but it also enables things like predictive and preventive maintenance and upgrades, which results in lower downtime and less capital expenditure over time.
  • Optimized manufacturing process: With more connectivity, shared data and better analytics, closer collaboration along the entire supply chain becomes possible, which could lead to increased efficiency, optimization and innovation across the manufacturing industry in the long run. “Machine-to-machine communications and integrated systems will drive greater collaboration among producers, suppliers, and other stakeholders along the value chain,” Ramaswami said. [Learn more about supply chain management for small businesses.]
  • Seamless recordkeeping and traceability: The immense capture and analysis of data also mean better record archiving and search capabilities. This has ramifications from government regulatory compliance to customer satisfaction. “Unlike traditional relationships, where feedback on products and services takes time to gather, the automated closed-feedback loop is an inherent component of Industry 4.0,” Ramaswami said. “The seamless recordkeeping enabled by digital systems will speed traceability while limiting liabilities, warranty costs and recalls.”
Key TakeawayKey takeaway
Though technologies associated with Industry 4.0 typically come with a steep price, the benefits across multiple facets of a business can make the expense well worth it.

How did Industry 4.0 affect businesses during the COVID-19 pandemic?

We’ve all heard many stories of struggling businesses during the COVID-19 pandemic. The unprecedented global crisis posed the question: Would the digital technologies grounding Industry 4.0 help stabilize businesses amid the unexpected upheaval of COVID-19? Or would they sink the ship? Well, it turns out the pandemic has been a boon for Industry 4.0.

In its 2020 Industry 4.0 survey, management consulting firm McKinsey & Co. found that companies with digital technologies better withstood the pandemic’s effects on business. Among the more than 400 companies surveyed, 94% said Industry 4.0 helped them stay operational amid the pandemic. Moreover, 56% of respondents described Industry 4.0 as critical to how they addressed the pandemic.

The survey further revealed that 81% of respondents who hadn’t implemented Industry 4.0 in their business were unable to adequately respond to the pandemic. Conversely, 96% of companies with Industry 4.0 use cases scaled across locations handled the pandemic just fine. And when asked whether they found Industry 4.0 more or less valuable after the pandemic, 65% of respondents said they found it more valuable.

Another survey finding helps make sense of favorable pandemic-era views toward Industry 4.0. When asked which technologies they prioritized with their Industry 4.0 use cases, 51% of respondents said remote work tools, video conferencing, cloud-based collaboration and more. That tracks: The pandemic is well known to have brought about a massive shift toward remote work. Whereas 6% of people worked from home in 2019, about 71% did in late 2020, according to NCCI and Pew Research Center data.

If any of your employees work from home, make sure your team's communication technology is as seamless (and cost-effective) as possible. Consider one of the best free tools for remote work or even choose a new video conferencing service to keep the whole team connected

Notably, respondents who correlated Industry 4.0 and remote work noted that frontline workers were still reporting in person. Manufacturing companies rely on such workers in the production process, even with advances in automation. 

Why is Industry 4.0 important for the future?

Although some employees still need to go to a physical workplace to conduct a business’s operations, it’s clear that Industry 4.0 and advanced digital technologies are already becoming the norm for manufacturing worldwide and providing advantages that run the gamut from increased productivity to improved recordkeeping. Those companies that adopt manufacturing 4.0 tools early on have a better chance to position themselves favorably in the future so they stand out from the competition and reap the rewards of optimization.

Max Freedman contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

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Written By: Adam UzialkoBusiness Strategy Insider and Senior Editor
Adam Uzialko, senior editor of Business News Daily, is not just a professional writer and editor — he’s also an entrepreneur who knows firsthand what it’s like building a business from scratch. His experience as co-founder and managing editor of a digital marketing company imbues his work at Business News Daily with a perspective grounded in the realities of running a small business. Since 2015, Adam has reviewed hundreds of small business products and services, including contact center solutions, email marketing software and text message marketing software. Adam uses the products, interviews users and talks directly to the companies that make the products and services he covers. He specializes in digital marketing topics, with a focus on content marketing, editorial strategy and managing a team.
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