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What is Industry 4.0, and why does it matter?

Jul 26, 2021

There always seems to be a next big thing in manufacturing. It certainly speaks to the importance of the industry and its enviable ability to keep evolving in order to get better, more efficient and more productive. But it can seem hard to keep up with.

Industry 4.0 is what the manufacturing industry is currently moving toward. While most manufacturers have heard of Industry 4.0, their understanding of what it is, how it can benefit them and how to implement it varies.

The MPI Group’s 2020 Industry 4.0 Study shows that, globally, 43% of manufacturers have a significant companywide understanding of Industry 4.0, while 57% have some, limited or no companywide understanding.

How extensive is your understanding of Industry 4.0 and how to apply it to your business? pie chart

Source: The MPI 2020 Industry 4.0 Study

As a firm currently involved in helping several of our manufacturing clients plan for and implement Industry 4.0, we wanted to take the time to break down exactly what Industry 4.0 is and why it matters to manufacturers.

What is Industry 4.0?

Industry 4.0 is a manufacturing-specific term used to describe the linking of physical equipment with virtual systems and the integration of people, processes, technology and data. The result is greater visibility that leads to stronger insights and better decision-making.

For example, Industry 4.0 encompasses using the cloud to let you easily access real-time data and applications that are critical to your performance. It uses the internet of things (IoT) to continuously monitor and analyze your factory floor to identify unplanned events. It uses artificial intelligence (AI) to provide operational insights. And it uses process automation to enable greater efficiency and productivity.

Part of that efficiency comes down to truly linking the physical and virtual worlds. As you start to link them, you create what’s called a digital twin, where what’s happening in the physical world gets mirrored in the digital world. Operators digitally log the interactions and outcomes they see in the physical world.

However, Industry 4.0 removes the need to manually create that digital twin by automatically creating it for you. Machine-monitoring technology automatically logs historical production patterns and creates reports with real-time data. There’s no dual entry of information.

The benefits of Industry 4.0

Industry 4.0’s benefits cover four main areas: 1) improving top-line revenue, 2) improving bottom-line revenue, 3) mitigating risks and 4) innovating.

What does this look like in action? Let’s look at some examples.

First, a manufacturer whose products are in high demand but is having trouble producing more volume is going to be interested in gaining visibility into where it’s losing capacity. The visibility provided by the connected machinery and process-evaluation of Industry 4.0 enables it to find solutions to the lost capacity and thereby increase productivity.

Another manufacturer is concerned with improving efficiency. It has problems with unplanned downtime and wants to make sure its equipment stays up as long as possible. Industry 4.0’s machine-monitoring technology forewarns it when machines may go down, as well as why they’ve gone down in the past. The process of implementing Industry 4.0 can also reveal other efficiency gains, such as improving manufacturing cycle times and reducing scrap.

There are plenty more examples. A manufacturer that wants to win profitable jobs can use Industry 4.0 to increase product complexity, gain visibility into past job performance and improve their estimating and quoting process. A manufacturer that wants to maintain gross margins can use Industry 4.0 to reduce operational variances, improve job profitability and decrease cost of goods sold. And a manufacturer that wants to operate a cost-effective plant can use Industry 4.0 to gain visibility into real-time plant performance, capture data on completed jobs and use that data to make improved decisions.

You also can’t understate the importance of investing wisely. Many manufacturers invest far, far more in new equipment than the investment that’s required to dive into how their current equipment is performing and where they can gain efficiency by adjusting their people, processes and technology.

The biggest Industry 4.0 misconception

Perhaps the biggest Industry 4.0 misconception is that it’s only for bigger manufacturers.

We see this a lot with technologies like blockchain, AI and big data. The bigger manufactures are often the first adopters because they have greater resources. When the technology has proven itself and can be implemented on a smaller scale, then the medium-sized and smaller manufacturers go for it.

But Industry 4.0 isn’t unproven. At its core, it leverages connected technologies and integrates them with your people, processes and data. And that can be done in a number of ways, depending on your needs, and along any type of timeline.

You can start off slow and ramp up over time, tackling a challenge like unplanned downtime first before moving on in the next step of your Industry 4.0 roadmap. Eventually, you’ll have linked all your technologies, from your ERP to your machine-monitoring tools to your time clock system. You’ll be using AI to gain data analytics and new, fast insights that improve efficiency. And you’ll be using automation to save time and money, as well as give yourself peace of mind during the continued shortage of skilled manufacturing workers.

Many manufacturers have already implemented pieces of Industry 4.0 without realizing it. You might be using some IoT tech or have automated some processes. But a lot of the time, these things are siloed from each other. Industry 4.0 helps connect them together and identify further needs and opportunities.

At Wipfli, we’re experienced in helping manufacturers get started with Industry 4.0, including taking that biggest step: developing a comprehensive roadmap that lays out your needs, the solutions and the steps to take to implement your Industry 4.0 journey. If you’d like to learn more about Wipfli’s Industry 4.0 process, click here.

Or continue reading on:

These 3 shifts in manufacturing are driving Industry 4.0

What manufacturers need to know before upgrading technology

Manufacturing resilience in the face of crisis

The Gemba Walk: a tried and true strategy for improving employee retention


Jake R. Rohrer
Senior Consultant
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Anirudh Nadkarni
Solutions Manager, BI and Analytics
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Joe Girard
Sr. Business Developer
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