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Upgrading Smart Manufacturing with Industry 4.0

  • Richard E. Crandall
September/October 2017

The face of manufacturing has evolved over the course of centuries from the days of handmade goods to the adoption of water- and steam-powered machines, the invention of mass production, the introduction of electronic automation, and now beyond. Companies that have not kept up with these industry transitions throughout the years often have been forced to close their doors. The ones that evolve survive and thrive.

Today, the benchmark for companies to keep up with is Industry 4.0. This is a state in which manufacturing systems and the objects they create go beyond simply being connected to also communicating, analyzing and using collected information to drive further intelligence action and execute a physical-to-digital-to-physical transition. It represents an integration of the internet of things (IOT) and relevant physical technologies, including analytics, additive manufacturing, robotics, artificial intelligence and cognitive technologies, advanced materials, and augmented reality (Sniderman, Mahto and Cotteleer 2016).

A survey by The MPI Group (2017) found that manufacturing companies have significantly increased their understanding of Industry 4.0, IOT and related programs in the past year. For example, 29 percent of respondents indicated a significant company-wide understanding of IOT, up from 5 percent in 2016. Similarly, only 8 percent of respondents said their companies didn’t have any understanding of IOT, which was down from 24 percent.

The path to 4.0

As the prevalence of IOT increases, experts advise that the adoption of Industry 4.0 is necessary for business survival. However, moving an organization toward smart manufacturing is a multi-faceted project, regardless of company size. In a large business with multiple facilities, the process could take months or even years to complete.

Here are 10 steps to get started with this task.

  1. Make the decision to go ahead. Key stakeholders must agree that the project to implement smart manufacturing is important — even essential — to the company’s future. Otherwise, the initiative will not have proper support.
  2. Select the team members. The project team should include a cross-section of the company, with representatives from manufacturing, accounting, engineering, human resources and marketing. All parts of the business have a role to play.
  3. Perform a cost-benefit analysis. This step is as much about identifying future expectations as it is quantifying known costs and benefits. Some costs will be difficult to estimate, and some of the benefits will be even less tangible. As a result, this type of analysis will require frequent revision and updating.
  4. Select an outside expert to guide the project. If there is insufficient knowledge or experience within the company, it is important to find outside help to guide the project team. Because it will be a long-term commitment, the selection of the right adviser is an important step.
  5. Design the project phases. All projects of any magnitude can be planned in phases so that each step can be evaluated and, if necessary, adjustments can be made.
  6. Select the technology. This is the critical step in project planning and the one that is the most challenging because of the newness of the technology and the paucity of successful implementations. Selecting the hardware, software and systems design for a smart manufacturing installation will fully test the knowledge and determination of the project team.
  7. Modify the infrastructure. Major changes may be required to upgrade to  Industry 4.0. At the macro level, the supply chain design may require modifications, the organizational structure may have to be realigned, and strategic objectives may need rethinking. At the micro level, policies, procedures and job descriptions will need review and refinement.
  8. Cultivate the internal culture. The project will not be successful until employees understand and accept the new environment in which they will work. Management must carefully explain the objectives of the program and the effects on people in order to gain their confidence.
  9. Establish relationships with external participants. It is important to explain to key customers and suppliers how the smart-manufacturing program will benefit them and to prepare them for any changes that will affect them.
  10. Begin the implementation. At some point, the changes begin. Those responsible for managing the project should monitor the progress and adjust as necessary.

Why upgrade?

A survey of manufacturers that have already completed this process found that the adoption of Industry 4.0 can help improve product quality; increase speed of operations; decrease manufacturing costs; and improve maintenance and uptime, agility and responsiveness, the quality of information used for product decisions, and safety (The MPI Group 2017). In addition to these short-term benefits, MESA International notes that Industry 4.0 users will gain longer-term benefits, such as increased revenues, more innovation and improved customer experiences (Almada-Lobo 2017). The increased abilities provided by Industry 4.0 — including better product quality, lower overall costs, the potential for higher product mix and improved customer experience — enable participating companies to become suppliers of choice. In addition, these abilities create opportunities for companies to grow their customer bases into larger markets, build customized and high-margin products, and offer intelligent services to accompany those products. The extreme visibility provided by Industry 4.0 gives companies better feedback about their research and development investments. By extension, this deeper insight into data and production can help companies provide better Customer Relations and even offer customers the opportunity to monitor project progress in real time.

To achieve these benefits, companies must be pioneers, as there are not many success cases to use as guides. At this point, very few companies have fully implemented smart manufacturing, although General Electric (GE) and Siemens have made strides in this area. GE invested more than $100 million in technology company Pivotal to help create GE’s industrial internet and data lake (The Connected Planet n.d.). Through this technology, a turbine on a plane in the air can transmit data to GE and the airline operating the plane, for example. The data lake offers 2,000 times faster data analysis than previous systems and is 10 times cheaper to operate, The Connected Planet reports.

GE also offers Predix, a distributed application and services platform for developing, managing and monetizing industrial internet applications. The system is set up to facilitate machine-to-machine communications, analyze large industrial data sets, and manage industrial asset performance. According to GE, the platform can improve visibility of asset health and performance; uptime, through optimized and predictive maintenance; operator intelligence and control; and data-driven insights that can help optimize manufacturing, scheduling and logistics.

Pitney Bowes chose to implement GE’s Predix platform to help the digital commerce, business intelligence, mailing and shipping company meet its goals of focusing on predictive maintenance instead of break-fix service contracts, optimizing customer operations of machines, and gaining the ability to accommodate top-priority jobs and meet critical service-level agreements through adaptive and dynamic real-time capacity scheduling. Although there is still much to be done to implement and utilize the platform to its full potential, the companies report that they are well on their way to operationalizing Pitney Bowes’s IOT vision.

Siemens offers Mindsphere, which the company describes as a cloud-based IOT operating system. The platform connects machines and physical infrastructure with the digital world and even third-party apps to gather and analyze data. Siemens says Mindspehere’s insights can help reduce downtime, increase output and utilize assets more effectively.

Other challenges to upgrading to Industry 4.0 include difficulties in identifying opportunities and benefits; adapting existing technologies to Industry 4.0; incorporating smart devices to provide desired intelligence; providing network capabilities; assuring network, device and data security; and, ultimately, changing company procedures. These obstacles are only short-term ones that will be overcome as businesses learn more about smart manufacturing, Industry 4.0 and automation in general. However, the potential short-term and long-term payoffs open companies to a world of possibilities that will keep them competitive as industry evolves.

Want more? Read this sidebar article about the evolution from Industry 1.0 to Industry 4.0.


  1. Almada-Lobo, Francisco. 2017. “The Business Value of Industry 4.0.” Where Manufacturing Meets IT, May 24.
  2. Sniderman, Brenna, Monika Mahto and Mark Cotteleer. 2016. “Industry 4.0 and Manufacturing Ecosystems.” Deloitte University Press, February 22.
  3. The Connected Planet. n.d. “General Electrics Industry 4.0 Vision.” The Connected Planet. au_=inVqpDW2rq2DH4H8.
  4. The MPI Group. 2017. “What a Difference a Year Makes: Manufacturers from around the World Are Now Profiting from the Internet of Things (Are You?)” The MPI Group, May.

For a list of more than 80 annotated references about this topic, contact the author at

Richard E. Crandall, PhD, CFPIM, CIRM, CSCP, is a professor emeritus at Appalachian State University in Boone, North Carolina. He is the lead author of “Principles of Supply Chain Management.” Crandall may be contacted at

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