Industry 4.0 is the business topic of tomorrow.
It will certainly take some time before all the dreams of interconnected production become reality. But the course has already been set, and it is critical to preserving Germany's competitive edge.
Germany is one of the world’s leading industrial nations. The country’s strengths in automobile manufacturing, machine building and electrical engineering, as well as its dual-track education system in a research and university environment linked to industry, are recognized worldwide.
Industrial output makes up almost 25 percent of Germany's gross domestic product. The broad industrial base is particularly responsible for the country's prosperity and level of employment. Germany needs industry, and Germany is an expert in industry. If this pillar of the German economy is about to undergo fundamental change, we must be the drivers of the transformation and not be driven by it. This is especially true of networked production, also known as Industry 4.0.
In the networked production of the future, Germany can assume a dominant position as leading user and provider. The tech industry association Bitkom estimates Germany's economic potential between now and 2025 at close to €80 billion, or $100 billion. Increases in productivity by up to 30 percent are possible where there is great diversity. Networked production also creates additional cost benefits through resource conservation and energy efficiency through improved coordination of processes.
Customized but affordable, the networked factory of the future organizes itself. Machines and work pieces communicate with one another. Because this type of factory is networked with suppliers and customers, it always knows how many parts are being manufactured and when, and which input products and raw materials need to be automatically ordered for production. This creates a previously unknown flexibility – all the way down to small-series or even individual production – and thus enables companies to sell both individualized and affordable products. There is a strong trend toward individuality, especially in mature markets. The goal, therefore, is to produce small numbers of products at the low costs of mass production. Industry 4.0 solutions fulfill these requirements. Even the production of individual units – a batch size of one – can be profitable.
An adaptive assembly line where we produce individual hydraulic valves for mobile applications is already in operation at the Bosch plant in Homburg, a town in the southwestern state of Saarland. The line can already produce roughly 25 product versions without requiring additional setup time. In addition, intensive communication among the machines, material carriers and components makes it possible to introduce new versions into production at any time.
In Industry 4.0, parts inform the machines what is supposed to happen in the next step of a process.
This example shows what profound changes are taking place in industrial production. Mass production, with its economies of scale, is no longer absolutely necessary to make cost-effective products. Growing automation, in connection with Industry 4.0, shifts the balance between high-cost and low-cost production locations, at least in terms of labor costs.
In Industry 4.0, parts inform the machines what is supposed to happen in the next step of a process. In other words, the objects themselves become intelligent. They have barcodes, radio frequency identification (RFID) chips or web-enabled sensors. Through partially or even fully automated information gathering and transmission, a virtual copy of reality is created. The combination of software programs and mechanical and electronic parts communicates worldwide via the Internet. This facilitates constant coordination and optimization, even between sites or across company boundaries.
But the most radical change is occurring in business models, such as new operator models. It is conceivable that production machines will remain the property of the manufacturer in the future. Instead of selling them, the manufacturer offers his customers entities like numbers of units produced or operating hours. And perhaps entirely new market players will insert themselves between the manufacturer and his customers.
In the networked world, new, fast-developing business models are radically altering entire industries, including companies that have been successful until now. These new business models have also reached Silicon Valley, and China and South Korea have announced networked production. It is clear that networking is now seen as a new quality in the global production race.
German machine-building companies already know how to effectively integrate data into industrial processes, but now they have to become specialists in Big Data and high-speed computing. In other words, in Industry 4.0, software developers and mathematicians are creating new competitive advantages with their algorithms.
In all of this, security within production and security against external attacks both play a key role. When it comes to data protection and data security, we should develop a pragmatic division of labor, with lawmakers creating the framework and legal certainty, using the European Union's General Data Protection Regulation as a basis. Companies will handle the technical configuration of this framework. Unless we trust in data protection and data security, Industry 4.0 solutions will not prevail. And another aspect will also be very important: We have to prepare people for Industry 4.0, which requires investment in education and training, especially in the IT competency of employees.
At the same time, software and system developers need significantly more production and product knowledge. It isn’t enough to be able to analyze Big Data. In the networked world, both things will still be necessary: knowledge about software and knowledge about hardware. This is why networked production creates substantial opportunities for industry, especially in Germany.
Volkmar Denner is the chairman of engineering firm Bosch. To contact him: [email protected]