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What is Industry 4.0 & What Could It Mean for ERP?

By December 20, 2017Blog, ERP, Manufacturing

Industry 4.0 is an evolution of a German concept proposed in the early 2010s. It is based on the notions of interoperability of equipment, transparency of information, improved assistance from machines, and the decentralization of decision-making enabled by cyber-physical systems (CPS). Industry 4.0 is developing into what has been called the fourth Industrial Revolution, and is poised to disrupt manufacturing by capitalizing on technologies such as the Internet of Things (IoT) and the emergence of the smart factory.

Though there is some debate whether we have already entered the next phase of manufacturing, there is no arguing that wireless connections and the ubiquity of the Internet have fundamentally altered the potential for virtually every business. Manufacturers must adapt to changing technology to remain relevant, and ERP solutions for manufacturing must be scalable enough to encompass the expanded functionality of smart networks.

Increased Connectivity for the Whole Production Line

A fundamental requirement for the Industry 4.0 smart factory is enhanced interconnectivity made possible by digital technology. Both internal and external methods of interaction benefit from the increased access to Web-based communication through the Industrial Internet of Things (IIOT). Employees, customers, and even equipment will intermingle much more seamlessly, and a report by Business Insider indicates that many manufacturers already plan to incorporate over 900 million IoT devices by 2020.

On the back-end, people and machines stay connected to the central hub through the Internet. Individual silos can be managed faster and more easily with cloud-based interfaces that can be accessed remotely if needed. Mobile technology allows real-time communication and interaction with both people and databases, as well as monitor functions such as produce lifecycle management. It can also manage smart manufacturing equipment that can be operated wirelessly through Wi-Fi or radio frequencies.

Enterprise-level software must act as the primary vehicle for digital communications internally to better facilitate these interactions. Industry 4.0 entails an increased digitization of data and automation of processes, so manufacturing ERP has to be able to receive and relay information quickly, as well be built for scalability to accommodate the consistent growth of this data.

Customization on A Mass Scale

Another defining characteristic of the new industrial age is the slow exodus from uniform mass production to the ability to personalize each product, yet still in large quantities. The increased communication between manufacturers and consumers allows for real-time customer feedback on items up to the point of mid-production. This mass individualization is forcing a major dynamic shift in manufacturing business operations, and can potentially remove the need for middle men between factories and individual customers.

Several smaller OEMs have already been able to carve out a niche in their markets by relying on product individualization to sell directly to consumers. Startups have begun outpacing traditional leaders in their industries with the help of social networking and increasingly personalized on-demand orders.

Software for manufacturing without adequate customer relationship management (CRM) solutions will be hard-pressed to handle this growing demand. The market is evolving into a progressively consumer-driven model that requires greater attention to personal detail. CRM systems will be integral to sustaining consistent client satisfaction and growth.

Decentralization of the Workspace

Industry 4.0 also allows for a move away from centralized organizations. Cyber-physical communication predicates more remote delegation with less of the historical pitfalls. Each business unit can function as an individual cell rather than as a dependent extension. The addition of autonomous machines also enables minor decisions to be made faster and easier.

The emergence of cloud computing has already prompted a migration for some industries to a more wireless model. The ability to compile and manage data without relying on physical storage can save both space and money, in addition to time when dealing with remote locations.

ERP solutions that provide options for offsite storage and functionality might become a starting point for manufacturers to consider in the future. Allowing for alternatives between on-premise and cloud networking could offer increased flexibility for operational decision-making.

Boost in Efficiency

Industry 4.0 is becoming a reality not because of the novelty that comes with using all the toys involved, but because of the very real benefits manufacturers have already seen from their application. Emerging technologies have enabled manufacturers to cut costs and expedite production times.

Advanced production breakthroughs – such as 3D printing – allow manufacturers to scale back on the length of key processes and the amount of materials required for each product. More intricate and time-consuming components are also easier to craft with modern techniques.

The enhanced communication between manufacturers and customers goes beyond individualization of products. Faster delivery times, instant assistance, and real-time feedback are all lending to quality control functions for many manufacturers.

This growth will necessitate an infrastructure expansion to meet the resulting escalation in operations. ERP solutions for the new industrial age will need to be scalable, customizable, and intuitive enough to avoid overwhelming users with incomprehensible data.

Industry 5.0 – What else is to come?

Even as we progress into Industry 4.0, we will begin laying the foundation for the next big leap. The subsequent phase will not be defined by machine to machine interaction, but by a significant improvement in human interaction. Industry 5.0 will not necessarily replace the smart systems that are appearing in 4.0, yet will see a greater emphasis on those solutions being designed to intuitively interact with people better.

This stage is not entirely theoretical, as some production lines that have introduced human elements to automated processes have seen significant increases in productivity. The underlying principle is that the automation of machines can be combined with the cognitive abilities of humans to produce the perfectly streamlined manufacturing system.

What this means for ERP will likely develop over time, but initially it will entail greater enhancements of innovations made in Industry 4.0. Wireless interconnectivity, mass customization and decentralized decision-making will become more standard by this point, and adaptations will have already been gradually introduced into enterprise-level software. These improvements will have to be pushed further to accommodate the greater personalization of machine systems and a near-ubiquitous digitization of data.

It Is Already Happening

American manufacturers have historically been slower in adopting Industry 4.0 solutions, yet the research shows that components of this model are being increasingly adopted all over the world. It also shows that market trends are very likely to continue in their current directions, so that any manufacturer not participating may find themselves trailing behind their competitors. If you want to learn more about how to join the next industrial stage, but do not want to commit to a full migration just yet, consider looking into a scalable cloud ERP solution that fits your current business.

Want to know more?

SWK Technologies, Inc.