Basic Knowledge IoT basics: What does Industry 4.0 mean?

From Lisa Waschbusch

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Industry 4.0 — a term that has fallen more often in recent years than most other. At leading trade fairs such as the Hannover Messe, the topic has been playing a central role for a long time. But what does industry 4.0 actually mean? We explain the concept.

Industry 4.0 is characterized by a rapid fusion of technologies that is successively dissolving the dividing line between the physical and virtual worlds.
Industry 4.0 is characterized by a rapid fusion of technologies that is successively dissolving the dividing line between the physical and virtual worlds.
(Source: Public Domain / Unsplash)

One of the pioneers of Industry 4.0, the Platform Industry 4.0, defines the term as “the intelligent networking of machines and processes in industry with the aid of information and communication technology”. Industry 4.0 therefore means the fusion of digitalization with traditional industrial processes. This results in intelligent value chains and product lifecycles that start with development, go through manufacturing, assembly, product delivery and maintenance, and end with recycling.

The first industrial revolution, which lasted from around 1760 to 1840, was triggered by the construction of railways and the invention of the steam engine. It ushered in the era of mechanical production.

The second industrial revolution began in the late 19th century and continued into the early 20th century. Their main drivers were the introduction of electricity and the assembly line in the automotive industry by Henry Ford in 1913. As a result, production became much faster, as each employee concentrated on only one work unit.

The third industrial revolution began in the 1960s and was significantly influenced by the development of semiconductors, mainframe computers (1960s), personal computers (1970s and 1980s) and the Internet (1990s).

The Fourth Industrial Revolution, also known as Industry 4.0, is the era of digitalization. The term itself was coined at Hannover Messe 2011 and was included as an important component into the German government's high-tech strategy. Two years later, the Industry 4.0 Platform set up by the Bitkom digital association, the German Electrical and Electronic Manufacturers' Association (ZVEI) and the German Engineering Federation (VDMA) took up its work. The Industry 4.0 Platform is the central network for national and international activities concerning digital transformation in Germany.

The fourth industrial revolution was significantly shaped by physical and digital trends. Klaus Schwab names four material manifestations of the fourth industrial revolution, which are concrete and thus tangible:

  • Autonomous motor vehicles (not only cars, but also trucks, drones, aircraft or ships)
  • 3D printing (suitable for medical implants and even wind turbines)
  • Advanced robotics (widely used from agriculture to healthcare)
  • New materials (e.g. graphene)

He calls the Internet of Things (IoT) the largest digital megatrend that bridges the physical and virtual worlds. The increasing networking of people, objects and machines with the Internet is leading to the emergence of new business models.

Smart systems shape Industry 4.0

Sensors and other devices are used to connect objects of the material, physical world with virtual networks. The basis for digital production lies in intelligent (smart) systems. But what does “smart” refer to in a specific context?

The term “smart” refers to a combination of equally tangible or intangible goods with digital systems. These in turn are networked and able to communicate intelligently with each other, which ultimately results in added value for the user. Here, the goods sometimes expand their original range of services many times over. There are also three terminological specifications: Smart Factory, Smart Products and Smart Services.

What does Smart Factory mean? The term Smart Factory, or intelligent factory, basically refers to adaptive production systems that are networked by software and connected to the various value creating networks. Operators benefit above all from the prompt dissemination and utilization of data. In order to ensure the most secure and predictable exchange of information between the devices and services involved, network and real-time capability as well as scalability are critical factors for success. On the basis of decentralized intelligence, these scalable architectures can make their own decisions. Apart from factories, products can also be intelligent. But this also raises the question of a definition.

Smart products and smart services

What are Smart Products? Smart products are products that can be flexibly adapted to the needs of the user and can also be connected to other systems by means of intelligent networking. This makes it possible, for example, to store configuration data on a component or module in such a way that subsequent commissioning of the machine is possible in a timely manner, since manual setup measures are no longer required. Private users may know this capability from the independent integration of a smart TV into their own device peripherals. Smart Factory and Smart Products are complemented by Smart Services as a third component.

What are Smart Services? Smart Services are generally defined as a combination of virtual and physical services that offer added value to the customer. Smart Products often go hand in hand with Smart Services. These services ensure a flexible market orientation at all times, which promotes agility. The basis for these services is provided by networked software environments, which in turn are embedded in the services.

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One example is remote monitoring: Things are made with sensors or RFID-Chips to allow them to be tracked. The exact point in the supply chain at which the product/object is currently located can be traced. This is widely used in the field of logistics and increases competitiveness and organizational capability.

Characteristics of Industry 4.0

The intelligent factory is at the heart of Industry 4.0. The aim is to create an autonomous production in which people, machines, plants and products communicate independently with each other. So-called cyber-physical systems make production more flexible and efficient. This makes it possible to implement individual customer wishes at costs that were previously only possible in mass production.

Since many of today's products are developing or changing faster and faster, production must be able to keep up. To avoid having to surrender without a fight to permanently shortening innovation and product cycles, it is necessary for companies to be able to act flexibly. One promising step along this path may be to identify the respective network production capacities across companies.

Due to the cross-company networking of productions, it is possible to react flexibly to fluctuating market conditions or order situations. Such smart factories, integrated into an ecosystem, also ensure particularly efficient utilization, which can reduce costs and promote more resource-efficient production. Company A shares its own free capacities with company B, which is fully utilized. If Company B uses the offer, it will not only temporarily expand its own production facilities but will also enable Company A to achieve better capacity utilization. This allows both companies to keep fluctuations in orders to a minimum. Since such order-controlled production requires standardization of the individual manufacturing steps, the prerequisites for automated order calculation, allocation and finally control are created at the same time. This results in additional efficiency. Additionally, maintenance procedures based on the evaluation of process and machine data can also be carried out proactively. This procedure is called Predictive Maintenance predictive maintenance.

Platform Industry 4.0, a joint project of the German trade associations Bitkom, VDMA and ZVEI, attributes the fourth industrial revolution the potential to increase the economic efficiency of production, strengthen the competitiveness of industry in Germany and increase the flexibility of production.

RAMI 4.0 as the basic model for Industry 4.0

But industry 4.0 does not just mean the further development of existing automation concepts. Digital transformation is also changing the demands users place on production equipment. For this reason, the Industry 4.0 Platform and the ZVEI have developed the so-called reference architecture model Industry 4.0 (RAMI 4.0).

This is a three-dimensional map, which is intended to help structure the topic Industry 4.0 in a better way: The model combines all elements and IT-relevant components in a layer and life cycle model.

The so-called layer structure of the reference architecture model Industry 4.0 contains:

  • Business (organization and business processes)
  • Functional (The functions of an asset, i.e. built-in components or other assets)
  • Information (The required data)
  • Communication (Accessing information)
  • Integration (transition from the physical world to the digital world)
  • Asset (The real object in the physical world)

OPC UA as a communication standard

A central challenge of industry 4.0 is to enable secure, standardized data and information exchange between devices, machines and services from different industries. RAMI 4.0 has already listed the IEC-62541 standard OPC UA as the only recommendation for the implementation of the communication layer in 2015.

The abbreviation stands for Open Platform Communications Unified Architecture. A set of standards improves numerous processes in the field of industrial automation and machine-to-machine communication. This service-oriented architecture is used to describe interfaces and semantics of data as well as to transport data from machine-to-machine.

OPC UA is also becoming increasingly relevant in die casting. VDMA Metallurgie, together with the European association CEMAFON and the OPC Foundation, has launched the “OPC UA High Pressure Die Casting Initiative” to equip manufacturers and suppliers from the die casting industry for the future. The aim is to jointly develop a manufacturer-independent interface standard.

Problems of implementation persist

Despite all this theory, the implementation is bumpy: The difficulty for companies often lies in mastering the path of digital transformation. Small and medium-sized enterprises (SMEs), in particular, are still struggling. Several studies confirm that the implementation of digitalization and industry 4.0 is still sluggish.

A survey conducted by Deloitte revealed that small and medium-sized enterprises feel only moderately prepared for the challenges of industry 4.0. In addition to technical know-how, a basic strategy is often lacking. The top management of SMEs does not yet actively include the topic in their corporate strategy. Furthermore, indicators and benchmarks are often not available.


  • Schulz, Thomas [ed.]: Industry 4.0: Potenziale erkennen und umsetzen. Würzburg 2017.
  • Schwab, Klaus: Die Vierte Industrielle Revolution. Munich 2016.