Section 2
What is Manufacturing 4.0?
“The adoption of Manufacturing 4.0 technologies can be understood as a phased process in which firms, particularly SMEs, require a gradual build-up of managerial, technical and innovation capabilities.”
What is Manufacturing 4.0?
This section serves as an introduction to Manufacturing 4.0.
It covers the following topics:
- Definition of Manufacturing 4.0
- The integration of cyber-physical systems
- The Fourth Industrial Revolution in development
- Manufacturing 4.0 interfaces
- Stages of Manufacturing 4.0 adoption
- Servitisation
“A key characteristic is the integration of cyber and physical systems leads to autonomisation (automation without human intervention).”
“Manufacturing 4.0 refers to the widespread integration of digital technologies in industrial manufacturing.”
What is Manufacturing 4.0?
Manufacturing 4.0 refers to the widespread integration of digital technologies in industrial manufacturing.
Different countries use a range of similar and related terms: “Fourth Industrial Revolution”, “smart manufacturing”, “digital manufacturing”, “industrial Internet”, “smart factories”, “cloud manufacturing”, “cyber-physical production systems”, among others.
It is often used under the rubric "Industry 4.0" (or “Industrie 4.0”), which was introduced in 2011 as part of the German government’s High-Tech Strategy.
Since then, Industry 4.0/Manufacturing 4.0 has become popular around the world in government, industry and academia because of its potential to make existing manufacturing industries more efficient; enable the development of new products, services and industries; and reshape the sources of competitive advantage.
For the purposes of this Guide, we refer to "Manufacturing 4.0" as our focus and nomenclature.
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The integration of Cyber and Physical Systems
Industry 4.0 is underpinned by the integration of cyber and physical systems.
Cyber-physical systems are engineering systems that link the “cyber” world of information and communication technology (ICT) (e.g. software, computational algorithms and wireless communication) with the “physical” world of operation technology (OT) (e.g. machines and human users).
These systems comprise a set of networked agents, including: sensors, actuators, control processing units and communication devices.
A key characteristic is the integration of cyber and physical systems leads to autonomisation (automation without human intervention).
Manufacturing 4.0 technologies include: sensors and actuators; Internet of things (IoT); big data; artificial intelligence (AI); machine learning (ML); advanced production technologies, such as 3D printing; advanced robotics; blockchain; cloud computing; and augmented and virtual reality (AR and VR). Appendix A presents definitions and application examples of these technologies.
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The fourth industrial revolution in development
“Industry 4.0” follows previous industrial revolutions:
- First Industrial Revolution, in which production was mechanised through the use of steam power;
- Second Industrial Revolution, in which mass production was developed through the use of electric power; and
- Third Digital Revolution, in which computers and ICT were used to enhance the automation of manufacturing.
The Fourth Industrial Revolution is still in development and is being driven by cyber-physical systems and changes in production driven by automation without human intervention (or autonomisation).
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Manufacturing 4.0 interfaces
As digital technologies become more popular, a variety of terms have been used to refer to the application of digital technologies across different sectors. The distinction among these terms helps to realise their interfaces and the need for a coherent and coordinated policy approach. Appendix A provides an overview of how international organisations and national governments define Manufacturing 4.0 and related terms.
For example:
- Manufacturing 4.0 refers to the application of digital technologies in manufacturing.
- Agriculture 4.0 refers to the application of digital technologies, which also connect the “cyber” and “physical” worlds, but in agriculture production.
- Digital government and information and communication technology for development (ICT4D) refer mainly to the application of ICTs, a subset of digital technologies, in areas such as public administration, health, education and transport.
Meanwhile, concepts such as Fourth Industrial Revolution and digital economy are used to refer to the application of digital technologies across all of the economy sectors. However, digital economy policies have, generally, placed little emphasis on manufacturing applications.
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Stages of Manufacturing 4.0 adoption
The adoption of Manufacturing 4.0 technologies can be understood as a phased process in which firms, particularly SMEs, require a gradual build-up of managerial, technical and innovation capabilities to first understand the business value of emerging digital technologies and later identify opportunity areas for adoption.
A necessary step to understand Manufacturing 4.0 opportunities for particular countries is to distinguish how domestic firms are currently using digital technologies. This is necessary because opportunities will vary for firms at different stages of the Industry 4.0 “digitalisation journey”.
However, Manufacturing 4.0 should not be understood as an ideal state. Both advanced firms and catching-up firms have the possibility to leverage these technologies.
Manufacturing 4.0 adoption is about identifying priorities within a business. “Right” technologies and applications will depend on these priorities, a firm’s particular position in the “digitalisation journey”, and the particular industry and segment of the value chain in which it operates.
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Servitisation: A New Business Model
The highly competitive nature of modern economise means competition is forcing manufacturers to innovate and differentiate beyond their product offerings by offering additional value-added services. Meanwhile, traditional boundaries between manufacturers and service providers are narrowing worldwide.
Offering services and solutions together with or alongside manufactured products is called “servitisation” and encompasses new commercial models based on product-service synthesis.
