Industry 4.0 and smart manufacturing. What do these terms mean? Can they be used interchangeably or not?

It is nearly impossible today to be in the manufacturing industry or the industrial automation industry and not have heard these buzzwords used in one form or another. They seem to be everywhere, actively discussed by thought leaders, industry experts, strategists, and company executives. They are written in mission statements and are even part of annual goals for a lot of companies, which gives you the impression that everyone knows exactly what they are. But if you dig a little deeper into it and start asking people what they mean, you will find out they will either be honest and say “I have an idea, but I don’t really know,” or they will give you a totally different answer than the next person. And if that is the case, it would make using or achieving anything related to these concepts difficult, wouldn’t it?

The purpose of this article is to help clarify these concepts, by defining them, explaining their relationship to one other and to your organization, and most importantly, answer the question: why are they such a big deal right now?

To do this, we need to address why people have a hard time defining these terms. The simple answer is: there is no universal definition people can go look up.

The Birth of Industry 4.0

Industry 4.0 (also known as Industrie 4.0 in Europe), as a term and a concept, was brought to life in 2011 at Hannover Messe, where Bosch described the widespread integration of information and communication technology in industrial production. The entire industry, along with the German government, took interest in this idea. A working group on Industry 4.0 was formed, led by Bosch executive Siegfried Dais and Henning Kagermann, the former chairman and CEO of SAP and president of the German National Academy of Science and Engineering (acatech). In 2013, this working group presented a set of Industry 4.0 implementation recommendations to the German federal government. From this moment forward, the fourth industrial revolution was born, and the working group members became recognized as the founding fathers and driving force behind Industry 4.0.

The 85-page paper developed by the Industry 4.0 working group starts off by explaining how we are entering the fourth industrial revolution, hence the reference to “4” in “Industry 4.0”. In order to help understand the fourth industrial revolution, it helps to remind everyone about the first three, and how we got to this point.

History of Industrial Revolutions

The first industrial revolution, which is often referred to as “THE” Industrial Revolution, is actually just the first of four revolutions so far.

• The first revolution moved from manual to mechanical by harnessing steam and water power, replacing raw muscle.
• The second revolution took advantage of electricity and the assembly line to generate mass production.
• The third revolution took off using electronics and software, the most iconic example of these two coming together being the computer—and the Programmable Logic Controller (PLC) in the industrial setting. This gave rise to an era of high-level automation.
• The fourth revolution is the revolution happening right now, according to this study. The physical world, the digital world, and the virtual world are colliding together, creating smart products, procedures and processes, and smart factories. The study goes on to describe this revolution being brought on primarily by cyber-physical systems and the Internet of Things to create a highly intelligent, integrated, and automated manufacturing ecosystem that spans far beyond the traditional “factory floor.”

Diagram depicting the four industrial revolutions, courtesy of the author

When I say cyber-physical systems, I am referring to the integration of physical processes, computation, and networking. According to cyberphyiscalsystems.org, embedded computers and networks monitor and control the physical processes with feedback loops, where physical processes affect computations and vice versa.

The Internet of Things (IoT) refers to an interconnected network of device-to-device communication that does not need a human or computer interface, usually taking advantage of the Internet. As far as I can tell, the phrase “Internet of Things” surprisingly dates back to 1999. An employee of Proctor and Gamble used it to describe Radio Frequency Identification, and since then, the phrase has continually expanded and evolved to include a lot of things. It could easily be a discussion topic of its own.

Trying to Define Industry 4.0

Putting all this together, Industry 4.0 is not merely a matter of connecting machines and products thought the Internet. It’s a paradigm shift in how we organize, manage, and approach business. As a society, we are starting to feel the impacts of Industry 4.0 already. Not only are companies investing, but also governments around the world are pouring a lot of money into this idea as the way of the future.

The working group characterized Industry 4.0 as a concept that is focused on creating smart products, procedures and processes, and smart factories. But that statement is so grandiose and vague that it provides almost no help. With all that visionary talk, we can easily get excited and energized, but we still don’t have a definition. The Industry 4.0 working group didn’t really provide one—and the lack of a definition is what makes this concept so abstract and confusing.

Ever since the working group convened, people have latched onto the concept of Industry 4.0 all over the world. Each country has attempted to define it in their context as they see fit, which of course means different ideas everywhere.  

At its most basic level, Industry 4.0 is a broad term that encompasses different perspectives, industries, corporate functions, technologies, and fields. What I have found is that most experts in the field consider its holistic conceptual basis to be one of its key strengths. The focus and understanding of Industry 4.0 are constantly evolving due to the high level of activity and continual development of new approaches, concepts, and solutions on the part of solution providers, hardware manufacturers, businesses, research institutions, and even governmental agencies.

What's the Difference Between Industry 4.0, Digital Transformation, and Smart Manufacturing?

As already mentioned, there isn’t an agreed-upon formal definition for Industry 4.0. The same goes for digital transformation and smart manufacturing. Many organizations and standards bodies have been working on attempting to define this new space, not yet with any luck. Joint Working Group 21 between IEC and ISO standards is probably the furthest along, and they still have arguably years to go. Currently, they have chosen to focus on the phrase “smart manufacturing” as a way of taking a piece of Industry 4.0 and narrowing the focus. So far, their current definition (still in draft stage) for smart manufacturing is, “Manufacturing that improves its performance aspects with integrated and intelligent use of processes and resources in cyber, physical, and human spheres to create and deliver products and services, which also collaborates with other domains within enterprises’ value chains.”

The National Institute of Standards and Technology (NIST), as another example, defines smart manufacturing systems as "fully-integrated, collaborative manufacturing systems that respond in real time to meet changing demands and conditions in the factory, in the supply network, and in the customer needs."

There are countless other groups attempting to define these concepts and put their stake in the ground with a specific term. At the International Society of Automation (ISA), we recognize that these terms and their associated concepts are evolving and will continue to change. Thus, we have decided (for now) to focus on the concept of “smart manufacturing” and think of it as an ecosystem which enables factories, warehouses, supply chains, and so on to be fully integrated and agile to fulfill customer demand for product or service delivery. Although arguments can be made to differentiate between other big buzzwords like "Industry 4.0" and "digital transformation," they are often used interchangeably. 

Regardless of the semantics, these concepts boil down to collecting and harnessing a tremendous amount of data to make better decisions, telling business leaders what to do and when to do it. The goal of most Smart Manufacturing initiatives, therefore, are to identify opportunities for automating operations and use data analytics to drive better agility, increase efficiency,, improve quality, and reduce a company's time-to-market. What makes all this possible is the collective application of different cutting-edge technologies that make manufacturing more connected, more intelligent, and more dynamic.  

My Advice: What Does All This Mean?

Pick a term and run with it. Both “Industry 4.0” and “smart manufacturing” can be thought of as visions or journeys, rather than as destinations with clear boundaries. This means that these concepts are really in the eyes of the beholder. It can, and will, mean different things to different people and different companies. And that is ok! So, instead of waiting for a formal definition by the industry, you should figure out what it means for your company. Establish a vision using the concepts discussed and communicate that vision across the entire organization.

This article is a product of the International Society of Automation (ISA) Smart Manufacturing & IIoT Division. If you are an ISA member and are interested in joining this division, please email info@isa.org.