Skip to content Articles Business value of Industry 4.0 in a manufacturing plant
What is the business value that can be delivered by Industry 4.0 in conjunction with a manufacturing plant? The following case studies show that business value of Industry 4.0 in a plant can be obtained by enabling the plant to reduce wastes. 

What is Industry 4.0?

Short history.1
What is Industry 1.0?
1st industrial revolution is known through introduction of mechanical production facilities with the help of water and steam power. It is recognized by first mechanical weaving loom in 1784.

What is Industry 2.0?
2nd industrial revolution is known through introduction of mass production with the help of electrical energy. It is is recognized by first assembly line in 1870.

What is Industry 3.0?
3rd industrial revolution is known through application of electronics and IT to further automate production.

It is recognized by first programmable logic control system in 1969.

What is Industry 4.0?
4th industrial revolution is known through cyber-physical production systems (CPPS), merging of real and virtual worlds.

While in some ways it's an extension of the computerization of the 3rd Industrial Revolution (Digital Revolution), due to the velocity, scope and systems impact of the changes of the fourth revolution, it is being considered a distinct era.2

The important characteristic of Industry 4.0 is cyber-physical systems that connect real worlds to virtual one in tremendous speed.

Physical to digital loop.3
The integration of digital and physical systems can be described in physical-to-digital-to-physical (PDP) loop. PDP loop consists of:

  • Physical to digital: Capture information from the physical world and create a digital record from physical data.
  • Digital to digital: Share information and uncover meaningful insights using advanced analytics, scenario analysis, and artificial intelligence.
  • Digital to physical: Apply algorithms to translate digital-world decisions to effective data, to spur action and change in the physical world.
This PDP loop is the main feature of Industry 4.0.

The Nine Technologies Driving Industry 4.0.4
Industry 4.0 are supported by these technologies:

  1. Additive Manufacturing. The classic example of additive manufacturing is 3D printing. Instead of prototyping individual components, companies can now produce small batches of customized products. The resulting advantages include the speedy manufacturing of complex, lightweight designs.
  2. Augmented Reality. Augmented reality (AR) systems support a variety of services, such as selecting parts in a warehouse and sending repair instructions over mobile devices. With AR, companies can provide workers with real-time information that improves decision making and work procedures.
  3. Autonomous Robots. Autonomous robots can interact with one another and work safely side by side with humans. These robots will cost less and have an increasing range of capabilities over time.
  4. Big Data and Analytics. In an Industry 4.0 context, the collection and comprehensive evaluation of data from many different sources—production equipment and systems as well as enterprise- and customer-management systems—will become table stakes.
  5. The Cloud. The more production-related initiatives a company undertakes, the more it needs to share data across sites. Meanwhile, cloud technologies continue to get faster and more powerful. Companies will increasingly deploy machine data and analytics to the cloud, thus enabling more data-driven services for production systems.
  6. Cybersecurity. It’s no surprise that Industry 4.0 boosts increased connectivity and the use of standard communications protocols. As a result, the need to protect critical industrial systems and manufacturing lines from cybersecurity threats rises dramatically. For this reason, secure, reliable communications, together with sophisticated access management for machines and identity verification of users, are essential.
  7. Horizontal and Vertical System Integration. Industry 4.0 allows companies, departments, functions, and capabilities to become much more cohesive. Cross-company, universal data-integration networks evolve and enable truly automated value chains.
  8. The Industrial Internet of Things. Industry 4.0 means that more devices are enriched with embedded computing. This process allows devices to communicate and interact both with one another and with more centralized controllers. It also decentralizes analytics and decision making, thus enabling responses in real time.
  9. Simulation. Simulations are a cornerstone of the industrial revolution 4.0. They’re used extensively in plant operations to leverage real-time data and to mirror the physical world. Done right, these models allow operators to test and optimize settings in numerous variations, thereby driving down machine setup times and increasing quality. 

Common problem in a manufacturing plant.

A manufacturing plant or a factory converts raw materials into finished goods and stores them in warehouses. The conversion process is commonly known as production process. One of the biggest challenge in a manufacturing plant are wastes, which can be found before, during and after production process.

Seven Wastes.5
Here are Taiichi Ohno’s categorization of the seven major wastes typically found in mass production:
  1. Overproduction: Producing ahead of what’s actually needed by the next process or customer. The worst form of waste because it contributes to the other six.
  2. Waiting: Operators standing idle as machines cycle, equipment fails, needed parts fail to arrive, etc.
  3. Conveyance: Moving parts and products unnecessarily, such as from a processing step to a warehouse to a subsequent processing step when the second step instead could be located immediately adjacent to the first step.
  4. Processing: Performing unnecessary or incorrect processing, typically from poor tool or product design.
  5. Inventory: Having more than the minimum stocks necessary for a precisely controlled pull system.
  6. Motion: Operators making movements that are straining or unnecessary, such as looking for parts, tools, documents, etc.
  7. Correction: Inspection, rework, and scrap.

Business analysis activities.

One common way to start business analysis activities is by conducting Strategy Analysis. Techniques used here are document analysis and interview. Here are the points gathered by those activities:

  • The business need is to reduce wastes in a manufacturing plant.
  • The plant contains shop floor and warehouses.
  • Wastes can be reduced more easily if the latest physical condition in the plant is communicated to the Plant Manager in sufficient level of detail consistently, in real time and continuously.
    • Data received in sufficient level of detail consistently enables decision to be taken appropriately.
    • Data received in real time enables decision to be taken timely.
    • Data received continuously enables decision to be taken any time when it is needed.
  • Plant Manager may choose these means to get data about latest physical condition of an object at field: his own observations, other persons’ observations and sensors. Among those options, only sensors are able to send consistent, real time and continuous data.
  • Plant Manager can take benefits of Industry 4.0 implementation as follows:6
    • Asset visibility: this feature is used to track and measure assets in real time and sufficient level of granularity, e.g. to gather data about inventory level and machine status (e.g. idle, running, breakdown).
    • Process visibility: this feature uses motion as an indicator and is used to make the process visible, e.g. to find out at which workstation currently a product or at which location currently an object is.
    • Error proofing: this feature is used to help people from doing wrong things, i.e. by providing real time and proper instruction and tools.
  • Cybersecurity must be implemented in every ICT system, at least in the area of CIA (Confidentiality, Integrity and Availability).
  • In this case, Artificial Intelligence patterns can be applied in Autonomous Robots and Big Data and Analytics technologies.7

Examples of Industry 4.0 application in a manufacturing plant.

Shop floor.
Industry 4.0 technologies that can be applied in production lines are:
  • Augmented Reality.
  • Big Data and Analytics.
  • Horizontal and Vertical System Integration.
  • The Industrial Internet of Things.
  • Simulation.
Wastes that can be reduced by these technologies are:
  • Overproduction.
  • Waiting.
  • Processing.
  • Motion.
  • Correction.
Warehouse and material handling.
Industry 4.0 technologies that can be applied in warehouse and material handling activities are:
  • Augmented Reality.
  • Autonomous Robots.
  • Big Data and Analytics.
  • Horizontal and Vertical System Integration.
  • The Industrial Internet of Things.
  • Simulation.
Wastes that can be reduced by these technologies are:
  • Waiting.
  • Conveyance.
  • Inventory.
  • Motion.
Quality control.
Industry 4.0 technologies that can be applied in quality control activities are:
  • Big Data and Analytics.
  • Horizontal and Vertical System Integration.
  • The Industrial Internet of Things.
Wastes that can be reduced by these technologies are:
  • Waiting.
  • Processing.
  • Motion.
  • Correction.

Human factors in Industry 4.0.

In order to create a smooth transition to Industry 4.0 culture, Industry 4.0 implementation project should be approached as a change management project.8

Let us take a look at Industrial Internet of Things as an example: Industrial Internet of Things is at the intersection of OT (Operations Technology) and IT (Information Technology).9 The top management must lead OT and IT teams to build strong partnership each other in order to bridge the differences and to overcome reluctance to learn new things, e.g. by demonstrating collaborative management review and implementing data-driven decision making process.

The future of work will require two types of changes across the workforce:10

  • Upskilling, in which staff gain new skills to help in their current roles.
  • Reskilling, in which staff need the capabilities to take on different or entirely new roles.
Companies that successfully adopted Industry 4.0 had these similarities:10
  • They made extensive use of smart technologies in their operations, while paid equal attention to their business processes, their management systems, and their people.
  • They approached automation and digitization as a comprehensive transformation program, driven by top management and involving the majority of the organizations’ managerial workforces.
  • They tailored and customized their training to match both the organizations’ goals and the needs of individual learners, from CEOs to frontline operators.

Where to start?

Do not implement Industry 4.0 only for the sake of having Industry 4.0 technology. In other words, do not start Industry 4.0 project from technology perspective.

The approach to adopt Industry 4.0 should be based on business value. Only by doing this, the decision can get support from many stakeholders, hence has high chance of success.

Business Case should be created to justify whether adoption of Industry 4.0 technology is technically and economically feasible. One way to achieve the feasibility easier is to integrate new and existing capabilities and technologies.8

Since Industry 4.0 consists of new technologies, it is very difficult for a company to foresee its implementation impact far in the future. For this reason, progressive elaboration should underlie decisions regarding Industry 4.0 implementation.

“Our role as business leaders is to understand the strategic implications of digital transformation, lead the way forward and implement our vision for the future of our businesses and their contribution to the communities we support through our activities.” - Antonio Belo Santos.11



  1. Industry 4.0 - Challenges and solutions for the digital transformation and use of exponential technologies. 2015 Deloitte AG, Chart 1.
  2. Forbes – Bernard Marr. The 4th Industrial Revolution Is Here - Are You Ready?
  3. Forces of change: Industry 4.0.
  4. Putting Industry 4.0 to Work.
  5. Lean Enterprise Institute. Seven Wastes.
  6. Visibility in Manufacturing: The Path to Industry 4.0.
  7. Forbes – Kathleen Walch. The Seven Patterns Of AI.
  8. Five Lessons from the Frontlines of Industry 4.0.
  9. Create Your Industry 4.0 Roadmap.
  10. Building the vital skills for the future of work in operations.
  11. Mirror Review Quotes.

About The Author:
The Hanny Purnomo

The Hanny Purnomo holds certifications in Certified Business Analysis Professional™ (CBAP ®), Project Management Professional (PMP)®, SAP - Production Planning and Manufacturing - Associate Level and Professional Level, Certified Information Systems Auditor® (CISA), and Certified Tester Foundation Level (CTFL). He has more than 29 years of experience in ICT field and is currently designated as the ICT Director of a public listed manufacturing company.