A Perspective on Industry 4.

0: From Challenges to Opportunities in

Production Systems

Ateeq Khan and Klaus Turowski

Magdeburg Research and Competence Cluster, Faculty of Computer Science,
University of Magdeburg, Magdeburg, Germany

Keywords: Industry 4.0, Digital Manufacturing, Industrie 4.0, Smart Systems, Smart Factory, Future Factory, Cyber
Physical Systems, IoT.

Abstract: Industry 4.0 and smart factory are the terms frequently used for next generation production systems. Advance-
ment of Information technologies paved the way for evolution of production systems. To remain competitive
in the market, enterprises want to utilize these technological advancements in order to solve current challenges
and serve customers in new ways which were not imagined before. In order to provide new services quickly,
new methods and technologies have to be introduced at manufacturing level. The paper briefly discusses
industry 4.0 and settings (arrangements) for co-innovation. This paper also describes what are the current
challenges faced by companies with the help of a survey. The paper proposes an approach from strategical
to operational level for the implementation of industry 4.0. In this paper, we also provide new opportunities,
scenarios, and applications enabled by introducing new tools and technologies for industry 4.0. At the end,
the paper provides summary and glimpse of the future work.

1 INTRODUCTION success of a company. There are many successful ex-

amples of big companies and start-ups. For example,
Advancement in Information Technology (IT) made Amazon (originally, a book-selling company) under-
it possible to bring production systems at new levels. stood what are the demands of customers and poten-
These new developments enable organizations to im- tial markets, now become one of the major IT services
prove current environment and allow them to serve provider challenging the position of the IT companies
the customers in new ways by using new business which are in business over many decades.
models to create value for customers and revenue for Technology has been advanced at the rapid pace
themselves. on enterprise level. However, these technological de-
Companies are eager to introduce new technolo- velopments are not applied on industrial level and it
gies to improve quality, efficiency and effectiveness still stands as old as the start of the third revolution
of resources, reduce risks, and to remain competi- with basic IT functionalities and monolithic structure.
tive in the market (Falk et al., 2015; Tassey, 2014). There are solutions on enterprise level which can be
A company which fails to cope the technology chal- applied at production or shop-floor level. However,
lenges also face the challenge of introducing new organizations are hesitant to use them on the shop-
products/services, innovation, and business models. floor level. This is due to critical nature of the systems
This places the company in fierce competition where and their potential economic impact on operations of
costs have to be reduced each year. organization. If a manufacturing system stops, the
New business models have been introduced by whole production line may have to be stopped which
various companies in order to provide more value and costs the loss to company (items produced per hour).
services for customers (Kallenbach, 2015; Figalist, Therefore, Technology used at production level is still
2015). These new business models not only bonded quite old and has not gained much attention in com-
majority of the customers but also created new cus- parison to enterprise level.
tomers (and their segments) to whom value-added ser- In this paper, we discuss about industry 4.0 and
vices can be provided. An innovative business model settings for co-innovation in future manufacturing.
coupled with the latest technical tools guarantees the We describe the current challenges faced by compa-

441
Khan, A. and Turowski, K.
A Perspective on Industry 4.0: From Challenges to Opportunities in Production Systems.
DOI: 10.5220/0005929704410448
In Proceedings of the International Conference on Internet of Things and Big Data (IoTBD 2016), pages 441-448
ISBN: 978-989-758-183-0
Copyright c 2016 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
IoTBD 2016 - International Conference on Internet of Things and Big Data

nies at production systems with the help of a question- A formal definition of industry 4.0 is defined
naire. These companies belong to diverse segments in (Kagermann et al., 2013) as follows:
of industry. We also provide promising future scenar- ”Industry 4.0 will involve the technical integration of
ios that can improve the efficiency of production sys- CPS into manufacturing and logistics and the use of
tems. We present an approach for industry 4.0 which the Internet of Things and Services in industrial pro-
will guide us for the steps needed to be taken for in- cesses”.
dustry 4.0. It will also describe how we can enable Various terms are used in above definition. Here
future scenarios (discussed in this paper) and simulta- we briefly explain these terms. Powerful autonomous
neously help to solve current challenges in production physical systems connected with one another and
systems. At the end we provide a summary of the pa- environment will perform operations intelligently
per and outlook. (smart systems). These interconnected systems re-
ferred as CPS (Lee et al., 2008; Tseng and Hu,
2014) communicates each other to fulfill the tasks.
2 INDUSTRY 4.0 AND Cyber-Physical Production Systems comprise smart
machines, warehousing systems and production facil-
CO-INNOVATION IN FUTURE ities that have been developed digitally and feature
end-to-end ICT-based integration, from inbound lo-
The first industrial revolution started in the end of gistics to production, marketing, outbound logistics
the 18th century with the introduction of mechanical and service. The IoT is a network of devices. These
machines. The second industrial revolution started devices can be small, e.g., sensor in a fridge or it can
in the beginning of the 20th century with electricity be a robot working inside a car manufacturing fac-
and mass production. The third industrial revolution tory. The No. of IoT devices till 2020 will be around
started in early 1970s with introduction of electron- 50 billion, an estimate by Cisco (Cisco, 2015). The
ics and Information Technology (IT). This was the significant number of connected devices opens up the
beginning of automation of manufacturing processes door for new opportunities and new use cases in every
and programmed machines to take the production re- field. Industry and academics will find new use cases
sponsibilities. In order to compete with other uprising and services which can be offered to various indus-
countries (like India, China) and offer more value to tries. Although currently IoT use cases at production
the customers, developed countries started to apply level are less and organizations does not know how
advance technologies on production level. In USA we can take advantage from it. Collaboration will get
and some other countries, such initiatives are termed more focus in future from industry 4.0 perspective as
as fourth industrial revolution, Internet of Things reported in (Kagermann et al., 2013). In the follow-
(IoT), or next generation systems. Whereas in Ger- ing, we present one of the future scenarios from in-
many, this initiative is driven by German government dustry 4.0 perspectives.
(Bundesministerium für Bildung und Forschung), and
referred as Industry 4.0 (industrie 4.0) (MacDougall,
2014). The industrial revolutions are depicted in the 2.1 Co-innovation Opportunities
Figure 1.
There are various definition exists for industry 4.0. Recent developments in IT have paved the way for
Various groups and companies define the term accord- the next industrial revolution. Next industrial revo-
ing to their understanding and perspective of discus- lution is going to change our eco-system. As stated
sion. There are also inter-relating terms like IoT, Cy- in (Kagermann et al., 2013), in future manufacturing,
ber Physical Systems (CPS), Smart Systems, Digital- collaboration will be the focal point. Whether such
ization, and Digital Factory. collaboration exists between CPS, industries or other
We define Industry 4.0 as a revolution enabled by partners, the granularity of such collaboration can
application of advanced technologies (like IT) at pro- vary from cases to cases. Services either from cloud
duction level to bring new values and services for cus- computing or fog computing (term initially coined by
tomers and organization itself. The will also bring Cisco (Bonomi et al., 2012)), will play a significant
flexibility and quality in production systems to fulfill role in this context, allowing systems and partners to
demands of new innovative business models and ser- work, communicate and collaborate from anywhere
vices quickly (service oriented architecture and net- in real time.
work communication at production level). The digi- There exists variety of collaboration possibilities
talization and virtualization are tools to bring end-to- for development of future products, e.g. within com-
end services throughout a product life-cycle (design panies, research institutions, or combination of both.
till recycle) and in a cost effective way for customers. Every collaboration requires adaptation of the strate-

442
 A Perspective on Industry 4.0: From Challenges to Opportunities in Production Systems

„ Fourth industrial revolution

„ 21st century (20XX)
„ Evolution from existing
„ Cyber Physical Systems (Intelli – Smart)

„ Third industrial revolution

„ 20th century (1960)
REVOLUTION

„ Programmable units (Mechatronics)

„ ICT (PCs)
„ Second industrial revolution
„ 19th century (1870)
„ Electricity – conveyer belt
„ Mass production (Ford)

„ First industrial revolution

„ 18th century (1784)
„ Mechanical (Hydro - power)
TIME

Figure 1: Industrial revolutions.

gies, as collaboration strategies between company- to commercial realization of a product or deployment

to-academics will be different than company-to- in a real environment. Companies will attract new po-
company collaboration strategy. For collaboration, tential employees in form of students by hiring them
partners decide about the scope of the collaboration, as internees or research students who already know
governance strategy, coordination, confidentiality, in- about the processes of the company.
tellectual property rights, deliverables, duration, mile- Such a collaboration exists between our institu-
stones, matters relating sharing of results, terms, and tion and our partners. We perceive the challenges
termination of the collaboration. of our partners facing and better guide what services
For collaboration between companies, companies they can offer in future in diverse topics. An exam-
can collaborate for a common shared goal to gain mu- ple of such collaboration in the context of industry
tual benefit. Such collaboration can exists between 4.0 is to find-out what are the requirements of next
companies to design a new product, using other com- generation manufacturing systems and services (like
pany infrastructures based on new business models, seamless integration, secure services, and smart sys-
or between partners to optimize logistics in manufac- tems) and conduct the research on industry 4.0 with
turing. There are also challenges involved, e.g., find- the help of industrial partners. We investigate solu-
ing and sparing suitable resources for such collabora- tions for current problems and how new and innova-
tion from their routine operations. Although it is quite tive services/systems can be created and evaluated for
possible that companies fear to participate in such col- next industrial revolution.
laboration project because of the fear that they may
disclose their business knowledge or companies com-
petitive advantage will be compromised. 3 APPROACH
Industries want to collaborate with academic in-
stitution to increase the research and development in As in real industrial context, all issues can not be ad-
the companies. By collaborating with research insti- dressed at once, therefore, an approach is needed to
tution, companies gain access to current innovative re- accomplish the goals. This approach should address
search areas from academics and can use the knowl- the current problems, and pave the way for industry
edge to co-innovate products for future or introduce 4.0.
new flexible processes in their organizations. In this section, we propose a high-level approach
Research institutions gain access to sources of which consists of nine phases. This approach can be
business relevant innovations and work on real world used for any pilot project. The approach is iterative
problems and case studies. Academic institution stu- in nature. The overall approach is depicted in the Fig-
dents will find placement opportunities for internships ure 2. For the detailed understanding of our approach,
and potential employers afterwards. Industrial part- we describe its phases as follows:
ners can help the academic partners to get the propri- In Goals and objective phase, organization set the
etary state of the art technology in terms of hardware goals and objectives what an organization want to
and software licenses. Industries can transfer the in- achieve in a project. All steps made in a project
novation from research prototype or proof of concept should help to achieve the objectives of the project

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Goals &
Objectives

Strategy
selection

Feedback loop
Identification
lesson learned

Evaluation and Landscape

comparison investigation

Proof of Design &

Concept analyze

Solution
proposals

Figure 2: An approach for Industry 4.0

and therefore the goals of company. The evaluation phase is to review the outcomes of
In strategy selection phase, organizations decide how the project. Here post implementation situation will
they want to proceed and select which strategy they be evaluated whether the defined objective and goals
want to apply. What are concrete steps needed to are achieved or not.
be taken in order to achieve goals and objectives Feedback loop phase is for the continuous im-
described in previous phase. New business models provement purpose. Experience gained will be doc-
can be introduced or developed in this phase (Madu, umented and suggestion will be prepared in case of
2013). rolling out project on larger scale. It also includes
In identification phase, high-level requirements suggestions or guidelines to improve overall process
will be collected. Partners and stakeholders will be for other projects.
identified for the project. Collaborative workshops In this part, we will describe strategy selection
will be conducted to identify pain points and oppor- phase in detail. There are various perspectives and
tunities. From stakeholders perspective, the purpose methods available and organizations can choose from
is to identify roles, responsibilities, and tasks in the them depending on the nature of problem. As for in-
project. dustry 4.0 changes are required at various levels, so it
In landscape investigation phase, detailed infor- is important for an organization to decide where they
mation about the current landscape will be collected. want to focus first in a project. One of the strategies is
In design and analyze phase, gathered information to address the areas where company is currently fac-
will be analyzed. This step will also bring better un- ing challenges or having problems. There are vari-
derstanding of landscape and helps to design the so- ous perspectives, namely outside-in or inside-out per-
lution. spective (Day and Moorman, 2010). In outside-in
In solution proposal phase, solution will be pro- perspective, customers are focal point. Organiza-
posed. Various solutions are possible for a project tions look for what are customer trends and require-
which will be compared and finalized in this phase. ment, which innovative services or value added bene-
For the selected solution specific guidelines will be fit they can provide to customers and on basis of such
prepared. Here sanity check is also performed to re- questions and requirements they design their strat-
alize the project, whether the organization have re- egy and build business models. Typical examples of
quired capabilities or not. outside-in perspective are offering new business mod-
In this phase, proof of concept of the selected so- els, products, and services e.g. which data companies
lution will be executed. or external customers required from production useful

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 A Perspective on Industry 4.0: From Challenges to Opportunities in Production Systems

for mutual benefit (without losing competitive advan- and collected from different machines sensors, pro-
tage). cess data, product data, quality data, plant data, logis-
In inside-out perspective, organizations look in- tics data, data from partners, and infrastructure data;
side the organization for opportunities how can they all contribute into explosion in data size.
better utilize resources and processes to provide new Such data poses various challenges and demands
services and products to meet customer’s require- new methodologies for storing, processing, and man-
ments. In inside-out perspective, organizations focus agement of such data. New algorithms, models, prod-
on organization itself and to solve internal challenges ucts, and visualizations techniques are required to use
first, e.g., solving data silos issues, providing real- and gain the actual benefits from the data. Data engi-
time data access, standardization, and process opti- neers are required to analyse such data and to find cor-
mization, which afterwards, will help to enable in- relation between data streams and to gain new insights
dustry 4.0 scenarios and benefits. Organizations also from the data which were not thought earlier. Specif-
have to decide which strategy they want to employ in ically, there is a problem in which plethora of inter-
projects top-down, bottom-up or hybrid one. In fu- mediate solution exists for data management within
ture, we plan to describe activities (conducting work- a company; it ranges from storing and exchanging
shops, interviews) in each phases in detail with the data in form of printouts, emails, excel sheets, propri-
help of a case study. etary applications, and using heterogeneous database
solutions between various departments or production
halls. Lack of standardized approach for data man-
4 CURRENT CHALLENGES AND agement is still one of the concerns in big compa-
nies. For example, redundant data is stored in var-
METHODOLOGY ious departments of the company, in different data
formats with minor extensions or enrichments. Such
For our research in this paper, we use one of the qual- data silos raise the amount of data redundancy, in-
itative techniques called case research strategy. As in- consistency, and different interpretation of data. Soft-
dustry 4.0 and smart manufacturing is relatively new ware licenses, updates, hardware, and skilled person-
research area, practice based problems, and poses new nel costs to manage such data landscape heterogeneity
challenges, case research strategy is a best candidate are a burden in a competitive production environment.
for it as discussed in (Benbasat et al., 1987; Eisen- Decision made on inconsistent data leads to incorrect
hardt, 1989; Eisenhardt and Graebner, 2007). In this decision.
paper, we want to know and understand the stake-
holder’s expectations, requirements and the potential
challenges industry 4.0 poses in the natural settings. 4.2 Data Exchange with Partners
Since current challenges, future expectations from in-
dustry 4.0 have been limited investigated and lack of Companies have to exchange data within their fac-
case data in production environment from companies. tories or departments and make sure the availability
To find-out, what the top challenges manufacturing of data for other processes in time. External part-
industry is facing, we prepare a short questionnaire ners also share their data with companies to keep pro-
and distributed it in an information technology exhi- cesses optimized, e.g. material logistics data to keep
bition. We also get insights by informal interviews, the stock level as minimum as possible. There is also
various company’s documents, and talks with indus- trend that instead of selling manufactured products,
trial experts and consultants regarding current prob- companies share their infrastructure or production fa-
lems and challenges in production environment. Al- cilities with other companies for revenue gain. Data
though due to different industry segments and com- transparency is also required in this case where other
plex nature of their business, challenges are also di- companies uses infrastructure as a service. Compa-
verse but there are also some common challenges. nies have to share the progress status of such prod-
We describe top five current challenges faced by ucts manufactured at their production facilities with
companies at production level in this paper. These other companies and for further processes carried out
challenges are also relevant to the evolution of indus- on products if needed. There is a gap between pro-
trial automation and manufacturing. duction level and ERP level. A close integration be-
tween shop floor and ERP level is often missing. Tra-
4.1 Data Challenge ditionally, data is not exchanged between shop floor
and ERP level in real time and independently. Trans-
In our data-driven world, we generate data in various ferring of data between various systems at production
ways. In production environment, data is generated level causes delay. In some scenarios, physical prod-

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uct is transferred on the conveyer belt but updated in- process flexibility (Zhang et al., 2013). Traditionally,
formation was not loaded to carry out operations on processes and systems at production level are devel-
the product which results in higher costs. Production oped and managed isolated over the time in various
status of a product is missing and often not in real departments. Change management at production level
time; hence status transparency lacked. Normally, is quite challenging. As processes span in various de-
even in state of the art factories, they have only three partments, a clear process ownership is also missing
states to update the status of the product, namely pro- in case of adaptation or changes. Change structure is
duction started, in progress, and finished, and are not also needed because sometimes it is not possible to
well integrated with ERP systems. So, a monitoring keep the required change in the specific area and will
solution from factory is needed considering which in- impact the whole landscape due to dependencies. In
formation to provide, in which granularity, user roles, case of changes, required changes are transferred in
as same information or process may be applied on the form of printouts or using email communication. Of-
other products. There are also issues due to data ex- ten these changes are handled individually in each de-
change with partners in a collaborative environment, partment without any specific standards which raises
e.g. sharing the process status of products and cur- the complexity and costs of managing such changes.
rent state of the processes applied on products. Com- There is a need to bring process standardization and
panies also have to consider that sharing information synchronizations between various company depart-
with partners does not result to lose competitive ad- ments to provide flexibility in an effective manner.
vantage or sharing critical insights. Similarly, in case
of machine faults at production level are not reported 4.5 Security
at ERP level and current state of the production does
not reflected. Necessary measures for machine repairs Security is also a top concern now and it will be the
cannot be initiated because of delay in reporting. major concern in future for industries. Industries want
to keep their people, products, and production fa-
4.3 Training and Skill Development cilities environment secure from security risks. The
trend of using smart devices in production is increas-
Normally, especially in Germany, companies are fac- ing. On one hand connectivity of these devices pro-
ing shortage of skilled staff due to various factors. vides great advantages to ease our lives. On the other
One of the major factors is aging population. People hand it poses greater risk from security perspective.
used to work in production are retiring and also tak- Monitoring of such devices, used in production, is
ing production knowledge and experience they gained also a challenge from software and hardware perspec-
during their jobs. Other issue is to keep the hired per- tive, which is often ignored. All devices whether in-
sons within organization, as younger ones wants to dustrial machines, computer, tablets, or smart phones
have incentives, promotion or prefer to change jobs needs to be updated on regular basis whether to avoid
frequently. As majority of the workforce consists of threats or due to configuration changes installed in
old people who do not want to learn technologies or these devices spread across the geographical location
hinder to have change in their routines work. Intro- or inside factory. Keeping track of updates and man-
ducing new techniques, gadgets, or changing their agement of such devices is a tedious task too. As
way is quite challenging as they resistant to such some of IoT devices used at production level have
changes. This challenge becomes manifold in case very limited processing capabilities which requires
of industry 4.0 scenarios where changes are eminent new tools or methods, and measurements, to keep the
factor. devices secure instead of tradition methods. Serious
measures are needed to restrict the threats posed by
the malfunctioning or hacked devices. There are al-
4.4 Process Flexibility ready various examples already happened where pro-
duction facilities are targeted, e.g., security holes ex-
As product life cycle in this decade is shorter than ploited in programmable logical controllers deployed
before (Hofreiter and Huemer, 2010; Hofmann and in factories (Zetter, 2011). It is also possible that
Bick, 2015). Individualized and customized products manufactured electronic products may contain viruses
also become reality. Such individualization and cus- from production facility when delivered in the market,
tomization requires flexibility at production level in a which may result heavy fines for company or product
cost effective manner. In order to provide such flex- returns.
ibility, production environment should be adaptable
at the process level. Technology, currently used at
shop floor level is inadequate and does not support the

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 A Perspective on Industry 4.0: From Challenges to Opportunities in Production Systems

5 FUTURE SCENARIOS FOR A company can allow other companies or partners

INDUSTRY 4.0 to use state of the art manufacturing facility, compe-
tency and knowledge know-how as a service to de-
velop their own product. In this case integrated pro-
Manufacturing industry has to cope with various chal-
cess across enterprise boundaries is a real challenge
lenges as mentioned in previous section. Despite of
where companies have to exchange information and
those challenges, in the following, we present some
applying processes at hired facility in a secure and
of the future scenarios from industry 4.0 perspectives.
confidential way.
The scenarios also reflect the challenges mentioned
in previous section. In first scenario, we discuss that
more integration of processes are required within en- 5.2 Real-time Data Access to/from
terprise between ERP and shop-floor level and also Shop-floor Level
across enterprise boundaries for optimal and collab-
orative environment. Second scenario highlights the Real-time data access in a production is very vital
importance of real time information access to make whether it is related to products, processes, or ma-
decision. Lastly, last scenario shows the importance chines operating in the factory. Traditionally, real
of predictive maintenance in a production environ- time information access for processes was not avail-
ment. able at shop floor level. In case of change in processes
or actions, workers or machines have to wait until in-
5.1 Integrated Processes structions are manually transferred or data is loaded
in the production system. Future factories demand
Product life-cycle involves series of processes, from a close integration between ERP and shop-floor and
design to production, service and feedback from cus- real time access of data at production level for real
tomers. These processes can belong within the same time execution and vice versa. Data collected from
enterprise or distributed across enterprise boundaries. machines and business processes is filtered, analyzed,
Process integration is quite challenging in this and then delivered in required format to provide in-
case due to various technologies, interfaces, stan- sights which in return will help to give better process
dards, methods and unique characteristics in each en- control, optimize, and reduce overhead costs.
terprise involved. Involving customer’s feedback or
customization direct in manufacturing process will 5.3 Predictive Maintenance
lead to improvement in the product and higher cus-
tomer satisfaction. Maintenance of machines is an important area which
Integrated processes across the enterprise will en- every manufacturing company has to address. Manu-
able to optimize and make decisions in real time. Lo- facturing companies try to carry out planned main-
gistics can be well optimized and out of stock or over tenance based on different strategies like operating
production cases, both results in revenue losses can be hours, number of products processed, or after a cer-
eliminated. Suppliers can access to live data at shop- tain time. A machine condition monitoring sys-
floor level and know when to provide the required ma- tem can be introduced to avoid unplanned mainte-
terial for better resource planning and will reduce un- nance. Machines equipped with sensors generates
planned outage or overstock situations. Existing pro- huge amount of data and records the operating con-
cesses can be optimized and will be executed faster. dition in which machine operates. Historical data col-
In case of companies having more than one manu- lected regarding machines operating conditions can
facturing facilities, whether in same geographical lo- play a vital role. Current state of the machine is com-
cation or scattered around the globe, cross plant man- pared with historical data and with other data in dif-
ufacturing and planning makes more sense if data ferent dimensions (product quality, and wastage data).
from facilities is available and integrated. Production Models can be developed to predict which part of ma-
load can be distributed from one plant to the other chine or machine is going to fail or vulnerable (Lee
plants for optimal resource usage. Business processes et al., 2015; Wang et al., 2008).
can be analyzed across plants (Lodhi et al., 2014) to Machines manufacturers can collect data from
find out which plant is performing better and what machines to provide remote diagnostics and offer
we can learn from one plant or how we can develop maintenance services from their locations. Such data
best practices for specific industry or products for the can also be useful for them to know in which condi-
whole organization. There is also a trend in which tions their machines are operating and what they can
instead of selling end products, companies sell their learn from such data. For example, machine manu-
know-how or other services. facturers can develop next generation of machines for

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specific industry or buyers segments by understand- Figalist, D. H. (2015). On the way to industrie 4.0. driving
ing their operating needs based on history. Remote the digital enterprise. VDMA Informationstag, Indus-
setting of parameter or operating conditions or pro- trie 4.0 Konkret.
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Kallenbach, D. R. (2015). The internet of things: Con-
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Bosch Software Innovations GmbH.
Lee, E. et al. (2008). Cyber physical systems: Design
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current challenges. We also discuss the new scenarios physical systems architecture for industry 4.0-based
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