Featured Product
This Week in Quality Digest Live
Innovation Features
Anton Ovchinnikov
In competitive environments, operational innovation could well be the answer to inventory risk
Brian A. Weiss
Tech transfer can be more efficient
Zach Winn
Optical milk scanner uses materials-sensing technology to measure the health of cows
Tamara Sheldon
EV subsidies are poorly designed, but simple changes could make them more effective and equitable
Rebecca Beyer
Knowing who creates a robot makes it feel more authentic

More Features

Innovation News
MIT course focuses on the impact of increased longevity on systems and markets
Upgraded with blue laser technology
The Ring Dex 2 filling and capping system is designed to simplify production.
The QM certification is awarded for excellence in curriculum design and quality
Recent research finds organizations unprepared to manage more complex workforce
For scenarios that require a rapid response
With block-based editor, anyone can realize projects using AI-based image processing
Product placement lends depth to sustainability
Industrial Scan&Sand solution wins RBR50 Innovation Award

More News

Festo Didactic


Bridging the Industry 4.0 Innovation Gap

Companies that ignore advanced manufacturing risk overpaying for underperforming plants

Published: Tuesday, October 11, 2016 - 17:11

Manufacturing in the United States and Canada is marked by negative stereotypes left behind from 1955. Repetitive and simplistic duties in grimy workplaces, without a chance to change or advance a career, are the images most people see when they imagine what it means to work in a factory. But, a new future for manufacturing is here: It’s called Industry 4.0.

Industry 4.0, or the smart factory, represents a paradigm shift from the assembly lines popularized by the U.S. automotive industry. Whereas the values typified by those initial factories prioritized profitability over people and safety standards, modern manufacturing has evolved to place an equally high value on clean technology, renewable energy, robotics, and on-demand yet affordable customization. What this means for manufacturing is not only a new way of production, but also new skill requirements for workers.

What is Industry 4.0?

In countries such as Germany and Japan, Industry 4.0 is a well-established approach in manufacturing. But in North America, companies have yet to make meaningful strides in the transition to Industry 4.0, and company executives remain relatively ignorant of its practices and benefits. Mention the phrase to most U.S. or Canadian manufacturing executives, and you’re likely to get a lot of raised eyebrows, notes a 2015 McKinsey article.

“If they’ve heard of it, they are likely confused about what it is,” write Cornelius Baur, senior partner, and Dominik Wee, partner, both based in McKinsey’s Munich office. “If they haven’t heard of it, they’re likely to be skeptical of what they see as yet another piece of marketing hype, an empty catchphrase. And yet a closer look at what’s behind Industry 4.0 reveals some powerful emerging currents with strong potential to change the way factories work.”

The McKinsey article contextualizes the name, which it calls the “fourth major upheaval in modern manufacturing,” within the “lean revolution of the 1970s, the outsourcing phenomenon of the 1990s, and the automation that took off in the 2000s.” What’s clear is that Industry 4.0, regardless if it’s technically a revolution, lies at the intersection of major “disruptions” from the likes of big data, analytics, and advanced robotics.

“Smart Manufacturing applies information and manufacturing intelligence to integrate the voice, demands and intelligence of the ‘customer’ throughout the entire manufacturing supply chain,” adds the Smart Manufacturing Leadership Coalition. “This enables a coordinated and performance-oriented manufacturing enterprise that quickly responds to the customer and minimizes energy and material usage while maximizing environmental sustainability, health and safety, and economic competitiveness.”

Industry 4.0, which is often referred to as the “fourth industrial revolution,” relates to what is called the internet of things (IoT). This new ecosystem, in which everyday objects are “plugged into” the internet, transforms traditional factories to smart ones. “Here, machines ‘talk’ to products and other machines, objects deliver decision-critical data, and information is processed and distributed in real time, resulting in profound changes to the entire industrial ecosystem,” according to an Accenture article. (The accepted timeline of industrial evolution begins with Industry 1.0, which was the result of the 18th century’s use of water and steam power. Industry 2.0 occurred with the 19th century’s electrical energy, and Industry 3.0 was prompted by the arrival of information technology (IT) and electronics during the 1970s. See figure 1.)

This kind of connectivity and interfacing is something that people are familiar with in their private lives, as when a cell phone “talks” to the car, says Thomas Lichtenberger, president of Festo Didactic North America, a provider of technical education equipment and training. “This kind of communication, where every device communicates with another and exchanges information, is getting smarter and smarter,” Lichtenberger says. “We are familiar with it in our private life, but this is exactly what is happening now in industry.”

The internet of things “is far bigger than anyone realizes,” notes a 2014 Wired article. In it, Daniel Burrus, founder and CEO of Burrus Research, writes that the IoT “revolves around increased machine-to-machine communication; it’s built on cloud computing and networks of data-gathering sensors; it’s mobile, virtual, and instantaneous connection; and they say it’s going to make everything in our lives from streetlights to seaports ‘smart.’”

Figure 1: Four industrial revolutions

Industry 4.0 pioneers

Announcing a national Advanced Manufacturing Partnership (AMP) at Carnegie Mellon University in 2011, U.S. President Barack Obama allocated more than $500 million to the effort, which the White House describes as a joint investment of industry, higher education, and the federal government in “emerging technologies that will create high-quality manufacturing jobs and enhance our global competitiveness.” The president referred in his remarks to a “renaissance in American manufacturing.” That renaissance, which is still in the making, takes its cue in part from German leadership in advanced manufacturing.

That leadership became apparent in 2008, when Germany’s manufacturing sector did “exceedingly well,” while most of the industrialized world was reeling during the financial crisis, notes the American Society of Mechanical Engineers. A 2014 article in The Wall Street Journal suggests that U.S. manufacturers can look to Germany’s success as a model. And in 2016, U.S. Secretary of Commerce Penny Pritzker said the “fourth industrial revolution” is changing products in pockets and homes alike and “is shifting the very nature of work for our people.” Secretary Pritzker notes that President Obama’s inspiration for the National Network for Manufacturing Innovation was the Fraunhofer Institute, Germany’s leading applied research organization, which employs 24,000 people across 67 institutes.

The International Society of Automation further illustrates the point by comparing the way other countries are now adopting technology to drive significant innovation to how Japan used automation and robotics during the late 1990s to significantly increase its market share of the automotive industry. During Japan’s ascension in automotive production, the U.S. had access to the same technology but did not use it. That cost the U.S. more than half of its market share.

Despite the warnings, industry in North America, however, isn’t prepared for the fast-evolving landscape, and it clings too often to outdated techniques and approaches to production. This is not merely a question of taste or philosophy. Companies that fail to embrace advanced manufacturing risk overpaying for underperforming plants.

Only 33 percent of the more than 2,000 companies from 26 countries that PwC surveyed in its 2016 report, “Industry 4.0: Building the digital enterprise” said that their companies had achieved appropriate levels of advanced digitization today (see figure 2). By 2020, 70 percent expected to meet that mark. Industry 4.0 will revolutionize industrial production, according to the report, to the tune of $493 billion annually in increased digital revenue globally until 2020, and $421 billion globally in annual cost reduction in the same time span. That means that between 2015 and 2020, those surveyed, on average, expected to reduce their annual costs by an average of 3.6 percent, and to generate 2.9 percent more in increased revenue per year, yielding a net gain of 6.5 percent.

Ready or not: Industry 4.0 arrives in North America

That optimism for the future influenced the statistics in the United States and Canada as well, where 37 percent of those surveyed in the PwC study expected revenue gains exceeding 20 percent during the next five years, and 39 percent thought they would reduce their costs over that same span by more than 20 percent. Half expected to increase their efficiency by more than a fifth by 2020.

As PwC’s data clearly demonstrate, Industry 4.0 isn’t a lofty theory; it’s already in practice. Significant investments in Industry 4.0 will amount globally to $907 billion per year until 2020, according to the study.

“Don’t buy the hype,” advises noted Reinhard Geissbauer, Jesper Vedsø, and Stefan Schrauf in their article, “A Strategist’s Guide to Industry 4.0” in PwC’s Strategy + Business. “Buy the reality. Industry 4.0 will be a huge boon to companies that fully understand what it means for them. Change of this nature will transcend your company’s boundaries—and probably the national boundaries of the countries where you do business.”

Effect on higher education

For colleges and universities with manufacturing-related degrees and certifications, Industry 4.0 also signals changes. Workers entering manufacturing today need new skills and higher levels of education than workers did a decade ago. By 2018, 38 percent of workers in manufacturing will have some post-secondary education, according to the Georgetown University Center for Education and the Workforce report, “Help Wanted: Projections of Jobs and Education Requirements Through 2018.” In 2008, 34 percent of workers in industry had some training beyond high school. While the predicted increase in necessary educational attainment is small, the authors of the report point to automation of routine functions as the cause. As machines and robots increasingly do the rote responsibilities of workers, employers will seek to hire individuals with more training to complete higher-level tasks.

 Figure 2: Embracing Industry 4.0. Most companies are still working to achieve advanced levels of digitization but are optimistic about meeting the mark soon.

Research from the National Skills Coalition (NSC) comparing the available jobs by skill type and the number of workers available to fill them, further confirms the need to adapt training. According to NSC, 54 percent of jobs in the United States are considered middle skills jobs—those that require more than a high school diploma but not a four-year degree—but only 44 percent of the workforce have the skills needed for these positions. Comparatively, more than 20 percent of the workforce is trained for low-skill positions, while the positions themselves make up about 15 percent of job demand. Based on these data, there is an obvious opportunity to engage the U.S. workforce in higher levels of education to fill the need of middle skill jobs.

These two trends will require higher education institutions to increasingly be in tune with the changing industry and skills requirements. So far, however, higher education as a whole is lagging behind in meeting the needs of employers. Even more telling is that administrators don’t seem to realize it.

A 2013 Lumina Foundation/Gallup study found that just 11 percent of business leaders agreed strongly that college graduates are prepared for the kinds of jobs they are seeking to fill. That number departs significantly from the 96 percent of college and university chief academic officers who were extremely or somewhat confident that their institutions prepare students for their future careers.

But there are some, like Jeff Selingo, author of the book, There Is Life After College (William Morrow, 2016) who lay some of the blame on workers themselves.

“In a day and age when careers and industries expand and contract at an alarming speed, workers can’t expect that their undergraduate or even graduate education will be enough to sustain them for their entire working life,” Selingo writes in a LinkedIn post. “Nor can workers expect that companies will invest in every facet of their professional development, given that today’s workers switch jobs and careers much more than their counterparts in the past.”

So as colleges and universities change their curricula to teach the new skills required by Industry 4.0, it’s clear students who want to enter manufacturing must also adapt a lifelong learning mentality. The title alone of the Harvard Business Review article, “Employers Aren’t Just Whining—the ‘Skills Gap’ Is Real,” by James Bessen, a Boston University School of Law economist, is telling.

Bessen writes: “Those workers who acquire the latest skills earn good pay; those employers who hire the right workers and train them well can realize the competitive advantages that come with new technologies.”

The scope of the skills gap varies according to industry and location, but a survey of more than 450 manufacturing executives conducted by the Manufacturing Institute and Deloitte yielded the following areas in which manufacturing employees were most deficient: technology and computer skills (70 percent), problem solving skills (69 percent), basic technical training (67 percent), and math skills (60 percent).

Changing the image of manufacturing

There are also cultural challenges that may complicate the pipeline to advanced manufacturing. “In the United States, there can be a ‘uniquely American’ view of manufacturing that comes from the loss of so many manufacturing jobs in the past 30 years due to globalization, the North American Free Trade Agreement (NAFTA) treaties, and jobs moving to East Asia and to Mexico,” says Mike Nager, business development manager at Festo. “When graduates consider a career in manufacturing, or when their parents consider those sorts of jobs for their kids, there tends to be a very sour taste in their mouths, because the manufacturing they remember is from their grandparents’ days.”

Image 3: Wanted: Industry 4.0 skills—New production processes require new skills, here is what employers are looking for.

In Germany, where the Festo Group has operated for nearly a century, that stigma doesn’t exist. “Germany never shed its manufacturing base,” says Nager. “It created many of the technologies that we are using today.” . Advanced manufacturing, which is on the rise in the United States and Canada, presents a very different environment than the sweatshops and poor conditions, lack of job security, and closing of plants that used to typify North American manufacturing.

“When a new plant opens up—no matter what they’re manufacturing—it’s typically well lit,” says Nager. “It’s clean. You can eat off the floors. It’s sophisticated. It’s robot programming. It’s very high end, and it’s very technical.”

As those sorts of plants proliferate in Europe and Japan, North America lags behind considerably. That’s a danger that troubles Daniela Vidal, the director of opportunity development at the University of Southern Indiana. “With the rapid pace of change that we are experiencing globally in technology, our industrial base really needs to embrace moving into the 21st century,” she says. “Or they’re really going to fall behind or disappear. If there’s a real disruption in the market, they’re not going to survive unless they have their eye on the ball.”


About The Author

Festo Didactic’s picture

Festo Didactic

Festo Didactic designs and implements learning laboratories, educational equipment, and programs that train people to perform in dynamic and complex industrial environments. Festo Didactic has more than 40 years experience in developing solutions for fast learning and  retention for technologies including mechatronics, factory and process automation, electrical engineering, renewable energies, electronics, fluid power, refrigeration and HVAC, industrial maintenance, instrumentation and process control, and teleecommuications. Festo Didactic’s purpose is to help people turn the power of intelligent automation into a catalyst for transformation.