I have been asked a number of times about Industry 4.0 and I have read several definition and interpretation. This is how I see it, in a nutshell, from the point of view of ICT.
The Production sector is undergoing its 4th major revolution, that we can address as “digital transformation of goods and services”.
What were the previous ones?
- the first was ignited by the use of steam (then electricity) power to augment human capabilities in manufacturing. Notice that contrary to others I place electricity as part of the 1′ revolution. It was about powering machines/tools, increasing workers strengths.
- the second happened at the turn of the last century with the advent of mass production (the Ford T was probably the kicking point, 1908). This imposed the one size fits all onto the consumer, volume drove design and production.
The use of information technology, in the 60ies and 70ies, to flank and make supply production and delivery more efficient is not considered a “revolution” although I feel that it probably would deserve it because it started the digital transformation of processes. Computers were not involved in the production but supported the production (and logistics) processes.
- the third was characterised by the broad application of robots in production and in a few specific parts of the value chain, like automatic warehousing (known as the digital transformation of manufacturing).
In the looming 4th revolution we are seeing two major elements (whose signs were already visible in the 3rd, although on a limited, focussed, scale): the softwarization of products and the fragmentation of production with supply and distribution chains becoming pervasive along the whole value chain. This is the digital transformation of the whole value chain.
The softwarization of products means that software is taking a crucial role in the delivery of the product functionalities and in the way it is perceived by the end user. This has several implications that are (and will be) going to reshape the whole value chain, the players, the idea of “product” and the marketplace:
- Softwarised products (think about a smart phone) meet the production requirements of economy of scale and the market requirement of customisation (market of one). In fact, the hardware part can be produced in volumes, thus benefitting from economy of scale and amortizing the heavy CAPEX of ever more costly production lines, whilst the software part can cover a broad spectrum from capital intensive development (like OS) leading to few players offering them to small apps produced at extremely low cost, distributed basically at zero cost to niches potentially spread all over the world.
- The decoupling of the hardware from the software (made possible by OS and API) leads to different life cycles: the hardware part may have a life cycle of one or more years whilst much of the software part may have a real life-cycle measured in weeks. In turns this leads to a continuous change in the product with the implication that the supply chains and the delivery chains are no longer solely connected to the production phase but they connect to the end user.
- The decoupling can lead to a physical displacement of functionalities, with some “co-located” in the product and others detached from it but made accessible through network connectivity (of various sorts). In turns this is pushing towards the transformation of products into services and into a different relationship between the user and the manufacturer that actually can become a multitude of service providers from the user point of view.
- The presence of supply chain and delivery chain at the point of use is also transforming the role of the users that can become producers themselves, since the value is also in the way something is being used, aggregated and connected to other parts, locally or through a network. We are already seeing signs of this happening through user groups (one of the first example was the explosion of flight simulators adds-on and the role of users/producers communities.
- The multitude of loosely connected “producers” (that now see the presence of users as well) steers toward co-design, co-production, co-maintenance and distributed usage. In this scenario the concepts of production, supply and delivery gets completely fuzzy.
- Among the players we need to include also artificial ones, like autonomous robots (hardware and software alike).
All of the above is what is characterising the fourth industry revolution, aka Industry 4.0.