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Industry 4.0: “From Factory to Smactory”
“Where disruption meets the manufacturing industry”
By Rick Bouter, January 2015

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Industry 4.0: from Factory to Smactory
It is August the 18th of 2014 when a German government official press
‘post’ on an update called: "Zukunftsprojekt Industrie 4.0”, not
knowing that this Industry number will complete transform the way we
traditionally did business.1
Where business transformation in prior times
mostly affected individual entities of businesses, this transformation
affects the whole business eco-system. The announcement, posted on
the “Bundesministerium fur Bildung und Forschung2
” or, in English,
the:”Federal ministry of education and Research” quoted the following
key message:
“The future project Industry 4.0 aims to enable the German industry in a position to be
ready for the future of production. Industrial production will be characterized by strong
personalization of products under the conditions of high flexibilised (high-volume)
production, the extensive integration of customers and business partners in business and
value creation processes and the coupling of production and quality services.”
Industry 4.0, where disruption meets the manufacturing industry
According the Cambridge Online Dictionary is revolution something that is: ‘a very important
change in the way that people do things’ or ‘one complete circular movement of something’. That
Industry 4.0 is a industrial revolution is an understatement. Industry 4.0 is a big disruption in the
economy & the way we (will) do business in the future. Before deep dive directly into Industry 4.0
let us have a closer look to the road towards it...
Industry X.0
What are the Germans counting for? The number behind Industry is the amount of Industrial
Revolutions. Let me first take you on the road towards Industry 4.0.
Industry 1.0
The first industrial revolution relates back to the end of the 18th
century, back to 1784 where the
first mechanical loom saw daylight. The first industrial revolution is known for mechanical
production facilities powered by water and steam.
Industry 2.0
The second industrial revolution takes us back to the start of the 20th
century. Don not confuse this
with the fundamental principles of electricity generation who were discovered in the period
between 1820 and 1830 by the British scientist Michael Faraday3
. The second revolution was all
about mass production based on the division of labour, powered by electrical energy.
Industry 3.0
The third Industrial revolution takes us back to the early 70’s where electronics, IT and heavy-duty
industrial robots where taken into process for a further automization of production
Industry 4.0
Industry 4.0 is an initiative of the German government to make the paradigm shift from the
traditional way of manufacturing to the future way of manufacturing. Where analog and mechanical
where key words in the traditional way of manufacturing, the future way of doing business in this
market segment will all be about digital. The fourth Industrial revolution takes us back to today
where we see the first steps of the so called Industry 4.0, what is based on Cyber-Physical
Production Systems.
1
http://www.bmbf.de/de/9072.php
2
http://www.bmbf.de/
3
http://www.michaelfaraday.net/

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Connecting the physical with the digital
Seen the revolutions we can see a pattern, mass production through automation. The fourth
revolution is changing the game. To stay in the competitive game, companies have to digitally
transform totally. Digital Transformation as key enabler to stay in the game. Connecting the
physical and digital dots to create a whole new era for the manufacturing industry, is what needed.
The German government and businesses realizes that is no other. Their economy is on the cusp of
that fourth industrial revolution:
“The economy is on the cusp of the fourth industrial revolution. Through the Internet
driven, grow real and virtual world continues along to an Internet of things. The hallmark of
the future form of industrial production are the strong individualization of products under
the conditions of high flexibilised (high-volume) production, the extensive integration of
customers and business partners in business and value creation processes and the coupling
of production and quality services, referred to in such opens hybrid products. The German
industry now has the opportunity to actively participate in the fourth industrial revolution.
The future project Industry 4.0 we want to support this process.4
”
Plug and play
“... in other words, standardization – is only one of the many attributes of what is known as
Industry 4.0. This concept, which was coined as part of the Federal Government’s High
Tech Strategy, describes a form of production in which all machines and products are
digitally networked together. It was presented to a broader public for the first time in 2011
at the Hannover Messe, Germany’s most important industrial fair.5
”
Think about it, a connected manufacturer is only the beginning. What is next is a whole distribution
chain connected and again, this is only the beginning. Whole business eco-systems will be
connected. Every action taken by employees, all concrete machine action and duration, every part
of transportation, the state of your products, employees and machines, available on every moment
in time. In terms of cost calculation, we never knew what cost calculation was, until the arrival of
4
http://www.bmbf.de/de/9072.php
5
https://www.deutschland.de/en/topic/business/globalization-world-trade/industry-40-at-hannover-messe

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the ‘smactory’. Managers and business leaders can now steer upon real time overall insights. No
impediments, uncertainties and so on. Real time, valid, data to steer on. Remember the well known
quote: “You cannot manage what you do not measure?”
That the German government takes the Internet of Things serious can be seen on the tremendous
amount of money the Germans reserving for Industry 4.0 namely, 200 million euro’s. But, not only
the German government is taking the Industry 4.0 seriously. Also industry leaders as Siemens,
Bosch and other German companies are working very concrete on Industrial Internet of Things
strategies.
Industrial Internet of Things strategies
When we look to two German companies which are heavily involved in the Industry 4.0, we see
Siemens and Bosch.
Siemens
Siemens AG, known for their electronic devices/ machines with presence in sectors such as
industry, utilities, healthcare, etc is one of the German companies who is actively developing a
strategy for the Industry 4.0. Siemens sees and does the following things:
 Fundamental change in manufacturing industry leads to increasing digitization and
networking to leverage productivity
 With 7,500 software engineers, the Industry Sector is trendsetter for linking product
development and production through the use of IT
 Integrated Siemens portfolio comprising hardware, software and services underpins
technological leadership6
A great example of the first steps of a ‘smactory’. Leveraging the network and linking product
development and manufacturing/ production through digital. Industry 4.0 is more than just linking
machines and production lines. It is also pioneering how all this data can support product
development to better determine customer/ business need and produce, what they want, and
deliver, when they need it. The role of supplier will significant change with the entrance of Industry
4.0. When your supplier have full sight on your stock and the way and speed of how you produce
they can take over the role of stock management. In this way you do not have to worry about your
stock of raw materials and companies can focus on their reason of existence.
Creating competitive advantage through simulation software
In their report on: “Self-organizing factories” Siemens wrote:
“To be competitive, companies must reduce the time and cost associated with developing and
manu- facturing ever more complex products. Customer requirements are also becoming more
demanding and nuanced. Production experts believe the solution is the merger of virtual
planning and physical production processes. This is the idea behind the concepts of cyber-
physical systems (CPS) and Industry 4.0. Customized software is a must here — but generally
not the horizontal IT systems which, like office programs and databases, can be used in many
different applications. Even more important is vertical IT — i.e. solutions developed for
particular industrial sectors and their special needs.7
”
Bosch
Do you still think Bosch is the companies of the green cordless drill machines, think again. With
Bosch Software Innovation, Bosch is one of the Industry 4.0 accelerators of the German landscape.
How all the Internets of X’s fit together
When talking about connecting the physical to the digital, there is a lot of rumour around different
definitions. Industrial leaders trying to coin to their own definition to grab a piece from the
connectivity pie. A thought sharing on the war of definition when we speak about connecting the
unconnected would result in:
6
http://www.siemens.com/press/en/pressrelease/?press=/en/pressrelease/2013/industry/i20130457.htm
7
http://www.siemens.com/innovation/apps/pof_microsite/_pof-spring-2013/_pdf/en/Self-organizing_factories_EN.pdf

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The overall coined term Internet of Everything (as a baseline) for connecting the unconnected/
physical to the digital. The term everything explains that we talk not only about ‘things’, but about
everything. Not only things but also people, processes and data. The original term Internet of
Things, coined by Kevin Ashton in his days as a product manager at Procter & Gamble is a part of
IoE because her the focus is on things and not on people, processes, etc. When we talk about the
Web of Things it is in my point of view focussing on the connectivity of things again. Bosch build on
this thought, by talking about the Internet of Things & Services. The industrial Internet is also a
part of IoE but focussing mainly on the big industries. Industry 4.0 is a part of the Industrial
Internet because Industry 4.0. mainly will be focussing on the manufacturing industry. M2M,
Machine 2 Machine is a very important part for the Industrial Internet. Machines which produces
data and communicates to other machines or general systems to say something about what they
sense where line/ production managers can steer on. Connectivity is key for ‘smactories’, that is
what the Internet of ‘X’ is all about. Real time decision making on valid data.
From Factory to Smactory
Where a factory is defined8
as a building or set of buildings where large amounts of goods are
made using machines, a Smactory is an almost self-steering industrial data leader in the digital
era. A factory that has a full focus on ‘Smact’. Smact, known for technology such as Social, Mobile,
Analytics, Cloud & (Internet of) Things are the key pillars for innovation in the Industry sector.
As a conclusion I would like to quote a part of Siegfried Dais, deputy chairman of the board of
management at Robert Bosch GmbH, his findings in an interview he had with McKinsey &
Company:
“With all this new information available—about interdependencies, the flow of materials,
the cycle time, and so on—manufacturers can lower their inventory costs and reduce the
amount of capital required. But don’t forget: this involves huge amounts of data, and the
fundamental prerequisite for such a system is that it is stable and reproducible. Common
sense won’t help here; this involves rigorous mathematics. And what’s interesting is that
the algorithms for this already exist. Mathematics has already solved numerous problems
that we won’t encounter in the real world for another 50 years. But analytical talent is
becoming increasingly rare in the labor market, so there will be fierce competition for
mathematicians and analysts. The opportunities presented by the Internet of Things are
clear—but so are the challenges.” 9
Do you want to know more about the Internet of Things? Join the LinkedIn group about: “Industry
4.0 & the Industrial Internet” now!
Sources
Bundesministerium fur Bildung und Forschung, “Zukunftsprojekt Industrie 4.0
” 18th of August 2014
Deutschland.de, “Industry 4.0 at Hannover Messe” the 7th of April, 2014
Wikipedia “Elektric Energy”
Wahlster, Wolfgang, “Industry 4.0: From the Internet of Things to Smart Factories”, Digile, 31rd of
May, 2012
Siemens, “Siemens prepares the way for Industry 4.0”, Siemens Press release, 8th
of April, 2013
Nikolaus, Katrin, “Building the Nuts and Bolts of Self-Organizing Factories” Siemens, spring”, 2013
Image credits:
8
http://dictionary.cambridge.org/dictionary/british/factory
9
http://www.mckinsey.com/insights/business_technology/the_internet_of_things_and_the_future_of_manufacturing

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Industry 4.0 - Impetum
Logo Bundesministerium fur Bildung und Forschung - Bundesministerium fur Bildung und
Forschung
From Industry 1.0 to Industry 4.0 – The Engineer