Industry 4.0 Is Here. Where Do You Stand?

August 24, 2022
Empower Frontline Workers

A report from Handelsblatt takes a close look at the state of Industry 4.0 in Europe. 1,452 industrial organizations of all sizes reveal their Industry 4.0 status, results, motivations, and outlook. Read on to find out how your company stacks up. [By Matt Bulow]

Digital technologies offer manufacturers many benefits. For suppliers, the ability to connect to networked systems and processes is becoming table stakes. What does real-world production look like under the influence of this big collection of revolutionary technologies we call Industry 4.0?

Many companies have yet to make significant progress towards their goal of digital transformation. Handelsblatt surveyed a random sample of decision makers who work for European manufacturers and asked about their progress and plans.


The Status Quo of Industry 4.0

Since the dawn of Industry 4.0 some ten years ago, countless companies have been increasing productivity and lowering costs with smart manufacturing technologies. The report tells a more nuanced story in Europe, however.

  • Fewer than 25% said their company has started to digitise
  • Over 50% have no strategy to digitise production
  • Only 10% have made good progress

So, what’s holding them back? In Europe, it’s a combination of cost, security, internal resources, and motivation.


Compatibility problems arise because smart factory technologies are not always implemented from a blank slate. Very often, manufacturers are retrofitting existing factories, systems, and equipment with digital capabilities.

Underscoring the strategic nature of Industry 4.0, top executives are the ones most frequently making final decisions on digitisation investments.


Benefits of Digitised Production Are Clear and Many

Overwhelmingly, decision-makers recognize the value of digital transformation. Especially those who work at companies that have already made significant progress.

  • Only 20% see “unclear benefits” as a key problem of digitised production
  • That number drops to 10% for companies who have already made significant progress

The perceived benefits involve many aspects of production. Over 70% of surveyed decision makers see the following benefits as (rather) important:

  • Increased efficiency
  • Lower costs
  • Better quality and service
  • Improved safety and security
  • Competitive advantage
  • Lower supply chain risk
  • Higher customer satisfaction
  • Opportunities to offer new products or services
  • Ecological sustainability
  • Shorter time to market

The Internet of Things

The Industrial Internet of Things (IIoT) is a digital network of all physical and digital resources in the production process. Sensors collect operating data, which companies can then monitor and analyse.

Among companies in the surveyed European countries with at least 250 employees, 85 percent are using one or more IoT platforms. For smaller firms, that number drops to 40 percent. Most are using applications from external providers. Significantly fewer decide to go down the path of a proprietary development.

Despite this considerable rate of IoT platform adoption, not even 30% of the surveyed European manufacturers claim they have already implemented “Networked and communicating machines/devices.”

This indicates a huge opportunity, for both IIoT equipment vendors and manufacturing firms in general. With most manufacturers yet to fully network production equipment, those who make rapid progress now can gain a competitive advantage.

The Most Relevant Technologies for the Future of Industry 4.0

The following four technologies rank at the top of the lists for both future relevance and progress already achieved:

  • Cybersecurity
  • The internet of things
  • Digital platforms
  • Cloud services

Blockchain, chatbots, and wearables are less significant. Smart glasses were also deemed less important, but augmented reality, mixed reality, and virtual reality have considerable importance.

The lack of significance attributed to smart glasses while augmented reality receives considerable attention by decision makers may indicate a lack of clarity with respect to use cases for these technologies. Because picking, assembly, maintenance, and expert remote support can all benefit greatly from a combination of smart glasses and augmented reality to empower frontline workers in logistics, manufacturing, and service.

Additive manufacturing, mobile robots, artificial intelligence, and big data have tremendous potential in the short and medium terms because many companies hope to implement them in the next one to two years.

Many also plan to implement autonomous driving, intelligent containers, voice and character recognition, AR/MR/VR, and collaborative robots (but have no specific schedules). We can thus expect the markets for these technologies to grow in the medium-to-long term.

Augmented Reality, Mixed Reality, and Virtual Reality

Augmented reality involves projecting various types of information such as text or video onto the user’s view of the real world via mobile device or smart glasses. Mixed reality is similar, but also incorporates persistent 3D objects that make it possible, for instance, to attach a sticky note to a physical object or add new virtual objects to the visual field. Virtual reality constructs a fully simulated experience.

Over 70 percent of companies in Europe expect there to be potential applications for augmented reality in production. However, fewer than one quarter of them have rolled out AR, VR, or MR applications in their production. Respondents listed the following applications as the most important:

Quality control

Assembly, maintenance, and repair services

Optimization of production processes

Remote support for remote expert assistance

Training and integration of employees

After-sales support for customers

We can explain the discrepancy between the current and expected use of AR in several ways. Perhaps not all potential adopters are convinced of the business case — they may not perceive the additional revenue as outweighing the costs. The estimated value of AR, however, increases with the size of the company. Larger companies are also more likely to be using AR. This suggests greater exposure to the technology may help prove the business case.

How Did We Get Here? Questions the Report Answers

Many companies are speeding up their efforts to digitise production. But the Industry 4.0 situation is still very heterogeneous. There are more companies in Europe that see potential for key Industry 4.0 technologies than there are manufacturers using the internet of things, augmented reality, or artificial intelligence in their production.

How did we get here, and where are things headed? The Handelsblatt report answers important questions to help us understand the Industry 4.0 situation and outlook.

Why are some organizations hesitating?

Reasons for the lack of widespread adoption inevitably come back to the business case and available resources. Companies that lack the funds or personnel to implement digitisation projects will progress more slowly. Sometimes, companies that are dragging their feet are not yet fully aware of the significance of Industry 4.0.

Will we be able to “wait out” Industry 4.0?

Although delaying is still possible, no one can avoid digitising their production processes for long if they wish to compete in future markets. Industry 4.0 is already shaping entire production value chains and causing many companies to gravitate toward it for this reason alone.

In practical terms, this means businesses that do not digitise their production processes may be unable to be part of a value chain as a supplier, for example, because they can no longer integrate into the networked processes of other participants.

Who is digitising the fastest?

Larger companies with more than 250 employees tend to see more potential applications for the IoT, AR and AI. By digitising their production processes, many such companies are increasing productivity and efficiency while lowering costs. In turn, possessing more experience with these new technologies also leads these manufacturers to attribute greater potential for adding value to Industry 4.0.

How is Industry 4.0 changing the way people work?

Overall production processes are evolving. Around 77 percent of companies expect the digitisation of production to cause IT skills and soft skills to become more important for production workers.

Employees will increasingly work hand-in-hand with machines and robots. Presumably, we will carry out production processes less frequently and instead control and monitor them.

What do companies need so they can say “yes” to Industry 4.0 technologies?

One fifth of the surveyed companies in Europe specified clear and flexible pricing as the most important criterion when it comes to selecting a technology provider. Security and the availability of advice, support, and professional services are also seen as exceptionally important.

Artificial Intelligence

AI-controlled equipment opens up new ways to structure the production process because it can react independently and control processes intuitively, reducing the need for human intervention. By combining structured machine data with unstructured data such as images, videos, and sounds, it is possible to detect patterns and correlations.

73 percent of decision-makers agree that artificial intelligence has potential in production. And although only a little over 20 percent have already implemented AI in their production, more than 40% plan to in the next one or two years. Among companies who have identified specific applications for artificial intelligence in their current production operations, the following fields were mentioned in particular:

Monitoring of manufacturing quality and revenue management

Fault prediction and predictive maintenance

Monitoring of security and compliance measures

Demand forecasting and production planning

Around two-thirds of respondents prefer storage over the cloud for the operating data that AI and machine learning tools use.

Conclusions: The Revolution Continues

The market for the broad array of digital manufacturing technologies known as Industry 4.0 is still expanding rapidly. As the revolution continues to gain momentum, market forces will make adoption less a question of “if” and more one of “how fast.” Because digital technologies are the only way cost-effective, sustainable production processes can be tailored to perfectly match the requirements of tomorrow’s customers.

The report includes several practical examples of European companies who are already leveraging Industry 4.0 approaches. How do you feel about the individual technologies behind Industry 4.0? Are your views different or similar to companies your size?

It’s worth examining the report more closely to find out. You’ll also learn more about what’s on the horizon for the manufacturing sector.

Research Report: Industry 4.0

How digital technology is changing companies’ production processes – by Handelsblatt Research Institute and TeamViewer.

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