Increasing production capacity. Delivering contracts on time and growing the business. Reducing the costs of production and inventory. These are just some of the benefits of the digital — or smart — factory. But, why do businesses need to digitalize their factories to get these benefits?

The manufacturing industry has gone through three revolutions over the past 200 years. The third revolution saw electronic automation and software systems increase production efficiency while reducing production costs. The use of the lean philosophy, based on the manufacturing systems that Toyota introduced in the 1950s, was also a significant change. Using these advancements, industry has supplied the growing demands of end users and shareholders for many decades. However, demand continues to grow rapidly; competition is increasing from existing competitors as well as new entrants using disruptive technologies; tighter regulations are being implemented; and the workforce is aging. The need for change is vital to the continued success of many manufacturing businesses.

So why not get more production and cost savings using existing automation, software systems and lean approaches?

Most companies have exhausted the use of lean approaches in their processes, mainly due to the lack of timely, correct and multi-dimensional data. Existing software systems have become expensive, inflexible, siloed and don’t accommodate additional data capture, big data and advanced analytics. Therefore, they are unable to provide the multidimensional information required for intelligent automation and intelligent decision making. The next generation of industrial machines hasn’t matured enough to justify a complete replacement of existing industrial capabilities.

This leads us to what has been described as the Fourth Industrial Revolution, or Industry 4.0. It is the current trend of automation and data exchange in manufacturing technologies. It extends beyond the factory into the supply chain, engineering, maintenance repair and operations, and into the products used by consumers. Industry 4.0 enables manufacturers to affordably increase production and quality while reducing costs in rapid time scales. This will remove constraints and increase capabilities in existing lean teams and automation.

The term “smart factory” is used to describe the use of Industry 4.0 in the production or assembly lines of manufacturing plants. The ultimate aim of a smart factory is to fully automate all operations including, in some advanced cases, the ability for a consumer to click a buy button at home and for the product to be produced and shipped without any human interaction. You may have heard of a “lights out” factory, which is fully automated and requires no humans onsite. In most cases, humans will still be required to work in a smart factory, but their roles will evolve from machine operators and assemblers to maintenance and knowledge workers.

Most manufacturers are at the very beginning of this journey and have yet to understand how Industry 4.0 and the smart factory concept can be of value to them. Some have adopted the full breadth of Industry 4.0 technologies, but only a few are benefiting to the extent of overall factory profitability and market share.

So why embrace the concept of a smart factory now? The answer lies in the advances of specific technologies such as the industrial internet of things (IIoT), sensors, analytics, robotics, augmented reality, additive manufacturing and cloud computing. These technologies are not only disrupting the manufacturing industry, but they have also become commoditized and therefore very affordable.  IIoT platforms are also challenging the traditional manufacturing execution system (MES) software packages, and some manufactures have chosen to use these new platforms over traditional MES software for monitoring and controlling complex manufacturing systems and data flows.

The market is rapidly upskilling to design new processes, integrate these technologies and, importantly, advise how to realize the benefits. This means Industry 4.0 is a real game changer. Without it, manufacturers will be left behind.