CPG Newsletter: Industry 4.0 – Opportunities and Challenges

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Industry 4.0 – Opportunities and Challenges

What is Industry 4.0?

Transformations in digital technology have led society into a fourth industrial revolution: Industry 4.0. The mechanization of hydropower and steam engines brought about the first industrial revolution. The second was prompted by an initial electrification of industries in the 1870s and 1880s, it went on to be defined by the mass production and moving assembly lines of the 1920s. More recently, automated production lines became possible thanks to electronic engineering and IT, and with them came the third industrial revolution. 

Originally initiated by the Science and Industry Research Union (Forschungsunion Wirtschaft – Wissenschaft) the future-oriented project Industry 4.0 was adopted by of the German Federal Government. In November 2011, the government published a plan of action, which presented high-tech strategies goals for 2020.

That being said, the term Industry 4.0 has yet to be agreed upon. Still in its early stages, Industry 4.0 can be viewed as the extension of a digital transformation that began in the 1980s. The shift to digital technologies is merely the first step of many to enter Industry 4.0. 

Industry 4.0 is primarily a vision of the future comprised of a range of varying elements. Several of these elements have already been introduced and so far, the effects have been positive. 

If all parties involved – suppliers, manufacturers and distributors – agree to these new elements they enter into a new network with one another and become: Industry 4.0. What exactly this network will look like remains unknown. 

It is to be expected that smart factories in the future become fully responsible for their production processes. Not only will machines function independently within the factories, but through external communication they create new networks. The good news for customers is that their orders will be directly communicated to the production line, enabling suppliers to customize their orders, too. 

The fast reaction times in smart factories will have future businesses individually manufacturing orders, rather than relying on stock. This alteration not only serves the customer directly, it ensures a reduction in waste and scrap materials therefore taking care of the environment. 

The technology of smart factories requires a digitisation of industry, merely the first step to Industry 4.0. Further steps of Industry 4.0 are in the introduction of alternative decision-making systems. This is where the German Federal Government sees itself contributing greatly as the frontrunner in global innovation. 

To this end, three associations: BITKOM, VDMA and ZVEI committed to a cooperation agreement in April 2013 to expand Industry 4.0. Since then support for the project has grown; businesses, unions, associations, academics and politicians have joined together with the Federal Ministry for Economics and Affairs and Energy (BMWI) via platform: www.platform-i40.de in an attempt to bring Industry 4.0 forward. 

The platform’s online library provides guidelines and advice mid-tier businesses looking for actionable solutions, and 270 examples presented on map

Elements of Industry 4.0

In its initial stages, many of the proposed plans for the fourth industrial revolution are already in effect. The maturity of an Industry 4.0 system is measured by the number of elements participating in the prospective networks. Many of these elements are understood as parts of a smart factory, once functioning together in a matured Industry 4.0, the idea is to structure smart factories using a modular system rather than a typical linear assembly line.  

Interconnectivity is a central technical requirement for all parts of Industry 4.0. All objects must be capable of exchanging information with one another; machines or sensors that can communicate are known as Cyber Physical Systems (CPS). 
How this exchange takes place, be it locally or via a network, is largely irrelevant as to how CPS is defined. CPS connected to the internet is known as the Internet of Things. Additional features beneficial to networks like CPS are human-machine interface (HMI) and digital twins. HMI is a software that presents updates about real-time processes, and receives other operators control instructions, while not a mandatory requirement of CPS, it can be extremely useful.  Comparably, a digital twin of certain products proves to be very expedient to the efficiency of such systems. 

A Digital Twin

A digital twin is an exact virtual reflection of a product or a production line, which digitally mirrors the behaviour of its physical counterpart. Factories and production lines benefit greatly from this duplicate because before production begins, the operation of the production can be tested through digital simulation.

If problems arise during the simulation, they can be eradicated before the manufacturing process begins. An optimization of a production line of this scale helps reduce energy use and material waste; plus, many other factors yet to be developed. of possible optimisations is endless.

A digital twin is just as beneficial to the production process as it is to the planning stages. Running the systems parallel helps readjust manufacturing procedures should last-minute alterations need to be undertaken. Ideally, the simulation would constantly calculate the next steps of production. Up until now this type of real-time application has had little use. 

Smart products

Smart products have the potential to redesign factories. They provide their own assembly instructions which are then programmed into the smart machine to begin the production process. The machines do not necessarily need their instructions to function, this decision is made depending on the product specifications. Once a product is finished, the machine receives the next product to be manufactured with its own instruction manual, a product that may require very different parts and techniques. 

Additionally, smart products are capable of navigating their own way through a modular structured smart factory. At any given moment, each product is accountable, recognizable, traceable and consequently making the planning of processing sequences easier. 

One example of Industry 4.0 innovation, still in its development stage, is the InBin from Fraunhofer IML an intelligent bin which records its location, and collects data about its surroundings, e.g. temperature. It can connect via radio and internet as a CPS machine and via a display with humans. InBin is capable of overseeing order picking procedures. 

Horizontal and vertical integration 

In Industry 4.0 integration, refers to the connection to CPS. There are two types of integration, vertical and horizontal. Figure 1 compares the modern Industry 3.0 with the horizontal integration of a future Industry 4.0. 

Horizontal integration is communication by way of same-level connections, these can extend beyond the limits of a system and even take place in a different plant, for example, a supplier can receive real time updates regarding the status of a certain part. 

Vertical integration, on the other hand, takes place within a system across many different levels of hierarchy. Different levels within one company are able to communicate with one another, e.g. development, production, accounting and distribution.

Figure 1. Information flow within and between three companies in both Industry 3.0 and 4.0. The connections in Industry 3.0 are limited (internal: department with department, external: company with company), whereas the connections of Industry 4.0 appear to be much more complex. 
A key factor in CPS integration is an assurance of IT-security. In order to maintain tight security protection in Industry 4.0 not all machines will be connected with one another. For each new application, smaller networks will internally exchange information with the relevant CPS from all departments. Temporary interfaces will then communicate with external networks as necessary. 

Smart Maintenance

The maintenance of certain parts often pose problems in assembly line production, however CPS networks in Industry 4.0 should not suffer the same fate. One solution, to avoid interruptions in the production, would be to preprogram machines to order their own parts after a duration period. Two other alternative ways to recognize that maintenance is needed: visible reduction in product quality or the simulation of a digital twin. Ideally, the replacement of parts should be timed exactly to optimise the life line of parts and to avoid interruptions in the production line. 

Big Data

The complexity of CPS networks, digital twin simulation, real time production line monitoring and supervisory sensors will certainly accumulate large amounts of data. These systems function in such enormous dimensions that analysis processes have to be redesigned. Big data has become the term to describe the processing and evaluation of such volumes of data. 

Autonomous mobile robots

Production lines in Industry 4.0 are expected to be flexible; machines will be able to regulate changes in the manufacturing process, crucial here is to avoid losing time retooling machines. In Industry 4.0, robots and machines will be programmed to function with reduced change-over times, part of this acceleration is due to the mobile autonomous robots, able to move to wherever they are needed, no longer repeating the same function at an assigned workspace. 

For more definitions see: Platform Industry 4.0 glossary


The future vision of Industry 4.0

The fundamental goal for factories in a transition stage to become a smart factory is to rethink the linear assembly line of traditional factories. The assembly line should be replaced by modular structure. The advantages of which are numerous, should the specifications of a products change, or a machine break down, the production line can be rapidly shifted to take place elsewhere. The assembly in a smart factory is decentralised and self-organized, an improvement on centrally controlled processes and linear production lines.

This short five-minute video presents a modular assembly line: SmartFactoryKL, see it in action here

The research project conducted by Fraunhofer IML takes the concept of a modular structured assembly line even further, as shown in Figure 2. Their innovative approach uses the Internet of Things concepts to manage an assembly line. Assembly parts and products to be processed navigate their own way around the production site visiting machine after machine.

Figure 2: The Smart Face Research Project from Fraunhofer IML, a diagram of a smart factory

In some industries, a single item production system is an advantageous choice, especially for those with limited storage space. This type of production evaluates the exact manufacturing specifications of a product before moving onto the next one. Consequently, reducing waste, avoiding over-production, and preserving raw materials. 

The VDI ZRE (VDI Centre for Resource Efficiency) has compiled a ten-minute video demonstrating the advantages of limited storage in single item production. 

Manufacturing smart products is a flexible procedure; smart products navigate their way around the production site even if their specifications vary from product to product. Smart products guide the machines by presenting their instruction manuals. Automated manufacturing can function efficiently even without central controls. 

Once smart factories achieve a high standard of product quality through non-linear manufacturing process, it won’t be necessary for all products to be the same. 
The future is flexible. Successful non-linear manufacturing processes may mean a permanent change in mass production. The customization of products will become much easier and sold at mass production prices, too. 

In July 2017, the Fraunhofer IPA demonstrated an automated production line for customized spectacles, individually tailored to customers desires. Along this new type of production line, the retailer provides the production site directly with the design specifications. Even today new automated production technologies enable customers to order a customized training shoe moulded to fit their exact footprint. 

Modular structures open up a wide range of new possibilities in manufacturing, for example, production site sharing. German and Korean businesses of Fraunhofer IOSB, cooperated to build the network Smart Factory Web, a group of smaller flexible factories, which offer their production capacities to third parties.

The idea, should Industry 4.0 take off, is for companies to offer small series production lines available for rent without their customers requiring the skills to control an entire factory. 

A change of this magnitude could pose large challenges to the manufacturing industry. Their profits are threatened if they no longer market the products they manufacture. Therefore, renting out production space, especially during periods of low production, could win manufacturers higher profit.

Products that are no longer bound to fixed production sites, can result in greater benefits for all. For example, external rental factory space nearby the customer greatly reduces delivery times and transport requirements. Consequently, factories close to urban areas could become attractive by pooling orders for a certain area.
Moreover, customers with strict environmentally friendly manufacturing
specifications can have the appropriate environmentally friendly factory contracted to meet their needs. On the whole, factories could employ more sustainable solutions and remain competitive on the market. (See the end of this newsletter for more information on how customer preferences have shaped our vision of the future.)  

The challenges of an Industry 4.0 transformation

The integration of new technologies coupled with the transformation of work processes they bring about pose great challenges on all levels, be it at the production or administrative level or the threat of occupational hazards. Chiefly, there are many unanswered technical and legal questions regarding the safety of humans and autonomous machines working together.

Any positive outcome of Industry 4.0 is met with a certain level of risk. Industries currently planning digital strategies should prepare for the relevant risks. Plant safety and data protection are two elements of great relevance for and  sustainability in businesses and the future of Industry 4.0. Overall, the new standards of practice in networked production have accelerated the need for a revision in current plant safety precautions. 

New modular structures, small scale production, just-in-time service, remote control and remote maintenance all challenge worker and plant safety, material assets and environmental values. These challenges also exist on a legal level, companies must redefine certain responsibilities within a legal framework to ensure the utmost safety for all. 

Equally, issues concerning data protection and security are crucial when it comes to digitisation. Industries must ensure that their in-process collection of data, data analysis and extrapolation measures do not put their own data under threat of attack. Secure exchanges of data in a networked system (internally and externally) are pivotal to dispel the chances of cyber-attacks. 

The larger the network, the tighter the security net needs to be. Each new connection to a networked IT Systems may expose it to possible attacks. Over the past two years, one in three German companies experienced cyber-attacks.

A recent paper, published by the Confederation of German Industry in August 2017, mentioned cyber security as a central issue for the success of Industry 4.0.

Out of support for businesses, the IUNO research project on IT security developed protection measures against threats and identified risks for smart factories. 

Another area of research for the IUNO is the storage of large data volumes. The solution goes beyond encoding; companies access rights, both internal and external the must be correctly managed. 

All parts of Industry 4.0 must be able to communicate with one another, emphasising the need for a common language. Most difficult are the older machines that aren’t yet CPS, only some of which can be upgraded.

But, older machines aren’t the only concern; new machines made by different manufacturers must adhere to global standards to ensure compatibility. Industry 4.0 global standards must correctly include measures to use big data. Until such standards are approved, industries transforming their factories must endure a timely process to integrate smart machines into their current processes. Only once global standards are agreed upon can Industry 4.0 reach maturity.    

A collection of German industry associations are the brains behind RAMI 4.0 – The Reference Architectural Model, a very promising model already being used for structured transformations to Industry 4.0. This five minute video by ZVEI Germany’s Electrical Industry, describes the RAMI 4.0 in more detail. The future of Industry 4.0, and its technologies abroad, would benefit greatly from the model if it became a worldwide standard for all Industry 4.0 components. The chances for which are looking prospectively high; the Federation of German Industries and the Federal Government intend on establishing RAMI 4.0 as this worldwide standard for Industry 4.0. 

Standards of Industry 4.0 will present businesses with a certain degree of internal upheaval. Any transformation done half-heartedly, will lessen the chances of businesses to reap any realistic benefits with a minimal number of positive outcomes. 

Businesses which undertake the majority of administrative and planning tasks by hand are advised against a transformation. It is in the interest of the companies themselves to calculate how much digitisation is economically viable.

Furthermore, a transformation comes at a high price, even businesses that could benefit greatly from a transformation should still expect high costs. Some of the high costs are caused by investments in hardware, purchasing licenses and elementary staff training.  

The BMBF commissioned Fraunhofer IESE to develop a basic system open platform for companies wishing to transform to Industry 4.0, the platform, BaSys 42.0, was developed in cooperation with the economic sector and academia. Another solution for companies looking for a complete commercial solution, is the Digital Enterprise Suite offered by Siemens. 

Benefits of a transformation to Industry 4.0 

VDI ZRE value small to mid-level businesses as significant players in the digital transformation, even if they are only in the early stages of transformation, one main motivation being the increase in competition. 

The BDI estimates that the digital transformation of the economy and society could add an extra 1,25 trillion euro to the value of European industries by 2025. 

The economic advantages aside, a transformation to Industry 4.0 is a chance to improve energy and material efficiency, while also preserving vital resources and energy extracted from fossil fuels.  

For many companies, new purchases now incorporate energy and resource efficiency measures, whether they are smart products or connected to a network is largely irrelevant. A new machine, for example, can be either put on stand-by, or turned off completely at weekends and during periods of lower production without wasting precious start-up time.

The decision to digitise will increase efficiency even without businesses having to establish a complicated network of different components. Manufacturing industries for example, still use traditional measures to achieve material efficiency. Digitisation, according to the German Institute for Economics in Cologne, can increase material efficiency by 3 to 4 percent. Measures regarding recycling and material efficiency should be included in any initial planning phases. 

The digitisation of industry is only the beginning of Industry 4.0. Further measures include simple communication solutions, e.g. connecting different domains or installing more sensors. These means, for example, could efficiently use the solar power from a panel on a company’s roof, particularly at times when it is generating high amounts of electricity, to charge company cars. Thereby preserving electricity generated by fossil energy. Another efficient means to conserve power is to link process heat and office heating systems.  

In a recent study, VDI ZRE found that businesses with a high energy and raw material consumption benefited the most from a transformation. The majority of savings were made in the following three areas: errors, emissions and waste, and energy. These values however, are always presented in direct contrast to the additional use of sensors and data processing hardware.

Another beneficial result of Industry 4.0 is an increase in the amount of extra sensory data. This data in water and wastewater management helps to preserve aggregate and optimise its regulation, plus hazardous situations can be recognized faster. 

The opportunities created by digital twin simulation help businesses optimise procedures to adhere to environment values. Often businesses only collect environmental data to comply with legal provisions. They record the data by hand and especially if they meet environmental standards, the results do not end up serving procedural optimisation. 

This is where sensors can cause significant change, sensors would continuously collect the data, which can be applied in a simulation and used to develop an optimal service. 

Businesses must often prove that they are producing according to certain environmental values, sensors, on the other hand, save both time and effort something usually associated with recording these values, plus they enable businesses to keep better track of recyclable materials. Traceability is a process in which products should be able to document all production processes and material and operating measures. 

The traceability of smart products allows faulty products to be rapidly identified, removed from production or, if possible, corrected. To this end, in an accident the products can be readily investigated.

Moreover, the information stored in the products is an important resource for questions regarding environmental topics, one that has never existed in this form before. Previous calculations about the sustainability of certain products were often estimates, now many more players, from manufacturers to policy makers, can be much more precise. 

Setting the course for a sustainable future

As previously discussed, Industry 4.0 only remains a viable option for the future if data processing and communication adhere to global standards. 

Figure 3: RAMI 4.0 - The Reference Architecture Model. This example of an operating Reference Architecture Model demonstrates the enormity of the task at hand. The diagram highlights the complexity via the many information levels. RAMI 4.0 was developed to be able to survey all components of Industry 4.0. Assets here include machines, products and parts. 

Figure 3: Information layers of The Reference Architecture Model RAMI 4.0

Each asset (a physical object) is managed by an administration shell, a digital storage for all the assets data that runs parallel to the supply chain. 

All administrations shell processes are marked on the product once manufacturing has been completed. Each part stores information in its administration shell. By the time the product is completed, the administration shell of the product contains all the information of the products individual parts.  If a manufacturer wishes, a QR code can be printed on the product making all the information in the administration shell of the product accessible. 

During production, the administration shell acts as an information channel between businesses, the information in the shell, like trade secrets, must be protected at all times. At present, developers are working on a rights management system to regulate who has access to certain data and when. 

The Federal Environment Agency wishes to see these futures standards put to use to warrant environmental protection. To this end, RAMI 4.0 and the respective administration shells should incorporate data from the following areas: environment, energy, and resources. This data will would prove extremely useful for future products. 

Down the line, once Industry 4.0 has reached maturity, consumers shall have the possibility to purchase customised products of their choice, tailored exactly to their needs. It is therefore conceivable that customers learn about the environmental footprint of their desired product; levels of energy and water consumption and the origin of the processed raw materials are just some of the information provided during the retail stage. The sharing of this information might give businesses competitive advantages. 

Consumers will then be in a position to choose more environmentally friendly production standards for their product. Before their purchase is completed they could be evaluating which environmental standards are being met.

In addition, legal requirements for safety-related data about certain products are easily identified by the environmental data stored in the administration shell, as with the REACH Directive for chemicals. Labelling the hazard substances and their transport requirements, either through a sticker or an engraved QR-code, visible at any time on the product, will result in fewer accidents. 

The opportunities this presents for recycling are endless. The listed components, even years after buying the product, will be retrievable due to the accessibility of the administration shell; valuable raw materials could be recycled and extra waste prevented. This information could therefore also include an instruction manual as to how to disassemble the product for recycling. 


The future visions of Industry 4.0 are yet to become reality, but components are already being implemented and used. Application examples and research projects help paint the picture of a future in Industry 4.0. 

By now, it is indisputable that directed networks of production, smart machines managing and simulating production line, plus many more innovations will all add to the efficient production of affordable, customized individual products that have never yet been possible. 

Currently, industries and policy makers are drafting the international standards for an Industry 4.0, these are urgently needed for a future digital network of Industry 4.0. Environmental data should play an influential role to these standards to ensure extensive advantages across the board.  

Industry 4.0 enables products to be manufactured under environmentally conscious conditions. These conditions can only be met with the correct data which, up until now, meant additional costs for companies.  

Incorporating environmental data into the standards will bring about economic advantages and economic progress. Customers, would then be able to incorporate the ecological footprint of a product in their respective configuration. Once environmental data have successfully become part of these standards, then this would ensure advantages for the environment worldwide. 

Industry 4.0 will bring about much change., Tthe benefits and how far their effects reach for environmental change will be decided over the next few years. 

Links and references 

Portal der Hightech Strategie der Deutschen Bundesregierung
Quelle: Die Deutsche Bundesregierung

Legislaturbericht Digitale Agenda 2014–2017
Quelle: Die Deutsche Bundesregierung

Die Internetplattform Industrie 4.0 des Bundesministeriums für Wirtschaft und Energie
Quelle: Plattform Industrie 4.0

Online-Bibliothek der Plattform Industrie 4.0
Quelle: Plattform Industrie 4.0

Karte mit Beispielen für Industrie 4.0
Quelle: Plattform Industrie 4.0

Glossar mit Begriffsdefinitionen der Industrie 4.0
Quelle: Plattform Industrie 4.0

Umsetzungsempfehlungen für das Zukunftsprojekt Industrie 4.0 – Abschlussbericht des Arbeitskreises Industrie 4.0
Quelle: BMBF; acatech – Deutsche Akademie der Technikwissenschaften e.V.; Forschungsunion Wirtschaft – Wissenschaft

Smart Maintenance für Smart Factories. Mit intelligenter Instandhaltung die Industrie 4.0 vorantreiben
Quelle: acatech – Deutsche Akademie der Technikwissenschaften e.V.

InBin - Der intelligente Behälter
Quelle: Fraunhofer IML

Verbundprojekt »SMART FACE«
Quelle: Fraunhofer IML

BaSys 4.0
Quelle: Frauenhofer IESE

Korean German Collaboration enabling a Smart Factory Web
Quelle: Fraunhofer IOSB

IUNO – Nationales Referenzprojekt IT-Sicherheit in Industrie 4.0
Quelle: Technische Universität Darmstadt

Industrie 4.0 - Finanzierung von Investitionen
Quelle: VDMA Verband Deutscher Maschinen- und Anlagenbau e.V.

Ressourceneffizienz durch Industrie 4.0 - Potenziale für KMU des verarbeitenden Gewerbes
Quelle: VDI Zentrum Ressourceneffizienz GmbH



Fraunhofer IPA entwickelt neue Anwendungsszenarien
Quelle: Industrie.de - Konradin Mediengruppe

Was die Digitalisierung mit uns macht
Quelle: Ingenieur.de - VDI Verlag GmbH

Industrie 4.0: Firmen in Mainfranken bekommen Hilfe
Quelle: Main-Post

Schutz für selbst denkende Maschinen
Quelle: Carl Hanser Verlag GmbH & Co. KG

Industrie 4.0: hohe Investitionen bremsen Entwicklung
Quelle: techtag (CyberForum Service GmbH)

Digitale Strategien für mehr Materialeffizienz in der Industrie
Quelle: Institut der deutschen Wirtschaft Köln e.V.

Digital-Zwilling spart Zeit und Geld
Quelle: Deutschlandfunk

BDI fordert mehr Einsatz gegen Cyber-Angriffe
Quelle: Handelsblatt GmbH

Leitfaden für die Industrie 4.0
Quelle: Echo Zeitungen GmbH


Perfect material flow in the  Black Forest
Quelle: VDI Zentrum Ressourceneffizienz GmbH

ZVEI explains RAMI 4.0
Quelle: ZVEI - Zentralverband Elektrotechnik- und Elektronikindustrie e.V.

Industry 4.0 - Saving materials - in development and in production
Quelle: VDI Zentrum Ressourceneffizienz GmbH

Industry 4.0 - It´s Easy! Apps help save material and energy
Quelle: VDI Zentrum Ressourceneffizienz GmbH



Doris Meurer



German Environment Agency
Division III 2.4 (Waste Technology, Waste Technology Transfer)
Wörlitzer Platz 1
06844 Dessau-Roßlau


Editorial department: Doris Meurer; Ralf Menzel; Anne Bachmann

Author: Joscha Steinbrenner

This Newsletter contains external links. CPG has no influence on the content of these linked websites. At the time of production of these newsletters no illigal content was detected. In case of any illigal, inaccurate or incomplete content, as well as damages deriving from using external information only the provider of those websites that are linked is to be hold liable. 

Figure 1: Industrie 4.0, Leitfaden IT-Security in der Industrie 4.0
Figure 2: Fraunhofer IML
Figure 3: Plattform Industrie 4.0
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