The Future of Manufacturing
Germany's Industry 4.0 Strategy
The Internet of Things, Big Data, cloud computing and artificial intelligence are changing how we live. Germany has now adopted a development strategy embracing those trends that it hopes will lead a revolution in how things are made.
Germany's Industry 4.0 StrategyBy Monique Ho, Elaine Huang
From CommonWealth Magazine (vol. 564 )
When the world's most influential automation show – SPC IPC Drives – was held in Nuremberg, Germany, in late November 2014, it felt more like a hardware show than a high-tech fest, with electrical cables, fasteners and nuts in evidence everywhere.
But what most caught visitors' eyes was a metal octopus that along with its exhibit embodied Germany's development plans for the next 20 years.
Much like rows of assembly lines, a cluster of factories or a string of supply chains, these robotic octopi can be linked together and with a central nerve center to be able to sense each other, communicate and make decisions together and work in unison.
Following an emphasis on hidden champions, this is Germany's new development approach. It has mobilized the private and public sectors and academia and fully invested the country's economic might in this new vision – to redefine the manufacturing sector and take charge of its future direction by becoming "the factory of the world's factories."
Germany's "octopus" plan has a formal name – Industry 4.0. Its objective is smart and fully networked manufacturing.
"We think our strength in Germany is the industry, so we think let's start the utilization of the Internet of things in the area where we are strong. And this area is industry," says Bernhard Diegner, head of the research department in the Industry 4.0 section of German electrical industry association ZVEI, one of three unions forming Germany's Industry 4.0 platform.
Taiwan was only represented by a handful of companies at the Nuremburg fair – Hiwin Technologies Corp., Delta Electronics Inc., Advantech Corporation and Teco Electric & Machinery Co.
"As long as your booth had even the slightest relation to Industry 4.0, it drew an especially positive response," says Albert Huang, vice president of Advantech's Industrial Automation Group, who visited all 11 of the trade show's halls and came away deeply impressed.
Several seminars were also held at the show, and any of them covering Industry 4.0 were packed.
The phenomenon has spread far behind Germany. A cursory Internet search shows that Industry 4.0 – in effect mankind's fourth industrial revolution – has become a hot topic among businesses around the globe.
"The first industrial revolution was when steam power spurred mechanization. The second was when electricity drove mass production, and the third was the explosion in information technology. The fourth is the next step in the global manufacturing sector – smart manufacturing," explains Pao-yuan Wang, a researcher at the Industrial Economics and Knowledge Center under the nonprofit Industrial Technology Research Institute.
The Industry 4.0 concept first emerged at the Hannover Messe, the world's leading trade fair for industrial technology, in 2011. The German government made it a national policy priority the next year and put it under the direction of the Federal Ministry of Education and Research and Federal Ministry of Economics and Technology.
The plan envisioned integrating the traditional machinery sector, the electrical and electronics sector and the information communications technology sector and creating an industry, academia and government collaboration platform, with big corporations such as Siemens, SAP and Bosch helping smaller companies along.
Through its status as "the factory of factories" and its many hidden champions – the most of any country in the world – Germany was already in a dominant position at the time, so why develop Industry 4.0?
"Human resources have become precious. They can no longer be wasted on repetitive or low-knowledge, low-technology tasks. Workers have to evolve from machine operators into manufacturing process decision makers and managers," Wang says.
Bernd Venohr, an adjunct professor at the Berlin School of Economics and Law who has tracked Germany's more than 1,000 hidden champions, also sees other forces at work in his country's new strategy.
He explains that hidden champions could hide and still be leaders in their fields in the past, but those days are gone. They must now be able to link up with outside systems, Venohr says, if not by using similar specifications for their products and services then at least by communicating in the same language so they can connect with bigger networks and create greater value.
Champions 'Linking' Up
Jay Lee, a professor at the University of Cincinnati and founding director of the National Science Foundation Industry/University Cooperative Research Center on Intelligent Maintenance Systems (IMS), cautions that simply equipping machines with sensors cannot provide the information necessary for the machines' users to make better decisions, at a time when information is plentiful. Factory production, traffic conditions, health management, disasters, and bank operations all generate big data, and that information has become relatively easy to collect through smart sensing technology, such as wireless RIFD (radio-frequency identification).
Echoing Lee, Venohr questions whether amassing reams of numbers is really what people mean when they hail "bid data," saying that unless the information can be made meaningful for users after it has been processed and interpreted, the information itself will have no value.
Smart Factories: One Machine, Many Functions
In the small southern German town of Kaiserslautern is hidden chemical giant BASF's innovation secret. Here one finds a plain-looking building that is the cradle of German smart manufacturing – the German Research Center for Artificial Intelligence (DFKI) and its first floor smart factory.
In an Industry 4.0 world, people and robots will work in unison, but machines will not necessarily replace humans.
The smart factory is equipped with only one production line stocked with red, blue and yellow liquid soap materials, but it can produce customized bottles of soap concentrate made of different formulas at the same time.
As plastic bottles come down a conveyor belt, they are armed with a sticker featuring a barely visible embedded chip that contains detailed order information. One after another, the bottles are filled, sealed, and labeled automatically.
The sticker resembles the brain of the octopi, telling the production line what colors of liquid soaps to mix in what proportions in each bottle before it ultimately prints out a packaging label. All that's left for the factory's technicians to do is control the production process from in front of a computer.
Detlef Zuhlke, scientific director of the DFKI's Innovative Factory Systems division, says the factory can take customized orders and quickly turn them into production, a degree of flexibility he believes will be necessary in the future world of manufacturing.
The white-haired, 65-year-old Zuhlke founded this smart factory in 2005, and it soon emerged as a showcase for Industry 4.0, drawing an endless stream of visits from multinational companies such as U.S.-based electronics solutions provider Flextronics International, South Korea's Samsung Electronics, and Japan's Hitachi.
"Today, it's the production line that determines what product is built. In the future, the product will determine what the production line is producing. So the idea of factory, the production, is turned upside down," says Wolfgang Dorst, the head of the Industry 4.0 division at BITKOM (the Federal Association for Information Technology, Telecommunications and New Media) in his Berlin office.
There are two major factors propelling Germany's Industry 4.0 campaign. The most obvious is the desire to seize the lion's share of the global equipment and integrated manufacturing solutions market that Lee describes as "incredibly big," but Germany also hopes it will lure home-grown manufacturers back home.
One example: Adidas. The global sporting goods brand's production is almost exclusively concentrated in Asia at present, but Adidas is mulling returning home and setting up a production line that will position it to offer more personalized and customized items.
Dorst envisions the day when people in Berlin can order a pair of shoes on the Web and won't have to wait five weeks for the shoes to be produced in Asian and shipped in a container back to Hamburg.
That will give many small and medium-sized German enterprises even better opportunities to upgrade their operations.
Leaving China Behind
Injection molded plastic parts specialist Valder Technologies UG, for example, had a growing problem finding workers, but the Industry 4.0 concept triggered the transformation of this half-century old family business located near Cologne.
Valder was originally dependent on a supplier in Shenzhen, but the company's founder and president, Monika Villalba, decided to bring its manufacturing back to Germany. She got a feel for demand based on an analysis of her customers and installed robots in Valder's factory to customize production.
Germany's aggressive strategy to upgrade its manufacturing sector has sparked anxiety in China, currently recognized as "the world's factory."
"The vice chairman of the German Chamber of Commerce told me: 'You Chinese have a lot of money and have made it big, but I don't care! Our small companies are all engaged in R&D in the revolutionary Industry 4.0 field,'" said Henry Cai, Deutsche Bank's executive chairman of corporate finance for Asia-Pacific, while describing a recent trip to Germany in a speech at a media event in late 2014 on future trends.
"Everybody should be aware that in this industrial revolution, the West is not bringing China along," Cai warned.
"The West is already developed. It doesn't need China's cheap labor, because your (China's) labor is no longer very cheap."
Companies around the world are all facing a reduced supply of labor, rising costs, shortened life cycles for products and services and rapid changes in consumer tastes and needs. Germany has adopted an Industry 4.0 strategy to deal with those challenges, and should that strategy be successful, it will seize the controlling voice in the world's industrial future.
Translated from the Chinese by Luke Sabatier