Industry 4.0 and manufacturing ecosystems

Manufacturers face changes on multiple fronts. Advanced manufacturing—in the form of additive manufacturing, advanced materials, smart, automated machines, and other technologies—is ushering in a new age of physical production. At the same time, increased connectivity and ever more sophisticated data-gathering and analytics capabilities enabled by the Internet of Things (IoT) have led to a shift toward an information-based economy. With the IoT, data, in addition to physical objects, are a source of value—and connectivity makes it possible to build smarter supply chains, manufacturing processes, and even end-to-end ecosystems.

As these waves of change continue to shape the competitive landscape, manufacturers must decide how and where to invest in new technologies, and identify which ones will drive the most benefit for their organizations. In addition to accurately assessing their current strategic positions, successful manufacturers need a clear articulation of their business objectives, identifying where to play in newly emerging technology ecosystems and (as important) what are the technologies, both physical and digital, that they will deploy in pursuit of decisions they make about how to win.

The charge is perhaps easier to execute in theory than in practice. Despite the hype around advanced digital and physical technologies, many are not well-understood. Likewise, many stakeholders are unclear as to what all this connectivity means for their companies—and for the broader manufacturing ecosystem.

One thing is certain, however: It would be folly to underestimate the crucial role the flow of information plays in the physical aspects of advanced manufacturing. In order to fully realize the opportunities both of these domains present, it is crucial to integrate the two—use the digital information from many different sources and locations to drive the physical act of manufacturing. In other words, integrate information technology (IT) and operations technology (OT) to forge a stronger manufacturing organization—a state that we and others refer to as Industry 4.0. Also known as SMART manufacturing or Manufacturing 4.0, Industry 4.0 is marked by a shift toward a physical-to-digital-to-physical connection.

In this report, we offer a perspective to help manufacturers navigate toward an Industry 4.0 future. We do so by examining the flow of information in intelligent production and connected supply chains—that is, systems that inform and coordinate the manufacturing, distribution, and aftermarket process—through the lens of Deloitte’s Information Value Loop (IVL). We then review the impact of the IVL on the manufacturing value chain. In this article we will:

• Explain the term "Industry 4.0," its history, and the expanding breadth of the concept
• Review the fundamentals of Deloitte's IVL framework and its relation to Industry 4.0
• Identify two strategic areas—growing the business and operating the business—and six transformational plays that encompass the core opportunities for manufacturers to create with Industry 4.0 technologies
• Uncover key challenges for Industry 4.0 deployments