Recently, McKinsey released an interview featuring an expert discussion between executives at Robert Bosch, namely Siegfried Dais (Partner of the Robert Bosch Industrietreuhand KG) and Heinz Derenbach (CEO of Bosch Software Innovations GmbH), and McKinsey experts. This interview addressed the prevalence of the Internet of Things in manufacturing and the consequent technology-driven changes that promise to trigger a new industrial revolution. Here at Bosch, and generally in Germany, we are referring to this phenomenon as Industry 4.0. The basic principle of Industry 4.0 is that by connecting machines, work pieces and systems, we are creating intelligent networks along the entire value chain that can control each other autonomously. Some examples for Industry 4.0 are machines that predict failures and trigger maintenance processes autonomously or self-organized logistics that react to unexpected changes in the production.
The Internet of Things in manufacturing
Dr. Siegfried Dais has been deputy chairman of the board of management at Robert Bosch GmbH until 2012 and is partner at Robert Bosch Industrietreuhand KG since 2007. (Picture: McKinsey & Company, Inc.)
So, what affects does this change have on the classic manufacturing value chain? Quoting Siegfried Dais, “it is highly likely that the world of production will become more and more networked until everything is interlinked with everything else.” While this sounds like a fair assumption and the driving force behind the Internet of Things, it also means that the complexity of production and supplier networks will grow enormously. Networks and processes have so far been limited to one factory. But in an Industry 4.0 scenario, these boundaries of individual factories will most likely no longer exist. Instead, they will be lifted in order to interconnect multiple factories or even geographical regions.
The basis for intelligently linking millions of devices or machines in the manufacturing industry is what we at Bosch call the concept of device-to-process: “It is essential to translate the physical world into a format that can be handled by IT.”, explains Heinz Derenbach. “That means a physical device becomes an active part of a business process: delivering data, sending events, and processing rules.”
Devices become information carriers themselves
Dr. Heinz Derenbach has been chairman of the executive board of Bosch Software Innovations GmbH since 2011. (Picture: McKinsey & Company, Inc.)
The concept of device-to-process allows us to merge information and material flows to become one, as material and information are inextricably linked to one another. Mr. Dais describes this future scenario as follows: “In an extreme vision, this unfinished material already knows for which customer it is intended and carries with it all the information about where and when it will be processed. Once the material is in the machine, the material itself records any deviations from the standard process, determines when it’s ‘done,’ and knows how to get to its customer.” The device or physical thing becomes a part of the processes that initiates every following step by itself.
Changing value chains
This is exactly where we are no longer only talking about changing production processes, but about a changing business in manufacturing. Imagine if the product “knows” about all process steps and machines work through components on order. Does it even matter who owns the machine? Mr. Tschiesner from McKinsey compared this to a trend that has already become part of our everyday lives: cloud computing. For many years now, consumers purchase only virtual capacity. The same is applicable to the manufacturing industry, with the only difference being that companies would offer machine capacity. And more: with all this information available, new market players come into the game. IT, design or service companies could use the information to offer new, value added services along the traditional value chain. For certain products the trend of separating processes such as design and production is already becoming apparent and will most likely continue to spread across other industries and sectors. But closing with a quote from Mr. Dais: “It won’t happen overnight.”
What are your thoughts on Industry 4.0 and the consequent changes in manufacturing? Which players will be the first, entering this established market with new services? How will large supply-chain operators deal with this trend?
In our next post about “The Internet of Things and the future of manufacturing”, Stefan Ferber is going to address the technological challenges of Industry 4.0. Stay tuned!