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The current status of Industry 4.0 in Germany – the perhaps painful truth?

In Germany, „Industrie 4.0” is a major hype topic – with politicians and the media full of stories about how Germany is leading the charge in the fourth industrial revolution.

However, if you look a little deeper, you will uncover the perhaps painful truth.

Fujitsu was one of the participants in a recent study by Bitkom, the German IT and telecoms industry body, to examine the current status of Industry 4.0 in Germany. This work originated from discussions in the Bitkom Industry 4.0 working group, where doubts were raised about the maturity of early implementations. Furthermore, despite the many high profile media articles and name checks by politicians, there was no empirical data available to paint an accurate picture of the nature and type of implementations to date.

We established a project group to perform quantitative analysis of Industry 4.0 implementations in Germany. The group comprised leading technologists from Hombug and Partner AG, Gerlach, Porst and Steiner GmbH, Fraunhofer SCS, ENX Association, Software AG, Hitachi Europe GmbH and was led by myself, representing Fujitsu. The group’s members examined a total of 203 Industry 4.0 implementations and recorded their findings to understand where Industry 4.0 is happening.

One of our report’s key findings is that Industry 4.0 is really only being implemented by approximately half the German economy. The majority of applications can be found in the mechanical engineering sector, followed by electronics and vehicle manufacturing. Not only does the process industry sector lag far behind, but also it is unclear whether this sector would benefit from integrating its value chains in the short term.

Furthermore, it is clear that Germany is predominantly focused on optimizing existing processes rather than innovating. Most applications today can essentially be described as an extension of Industry 3.0, rather than true 4.0 implementations. That is, they essentially just optimize existing business models and value chains, either to reduce costs or to accelerate production times. Despite this, both politicians and the ICT market itself continue to describe the results as Industry 4.0.

Our working group’s initial assumption was that predictive or preventive maintenance would be the leading industry 4.0 applications. However, findings were quite contrary. They showed that that the majority of Germany’s Industry 4.0 applications in fact fall under the category of ‘assistance systems’ (totaling approximately 40%). This primarily includes automation solutions, but also energy saving solutions.

Our analysis also revealed that many other types of implementations are still in an early stage of development. In fact, many examples are still only in the planning stage or are pilot projects, at best. Consequently, there is a great deal of untapped potential. The greatest opportunity for ICT vendors is to create new business models and services based on complex interconnections. Of course, doing this brings its own challenges – transporting, processing and evaluating large amounts of data brings significant new security and compliance implications. Not surprisingly, this type of Industry 4.0 is still in its infancy.

The limited scope of the majority of implementations means that a fundamental change was achieved only in exceptional cases. The report did find a few cases of best practice in product-related services, however, such as some new ‘servitization’ business models – where a product-based business transforms into a cloud-based service – but these are rare.

That said, we can assume that not all current Industry 4.0 applications have been made public. As the report sourced examples exclusively from publicly accessible documents and analyst data, it is likely that the most innovative examples are being kept under wraps for as long as possible, in order to maximize the competitive advantage they are anticipated to bring.

While the reality does not quite live up to the hype, we believe there is still great potential for the future and we are seeing ever more examples coming to light. Our advice to Fujitsu customers is, before taking concrete action to innovate business processes, they should review the deployment of Industry 4.0 in their respective industries and also be sure to evaluate their so-called IT “fitness” – particularly in the area of industrial IT security. Weak IT security is a serious concern, since it represents a significant obstacle to value chain integration. Business of all sizes should follow the comprehensive guidelines published by leading German industry associations such as the VDMA (the engineering industry association), government offices and stakeholder groups to reach an appropriate level of industrial security.

In the short term, companies can implement automation to become more cost efficient. Smart services can generate new high-value business models, and adaptable products and factories can enable very small production runs, allowing custom products to compete with mass-produced ones. However, it will not pay to wait too long. In the longer term, companies that fail to increase their value-chain integration will face increasing pressure from their more innovative competitors.

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  • […] we have seen in the analysis of Industry 4.0 deployments so far (see: The current status of Industry 4.0 in Germany – the perhaps painful truth? ), the transition presents significant opportunities for those companies that take the leap to […]

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