Market Dynamics Behind Industrie 4.0 and the Industrial Internet of Things

Executive Overview
In 2013, the Fraunhofer Institut and the German federal government, with the support of a large number of suppliers, introduced the term "Industrie 4.0" to describe the next industrial revolution. In parallel, a number of industry consortiums were developing the concepts and models that comprise what ARC Advisory Group now refers to as the Industrial Internet of Things (IIoT).

This ARC report attempts to put both concepts in a common framework and show the common trends, which are fundamental dynamics of supply and demand. From the product and production perspective, important factors include increasing requirements for manufacturers to accommodate shorter product lifecycles, smaller batch sizes, and an increasing percentage of customized (as opposed to mass produced) products.

Clearly, the changing consumer demand will lead to more regionalized and smaller scale production. For example, the current product lifecycle (particularly for trendier consumer products) can be as short as 35 days. As it takes approximately 30 days to ship containers from China to either Europe or the US, mistakes in planning and forecasting consumer taste can be very costly. This can be minimized by more local production. However, production in North America and Europe needs to be flexible and highly automated to be profitable. Enabling technologies range from smart and flexible sensors, to Big Data analytics, production management software, virtualization and simulation, and robotics and 3D printing.

Certainly, the need for more flexible production generally applies more toward the retail consumer end of the discrete and batch manufacturing industries. However, this also increasingly applies to some process manufacturing and utility industries in which the market dynamics are changing.

While many of the technology concepts behind Industrie 4.0 and IIoT may seem futuristic to some readers, ARC has identified a number of early adopters that are already applying the technologies and concepts today with great success to help meet these and other challenges.

Table of Contents

• Executive Overview
• Why Now? A Historical Context
• The Concepts
• Trend towards Regional, Smaller Batches, and Customization
• Industry Development
• Recommendations

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Keywords: Industrie 4.0, Industrial Internet of Things (IIoT), Local Production, Manufacturing, Industry, ARC Advisory Group.