The Smart Factory, Industrie 4.0, and Supply Chain Optimization

In North America, the Internet of Things (IoT) is getting a great deal of attention.  In one definition of the term “Internet of Things,” almost all objects have sensors, connectivity to a broader environment, and intelligence. Sometimes the object has just a sliver of intelligence; but it can be much more substantial. Objects can be products, production or material handling equipment, containers, or other things as well.

In Europe, Germany in particular, they speak of Industrie 4.0 much more frequently than IoT.  The concepts are related.  Industrie 4.0 relies on IoT and other technologies to drive towards a form of decentralized supply chain optimization in production environments (there are some other key concepts as well, but I won’t focus on them in this article).  Now “decentralization” and “supply chain optimization” are not terms that most supply chain practitioners expect to see in the same sentence.  A little explanation is warranted.

One of the stated objectives for implementation of Industrie 4.0 is “self-organizing and self-optimizing” production facilities.  Perhaps the best example of Industrie 4.0 in action takes place at Audi’s Ingolstadt factory in Germany.  This is a make to order assembly line, each car is unique.  However,  Audis are built on the same platform, so having a responsive assembly line is feasible. In practice, this means that each assembly station (often manned by robots), gets its marching orders via a black box attached to the base frame, and rearranges its clamping and adhering positions for every assembly.


Painter Bots at Audi’s Ingolstadt Factory

In other value chains, Industrie 4.0 will involve flexibility around the flow path a product will take as it moves toward completion, rather than instructions from a WIP product to an automated station on what actions need to be performed at that station.  Supply chain planning is still required in longer time frames in this value chain.  The planning engine takes into account the capacity of a line and machines on that line, change over times, and other constraints, and creates an optimized plan for the coming days or weeks.  But that plan assumes everything will proceed without disruption.

But anyone who has worked in a factory know that stuff happens.  This is where the concept of Industrie 4.0 kicks in.  For example, a sensor on a machine may indicate that it is producing out of spec materials.  The smart factory is then capable of repairing the schedule in real time.

Perhaps the goods on the factory line have RFID tags attached.  The work in process product “knows” – based upon embedded intelligence in the RFID tag – what production or packaging activity next needs to be performed in its journey to become a finished good.  When the preferred path closes, the product raises its hand and says “I need to go to a Type 2 packaging machine.”

A smart material handling system then routes it to the appropriate equipment.  Other products with a higher priority get slotted in at the head of the line.  Meanwhile the factory scheduling system is working to understand what work can get done that day and repair the next few days schedule.  It is not, however, focused on repairing that day’s schedule.  The smart factory is already self-organizing itself to complete as much of that day’s priority tasks as will be possible.

Does the flow path version of Industrie 4.0 seem like science fiction?  Some companies are working to implement this vision right now.  But the task is difficult.


My colleague Valentijn de Leeuw wrote about Arla Foods journey toward Industrie 4.0.   Arla Foods is a farmer-owned global dairy company with headquarters in Denmark.  In the article, Valentijn describes how Arla Foods embraced the PackML standard to design a smart packaging line that would be capable of interfacing with self-organizing and self-optimizing products.  If you read the article, you will see this was not an easy project, although it did have several other benefits.

According to Arne Svendsen, the Head of MES & Automation Solutions at Arla Foods, as a result of this project “’Industrie 4.0’ is already taking off at Arla Foods.”  But implementations at the process level (products; material handling, production, and packaging equipment) need to be as complete as possible.  According to Mr. Svendsen, “If you only go 80 percent, you only get 20 percent of the benefits.”