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Industry 4 0 Interoperability What is it and Why Should You Care

Industry 4.0: There’s a Digital Revolution Headed for Your Warehouse. Are You Ready?

Considering the advances in automated material handling technology that have occurred in recent years, it’s a little surprising to learn that eight of 10 warehouses are still manually operated. But, with the fourth industrial revolution upon us — what is being called Industry 4.0 — that is changing.

Driving Chance

The first industrial revolution was powered by mechanization; the second by the assembly line and mass production techniques; and the third by computerization, automation, and lean management. All three sparked major improvements in productivity.
Now, the convergence of connectivity, low cost sensors, big data and advanced robotics is creating the cyber-physical production systems that will be the hallmark of Industry 4.0. Industry 4.0 encompasses, but is also broader than the industrial Internet of Things (iIoT). According to McKinsey and Company, five disruptors are driving the evolution to Industry 4.0:
  1. The unending increase in data volume (big data)
  2. Connectivity, especially low-power, wide area networks
  3. The emergence of real-time analytics and business intelligence
  4. New forms of human-machine interaction, such as touch interfaces and augmented reality
  5. Improvements in transferring digital instructions to the physical world, such as in advanced robotics

Implications for Material Handling

As these disruptors advance, the intelligence of computers is being decentralized while more devices are equipped to connect and communicate, generating large volumes of data. In the warehouse, SKUs will connect with machines, and machines with other machines and with higher-level processes in enterprise resource planning (ERP) and warehouse management (WMS) systems. Distribution operations, outfitted with advanced networking and robotics, will respond to changing tasks and continuously reconfigure themselves — increasingly without need for human co-workers to intervene.

The reliability and cost of these technologies are now at a point that they fit into a business case to automate warehouse operations. A major component of that business case will center on the industry’s dependence on labor — particularly seasonal labor.

I recently visited a third-party logistics provider that planned to bring in approximately 800 additional workers to process orders for a number of retail brands during the last holiday season. The company, however, was able to hire only half that number, despite attractive bonuses and other incentives. That represents a serious threat to their business.

Competition for the limited labor pool has become intense and demographic trends are working against the industry. The pool of available workers is shrinking at the same time the pressure on wages from competition is growing. We can’t continue to throw labor at our productivity challenges. The solution for many companies will be found in the smart, integrated warehouse systems of Industry 4.0.

Connectivity and data analysis are important to Industry 4.0, but so too is advanced robotics.

You’re probably familiar with the large industrial robots installed behind security cages in manufacturing and recognize they lack the mobility, flexibility and dexterity required for multi-channel picking and packing. However, a new generation of lightweight, collaborative “cobots” has emerged capable of working alongside humans in the warehouse to alleviate the current labor challenge. We’ll discuss the incredible advances occurring in robotics in an upcoming post.

Building the Foundation

The first step in the evolution to Industry 4.0 that material handling organizations must manage is developing the infrastructure to collect and convert big data into insights – smart data – that enable them to better predict demand, especially from unstructured information, such as that found on social media. These insights are what will enable an organization to configure and adapt its equipment, cobots and labor to fulfill ever-changing and complex orders.

In my experience, there are four steps an organization must take to develop this capability:

  1. First, establish data science capabilities. With the intense competition for data scientists today, many organizations will find it difficult to build in-house capabilities; however, partnering with a data science consultant may prove to be an even better solution as you have immediate access to established supply chain experience. Partnering with a consultant can also provide more flexibility in dealing with peaks in demand for data analysis services associated with a warehouse redesign or quarterly reporting.
  2. Simultaneously, build a data repository capable of aggregating business information from multiple sources, including ERP, WMS, web analytics and social signals. The rapid development of big data technologies provides a variety of “off-the-shelf” solutions that can be configured to your needs.
  3. Audit devices within the warehouse to determine where you can collect IoT data to augment business data and develop a plan for enabling devices outside the network with the intelligence and connectivity required. The availability of low-cost sensors has significantly expanded the feasibility of the warehouse IoT.
  4. Finally, ensure you can visualize your data in a way that delivers timely, actionable insights to internal stakeholders.


Once you master these initiatives, you then can begin using artificial intelligence to create feedback loops with prescriptive algorithms to adjust distribution processes on the fly based on demand or conditions within the distribution center.

Calling this a vision of the warehouse of the future is perhaps understating what’s happening. I’m describing an intelligent and systematic makeover of distribution operations that will be occurring, in many cases, within the next 10 years.

Business leaders need to understand Industry 4.0 technologies and possibilities today — and begin planning how their companies will grow with them tomorrow. At Swisslog, we’re actively working with forward-thinking organizations to help them develop the infrastructure and processes to support the evolution to Industry 4.0.

Coming Up: Interoperability

Industry 4.0 will be built on software that connects, communicates and coordinates with any and all other systems in a distribution center. Look for our upcoming post about role of interoperability in the next industrial revolution.