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Production of the Future

How to Prepare for the Fourth Industrial Revolution

Produce Like Never Before

IT is an enabler for change in Industry 4.0

Industry 4.0 stands for a networked economy powered by seamlessly and timely connected devices,technologies, and processes. I truly believe the Industry 4.0 vision will become reality. The use of smartdevices will drive a new wave of digitalization, awareness and automation that will re-invent themanufacturing industry. It will fundamentally change how products are ordered, built, and consumedthereby creating a "new kind of normal".

This e-book explains how SAP can help your business make the best use of the opportunities that comealong with this new industrial revolution. You will get a comprehensive overview of our steps towards aneven more connected and networked future, including our view on new, smart production systems,

networked supply chains, predictive maintenance and analysis, as well as new ways of working in the manufacturing industry.

This is all rounded out by insights into key enabling technologies such as cloud, Big Data, analytics, mobile, machine-to-machine communication, and the Internet of Things.

I am looking forward to bringing our vision to life and, therefore, collaborating and innovating jointly with our customers andpartners. Take a glimpse at future opportunities of Industry 4.0 with SAP and enjoy your reading!

Bernd Leukert

Head of Application Innovation and a member of the Global Managing Board of SAP AG

Contents

The Vision

A new wave of digitalization, automation, and use of smart devices is changing the way we produce and consume.

Key Opportunities in Industry 4.0:

Evolution of Business Models

Home Preface

Contents The Vision

Key Opportunities in Industry 4.0 • Evolution of Business Models

• End-to-End Digital Engineering • Top Floor–Shop Floor Integration

• Real-Time, Value-Added Networks • Enhanced Work Environments

Idea to Performance Prepare Your Company

Glossary

Search

P E-Book http://global.sap.com/community/ebook/2013_11_28302/enUS/index.ht...

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End-to-End Digital Engineering

Top Floor–Shop Floor Integration

Real-Time, Value-Added Networks

Enhanced Work Environments

Idea to Performance

Companies need to integrate all the different parts of the value chain, from the ideation of a product to design,manufacturing, and aftermarket services.

Prepare Your Company

Industry 4.0 will restructure production – and will change global competitiveness – with new opportunities for companies togenerate value.

Glossary

More Information

The Vision

A new kind of automation

Industrial production has been key for the growth and prosperity of the world's population for more than 200 years. Profoundshifts in society, business, and technology suggest that a new industrial revolution is underway.

Manufacturers are faced with increased cost pressure as well as market volatility. Product lifecycles are getting shorter andproducts are becoming more complex as consumers start to demand individually made products in growing numbers.

The strongest transformation will come from new technologies. Sensors and microchips can be added to almost every product(tools, machines, and even raw material), thus making the products "smart." We will see a dramatic increase of available datafrom any kind of device that will be used to better analyze and control processes. Production will be highly responsive andorganized in networks in companies of all sizes.

Governments and industry associations see clear opportunities for using a new manufacturing environment to supportlong-term job creation and economic growth. It is a truly global topic as both traditional industrial nations and emergingeconomies seek further automation to produce, reestablish, or grow their manufacturing base.

Find out more:

Idea-to-Performance. Maximizing Opportunity in a New, Technology-Driven Industrial Revolution (http://www.sap.com/bin/sapcom/downloadasset.idea-to-performance-maximizing-opportunity-in-a-new-technology-driven-industrial-revolution-pdf.bypassReg.html)(SAP thought leadership paper)

Renaissance of Industrial Manufacturing: National Programs Around the World (http://blogs.sap.com/innovation/industries/renaissance-industrial-manufacturing-national-programs-around-world-0834066)(Blog post)

A new wave of digitalization, automation, and use of smart devices is changing the way we produce

and consume.

A Fourth Industrial Revolution

Merge of physical and digital worlds

Industry 4.0 – More than a new term

Industrial revolutions are turning points in economic, social, and political history.

First revolution: Water and steam power enabled mechanical production (end of 18th century)

Second revolution: Electric power enabled mass production (early 20th century)

Third revolution: Electronics led to automated production (during the 1970s)

This development has now given way to a fourth industrial revolution, in which technology is merging physical and digital

worlds throughout all layers of production.


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Click to enlarge.

New technologies will help companies to connect to systems, networks, and machines to enable a more autonomous andself-organizing approach to production.

Find out more:

Industry 4.0 Leads into the Innovation Economy (http://blogs.sap.com/innovation/industries/industry-4-0-leads-into-the-innovation-economy-030479) (Blog post)

Industry 4.0 Recommendations (acatech) (http://www.acatech.de/fileadmin/user_upload/Baumstruktur_nach_Website/Acatech/root/de/Material_fuer_Sonderseiten/Industrie_4.0/Final_report__Industrie_4.0_accessible.pdf)

Everything Is Connected

The promise of cyberphysical technologies

In 2020, 50 billion devices will be connected to the Internet. A good share of them will be tools, machines, parts of vehicles,and buildings that are integrated into production of goods and service offerings.

Within this development, an intelligent connectivity and communication between machines will arise through cyberphysical

systems.

The foundation of cyberphysical systems will be machine-to-machine (M2M) communication, which enables network-

connected devices to exchange information and initiate actions without requiring human intervention or assistance.

Find out more:

The Technological Revolution Continues! (http://www.vdma-webbox.tv/english/filmdatabase/industry-4-0-the-technological-revolution-continues.html) (Video)

Rise of the machines: Moving from hype to reality in the burgeoning market for machine-to-machine communication(http://digitalresearch.eiu.com/m2m/report ) (Report)

M2M – Bringing Technical Worlds to Life (http://blogs.sap.com/innovation/industries/bringing-technical-worlds-life-0886100)(Blog post)

“Not an Optional Exercise”

Interview with Scott Bolick and Nils Herzberg, Industry Solutions at SAP

Which companies should care about Industry 4.0?

Bolick: Industry 4.0 is relevant for companies in the manufacturing space. But the topic is even larger. Manycompanies are moving out of their traditional industry silos to cut across value chains. Industry 4.0 supports thisby connecting systems, networks, and machines, and making these systems smart, enabling smart factories,smart grids, and even smart cities.

What is your recommendation for companies that would like to start with Industry 4.0 scenarios?

Herzberg: You actually need to stand back and figure out where the biggest opportunities are and where youcreate the most value for your customer. We won't do this in a theoretical way. We start with the most promisingscenarios and help companies to change along their innovation capabilities.

What changes will we see within the next years?

Bolick: What I see happening is a shift towards individualization. Businesses and end customers are looking for individualproducts and services. These require companies to get down to lot size one. A second trend is that people don't want to ownthings anymore, but rather want to use them.

Can you provide an example?

Herzberg: A car manufacturer owns a thousand forklifts. Why? He would just like to use them. Then the forklift manufacturer suddenly has to care about reliability, availability, and utilization. How do you price that service? How do you get data about


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the machines' condition? Companies who start now to think about new processes will have a competitive advantage.

How does SAP support companies?

Bolick: With the idea-to-performance initiative, SAP enables companies to seize opportunities of Industry 4.0 today. Thisholistic approach offers technologies and methodologies to prepare IT infrastructures with Big Data, mobile, cloud, analysis,and applications and transform the business when moving from an ownership to a consumption economy.

You can find the long version of the interview here (http://en.sap.info/the-new-industrial-revolution/99897).

Key Opportunities in Industry 4.05 areas of action

As Industry 4.0 unfolds, all existing business processes need to be redefined and integrated. This journey offers new opportunities along the following dimensions:

Evolution of business models

Mass production will become more individualized, leading to customer-specific products integrated into new service offerings.

End-to-end digital engineering

Preplanning will give way to a more active, autonomous, and self-organizing production.

Top floor–shop floor integrationFactories will adapt automatically to changes thanks to more transparency and autonomous decision making.

Real-time, value-added networks

Supply chains will evolve into highly adaptive networks managed through real-time monitoring and feedback.

Enhanced work environments

Work will be less centralized, more fluid, more project oriented, and more virtual and international.

Technological innovations can help optimize existing services and build new services and business

models.

Evolution of Business ModelsFrom mass production to mass customization

Most of today's business models for manufacturing have their roots in previous industrial revolutions. They are based largelyon mass production and automation and focus on design, production, and marketing processes. The trend towardcustomization is a key driver of new business models.

Mass production will become more individualized, leading to customer-specific products integrated into

new service offerings.

Business trends connected to Industry 4.0:

Offer individual products As the shift towards industrialization continues, manufacturers will offer customer-specific products, getting down to lot sizeone and “make-to-me” products.

Sell services not products

In more service-oriented industries, manufacturers shift their revenue from products to services, creating new value-addedservices for existing products, such as after-sales services or asset benchmarking.

Create value within business networks

Borders between companies and industries will disappear, bringing processes and information closer together. Companiescan create value within business networks, for example, offering unused production capacity in a marketplace to companiesthat temporarily need more capacity.

Find out more:

Top 5 Reasons Why Industry 4.0 Is Relevant (http://blogs.sap.com/innovation/industries/top-5-reasons-industry-4-0-real-important-0833970)(Blog post)

Future Manufacturing Scenarios


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Highlights from the factories of the future

Industry 4.0 scenarios that SAP has investigated with customers and partners:

One-piece flow

Support custom manufacturing by decoupled, flexible, and highly integrated manufacturing systems.

Asset information management

Provide up-to-date documents and value-added information for millions of machines.

Predictive maintenance

Use data from sensors to decide which parts should be replaced right before they break.

Adaptive logistics

Achieve transparency of all material and information flows across the supply chain.

Quality management

Enable early recognition of quality issues and immediate measures.

Warranty management

Identify warranty frauds and reduction of costs.

Recall management

Determine root causes to be able to conduct more selective recall campaigns.

Service cross-selling

Offer situation- and context-sensitive services such as upgrades and maintenance.

Digital product memory

Provide complete information along the product's lifecycle (parallel material and information flow).

Integrated compliance

Enable compliance with safety and other regulations by using cyberphysical systems.

Service-enabled products

Turn products into services and sell holes, hot air, and horsepower instead of drilling machines, compressors, and engines.

Find out more:

Co-Innovation: How Research Helped To Shape Industry 4.0 (http://blogs.sap.com/innovation/industries/co-innovation-research-helped-shape-industry-4-0-0834190) (Blog post)

End-to-End Digital Engineering

Embracing increased flexibility and complexity

All products will belong to a digital chain

Integration of the complete product lifecycle with the value chain will be the cornerstone of “digital chains,” innovative businessprocesses, and new business models.

In this environment, it will be necessary for manufacturers to identify existing data sources, combine and analyze thesesources, and model the product lifecycle. They will need technology to generate, collect, filter, and analyze data from differentsources and integrate existing IT solutions.

Standards for information integration need to evolve as well as new levels of interoperability of systems and transparencyabout existing data sources that never have been used, combined, or analyzed.

Preplanning will give way to a more active, autonomous, and self-organizing production.

The rigid preplanning process will disappear.

As products become smart, they will be linked to the digital chain and be able to decide on their own how they need to bemanufactured. Smart machines will enable more active, autonomous, and self-organizing production based on small units.

Optimizing the production process with data from the whole digital chain is only the first phase of the digitalization of businessprocesses. Companies will be enabled to become truly digital enterprises that quickly incorporate new demands andinnovative ideas across the whole lifecycle of a product.


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Lifecycle Engineering

Connecting the dots between products and processes

Design and engineering

Before modeling a product as a physical part, manufacturers digitize its design and engineering and simulate production. Thisrequires that the digital models be available today in computer-aided design or that engineering systems be incorporated intoa production planning system that can simulate the whole production line.

Production

During production, manufacturers turn data into context-sensitive information that is leveraged to reduce the risks and

complexity involved in their production processes. Full transparency and traceability help them identify the reasons for costly waiting times on the shop floor and better integrate feedback into the product design.

Service provisioning

After production, a product's digital structure is shared with the manufacturer's service department, so it can predict the areas where the product might fail. Feedback loops from the production and service departments to the engineering department,based on digital information, can help cut service time and costs and optimize production.

End of lifecycle

Finally, at the end of a product's lifecycle, information about design, production, and usage can help companies weigh variousremanufacturing and recycling options collaboratively across boundaries.

Rise of a new profession

To integrate all resources, products, and processes, manufacturers need to identify existing data sources – from theassembly line to social networks – and combine and analyze them. This can involve insights to adapt manufacturing processesin real time and connecting with customers and partners for predictive maintenance or local, just-in-time production.

Top Floor–Shop Floor Integration

A new kind of automation

Everything will become smarter

Machines in automated production processes are already connected by business and production systems. Usually, theyreceive instructions from a manufacturing execution system based on a central production plan.

Going forward, we will see increasing convergence of information technology and operational technology for new businessscenarios. Autonomous manufacturing units, coupling robotics and highly skilled workers, will adapt to continuous customer-driven changes in product, enabling a single production line to create different product types without reengineering theproduction process.

This autonomous capability is critical as manufacturers increasingly face a world of batch-of-one orders. Logistics will have todecide whether to ship spare parts or position 3D printers at the locations where they are needed.

Via cloud technology, companies can also share data with the businesses that produced their machines and help them developbetter products and services. Detailed data from the production and delivery processes can help them identify affectedproducts and customers more precisely, thereby reducing the number of customers they must notify.

Find out more:

Manufacturing Solutions from SAP: Grow Your Margins in Industrial Machinery & Components (http://www54.sap.com/solution/industry/industrial-machinery.html) (Web site)

Factories will adapt automatically to changes thanks to more transparency and autonomous decision

making.

Listen to the Machinery

How to benefit from data from production

As machines and objects become smart and communicative, production units will become more active, autonomous, andself-organizing. Objects and machines will be able to decide together which tools will be used and where parts should movefor the next production step.

Machines will report their condition and work status back to a manufacturer's enterprise resource planning (ERP) system.Plant managers will get a real-time view of production through these systems – and will then be able to react quickly if problems occur and adjust production plans to optimize order fulfillment.


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Supporting optimization and new business ideas

All of this communication will produce massive amounts of data. With 50 to 100 sensors per machine and 500 manufacturingsteps (or more), there can be terabytes of data that must be stored, combined with other data sources, and analyzed. Whencoupled with enterprise production data, this data from the shop floor will enable completely new kinds of optimization andbusiness ideas.

Find out more:

See how Greenhack Fan is using SAP to run its business

Augmented Reality at the Shop Floor

Digital experience engineers and workers

3D visualization allows users to understand the complexity of objects and systems more easily. In the future, work instructions will be 3D-animated and will visually guide engineers as they dismantle and reassemble machinery. The search for anydefects, r ight screws, or suitable tools will be faster and thereby reduce downtimes on the shop floor.

Working hands-free

3D visualization, in addition to glasses powered by a context-sensitive system, will bring relevant information at the right timeand right place to manufacturing and will help engineers cope with rising machinery complexity.

Find out more:

SAP & Vuzix Bring You Augmented Reality Solutions for the Enterprise (Video)

Real-Time, Value-Added Networks

The rise of online business communities

When it comes to collaboration between companies, technology has historically created rigid processes by triggeringsequential workflows. Inspired by social networks, the depth and breadth of collaboration between companies will changeconsiderably in coming years.

More business processes will be linked, and the interaction between companies will evolve from supply chains into valuenetworks that can rapidly restructure partnerships to address batch-of-one requests.

Operating without borders

Manufacturers will optimize the entire business network by sharing and analyzing data. Digitalization and pervasive connectivity will enable real-time analysis of all business activities. Cost structures can be simulated to support decision making.

Market changes can be anticipated and business ideas implemented more quickly. This will lead to much higher value for allnetwork members and an increase in outsourcing and project-based work.

Such improvements require business-critical data from partners – including information on capacity, planning data, and productcosts. A secure and efficient exchange between partners, in turn, requires a reliable infrastructure and systems that enabletrust building.

Find out more:

Securing Applications over the Cloud – A Research View (http://scn.sap.com/community/research/blog/2013/10/14/a-glimpse-into-the-future-of-security-in-the-cloud) (Blog post)

Supply chains will evolve into highly adaptive networks managed through real-time monitoring and

feedback.

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Remote Service Management

Reduce cost with up-to-date asset information

Suppliers of automation technology have millions of devices used at their customer locations, with thousands of differentversions. If an asset needs maintenance or repair, usually documentation and work instructions are needed. In many casesthe information is outdated or media breaks prevent finding the right content.

Click to enlarge.

Combining data from various sources

Remote service management combines real-time device information, for example, collected by sensors, as well as assetinformation stored in back-end software systems. By providing transparent and secure access to asset information fromvarious sources across different organizations, all collaborating business partners can provide asset-related services, likemaintenance, much more efficiently.

Find out more:

Just Like Being There with Remote Service Management

Places to Collaborate

Welcome to the networked economy

Connectedness will be core to enterprise success

Many companies already use marketplaces to collaborate with their supply chains. These marketplaces and other business

networks will cover an increasing number of business activities going forward, enabling dynamic relationships for engineeredservices and direct materials supported by new contractual terms and fast onboarding.

Challenges exist, but as production becomes more localized and individualized, online networks will help manufacturersanticipate production stops, find new suppliers on the fly, and manage changes in market conditions and customer behavior more effectively.

The Ariba example

The world's largest business commerce network, run by Ariba, is a pioneer and role model for this trend. It connects morethan 730,000 companies driving more than US$319 billion in commerce transactions.

Using Ariba Network, businesses of all sizes can connect to their trading partners anywhere, at any time, from any applicationor device to buy, sell, and manage their cash more efficiently. Network participants reach remarkable operational cost

take-outs of 60%–80% and a 66% decrease in approval times.

Find out more:

The Power of Ariba for SAP Customers (http://www.ariba.com/resources/library/the-power-of-ariba-for-sap-customers)(E-book)

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Enhanced Work Environments

Work and life rediscovered

As forthcoming cyberphysical systems further automate machine-related work, will factories of the future be as empty of humans as offices are now empty of paper?

While manufacturers must have the flexibility to respond quickly to increasingly rapid fluctuations in demand, constantly layingoff employees and rehiring them can be costly. Leading companies will gain competitive advantages by replacing rigid workpatterns with flexible workforce deployment. However, the role of the blue-collar workers will definitely change.

The nature of work will change As machines become smarter, production lines can be enriched and humanized. As simple manual tasks disappear andcustomized production becomes the norm, workers can be assigned as needed to coordinate automated productionprocesses and intervene when machines call for action.

They will have new demands in managing complexity, problem solving, and self-organization. This might involve, for example,robots helping with manual work or augmented reality that provides the right information at the right time.

Find out more:

Manufacturing act ivities of the future – Industry 4.0 (http://www.iao.fraunhofer.de/lang-en/business-areas/corporate-development-work-design/1053-guideline-study-into-the-future-of-manufacturing.html) (Study published by the Fraunhofer AIOresearch institute)

Work will be less centralized, more fluid, more project oriented, more virtual, and international.

A Humanized Work Environment

Technical and demographic changes

Balancing professional and private needs

Looking at augmented reality, context-sensitive glasses and 3D visualization can help workers fulfill their tasks without longtraining sessions.

Technicians can get visual instructions and historical data from machines during maintenance and repair. Engineers can easilyaccess large amounts of data on their mobile devices and identify machine weaknesses on the spot. These and other

technologies will also enable an aging expert workforce to collaborate closely with a younger tech-savvy generation.

In the face of the shortage of skilled labor and the growing diversity of the workforce (in terms of age, gender, and culturalbackground), leading companies will enable diverse and flexible career paths that will allow people to keep working andremain productive for longer.

To succeed, manufacturers must find new ways to connect with and engage employees with very different work partners, andbalance professional development and private needs. This might involve new technologies, but also new architectures of factories, for example, placing them into virtual environments, reducing time for workers to commute, making shorter shifts, or working on weekends as an alternative.

Self-Organized Capacity Management

How fixed working hours become obsolete

Web 2.0 for Industry 4.0

Work will be more flexible and project oriented in the future – even on the shop floor. But how can shift managers organizethat? How can they ensure that the production follows the demand curve as closely as needed? The research projectKapaFlexCy proved that self-organized capacity planning can work. You just need a smart production system and a workforceequipped with smartphones and committed to work as a team.

When the production system senses changing demand situations, it notifies the workers directly on their smartphones.Individual profiles help ensure that work, family, and leisure time is traded efficiently and assignments are transparent andcomplete.


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Find out more:

KapaFlexCy – Self-Organized Capacity Management in Cyberphysical Systems (http://scn.sap.com/community/research/blog/2013/10/17/kapaflexcy-self-organized-capacity-management-in-cyber-physical-systems) (Blog article)

Idea to Performance

A blueprint to get started with Industry 4.0 today

Sell performance – not products

Let's be clear about one assumption: only companies that are agile and can use their data efficiently to optimize performance will lead the upcoming revolution in manufacturing.

With its idea-to-performance initiative, SAP enables companies to integrate the industrial value chain and product lifecyclesand develop, produce, operate, and maintain innovative products with high value to their customers.

Idea to performance is designed to enable:

Smarter decisions driven by the real-time availability of data through the SAP HANA platform

Faster execution of integrated processes

Simpler user experiences with 3D visualization, social media, and mobile technology

Solutions within the idea-to-performance process leverage SAP Business Suite applications as a foundation, extended bymobile, SAP HANA, and cloud functionalities as well as leveraging 3D visualization and M2M connectivity.

Find out more: Idea to performance – overview

Companies need to integrate all the different parts of the value chain, from the ideation of a product, to

design, manufacturing, and the aftermarket services.

Integrated Solution Offerings

From sequential steps to integrated processes

A holistic approach

Idea to performance provides an integrated solution offering across R & D, manufacturing, operations, asset management,and sustainability to achieve the highest business performance.

The initiative addresses four areas:

Sustainable innovation

Improvements for ideation, innovation, product design, and development

Responsive manufacturing

Quick reaction to market demand signals and operations that are consistent and socially responsible

Aftermarket service

The right platform, support, and information to provide superior customer service

Operational excellenceSafer, more reliable operations with increased productivity and agility

Idea-to-performance integrated business processes

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Click to enlarge.

Example: Real-time Manufacturing

The Harley-Davidson case

A showcase for end-to-end digital engineeringThe digitalization of products – and even whole factories – sounds visionary. But real-world use cases by companies likeHarley-Davidson Inc. show how we are moving closer to end-to-end digital engineering.

Motorcycles from Harley-Davidson are highly emotional products – a symbol of personal freedom and the American way of life. Every single bike is custom-made.Behind this customer centricity stands a state-of-the art manufacturing process that is highly flexible and efficient.

At a new plant at its U.S. location in York, Pennsylvania, Harley-Davidson can build 1,700 bike variations on one productionline and ship a customized bike approximately every 90 seconds. Real-time monitoring of the production line helps plantmanagers detect problems before they occur. This permits real-time decision making – what Harley-Davidson executivessimply call a “phenomenal experience.”

Find out more:Turning Cold Steel Into Harley-Davidson Motorcycles (http://scn.sap.com/community/business-trends/blog/2013/05/14/turning-cold-steel-into-harley-davidson-motorcycles) (Blog post)

Sustainable Innovation

Accelerating product and service introduction

Overcoming organizational challenges

Sustainable innovation, a key part of the idea-to-performance approach, emphasizes improvements for ideation, innovation,product design, and development – as well as the exchange of data with manufacturing, service, and other downstream

activities. Sustainable innovation is the front end of a holistic process view of a product's lifecycle.

Capabilities needed for sustainable innovation:

Continuous product innovation

Users must be able to view and analyze your company's product portfolio, define key performance indicators (KPIs), scoreKPIs in a transparent way, and include budget allocation in a project's planning stage. During execution, users mustcontinuously update and monitor status, effort, timelines, budgets, and resource availability of projects using powerful and

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contextual analytics.

Integrated product development

Companies must be able to manage all product data related to development – including versioning, workflow approvals,change management, and 3D computer-aided design tools – in a single integrated environment. Synchronizing theengineering bill of materials and manufacturing bill of materials is an increasingly desirable trend, ensuring that engineeringand manufacturing departments use the same product data.

Embedded product compliance

By embedding compliance and sustainability requirements in the design process, you can streamline and automate productdevelopment, driving speed without risk.

What research says:

14% shorter time to market for new products when companies have a formal product lifecycle management process

61% higher revenue from new products when portfolio goals are communicated throughout the organization and results aremeasured and reported

36% higher new-product revenue for companies that use compliant and sustainable components and materials

Source: SAP Performance Benchmarking

Find out more:

Why It Is Important for Engineers to See Beyond Engineering (http://scn.sap.com/community/business-trends/blog/2013/08/20/why-it-is-important-for-engineers-to-see-beyond-engineering) (Article)

Responsive Manufacturing

Driving continuous improvement

Quicker reactions to demand changes

Planning decisions in manufacturing are often based on periodic material requirement planning runs and outdated information.

Responsive manufacturing – which covers the design, plan, and make portions of the idea-to-performance approach – enablesinnovation, quick reaction to market demand signals, lower total manufacturing costs, and operations that are consistent, of high quality, and socially responsible.

Capabilities needed for responsive manufacturing:

Repetitive manufacturing

A form of mass production where high numbers of identical units are made in a continuous flow. Companies need robustmanufacturing, integrated planning, and real-time visibility capabilities.

Make-to-order manufacturing

Manufacturing process that only starts when a customer order is received. Operational integration is key to overalleffectiveness and control.

Engineer-to-order manufacturing

Building more complex and regulated projects with integrated, intuitive solutions for managing configuration information andprocesses, integrating graphic design into the build to simplify comprehension, and manufacturing deliverables.

Process manufacturing

A type of manufacturing that optimizes planning and use of raw material and resources. Operations are managed againstdefined metrics that require real-time performance visibility.

Outsourced manufacturing

Manufacturing in global networks that require robust collaboration capabilities.

What research says:

19.7% higher production plan adherence when customer delivery dates are integrated with material availability andreal-time manufacturing conditions

47.4% lower manufacturing cycle time when equipment is correctly allocated to operations and its usage is tracked in real

time5.2% higher plant on-time delivery when production personnel can quickly pinpoint root causes of problems and identifypossible resolution


Find out more:

Optimize Your Responsive Manufacturing Operations (http://www54.sap.com/bin/sapcom/downloadasset.responsive-


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integrated with core business operations:

Asset visibility and performance

Asset operations and maintenance

Environment, health, and safety management

Energy and environmental resource management

Quality management and compliance

What research says:

17% higher return on assets where asset management systems are fully integrated with inventory management, MRO,purchasing, engineering, and finance

79% lower recordable accident frequency with establishment and monitoring of strong safety measures for people andassets

40% lower scrap when quality system supports supply chain planning, root cause analysis, quality notifications, andadvanced product quality planning


Find out more:

Aiming for Operational Excellence in Your Organization (http:/ /sapinsider.wispubs.com/Assets/Articles/2013/July/Aiming-

For-Operational-Excellence-In-Your-Organization) (SAPinsider

)Drive Operational Excellence with Superior, Sustainable Asset Performance (Video)

Würth Group Extends Relationship with SAP to Meet Global Product Compliance Goals in the Cloud (http://www.sap.com/corporate-en/news.epx?PressID=21309) (SAP Corporate News)

Prepare Your Company

The revolution is already on the way

Comprehensive stakeholder strategy is key

Industry 4.0 is a confluence of new pressures, opportunities, and technologies. It will restructure production – redefining not

only manufacturing processes, but also redefining what a product is. It will change global competitiveness – for companies,industries, and (as production becomes local) nations – with increased colocation of design, manufacturing, and servicing.

Of course, this transformation will not be linear or predictable. It involves innovation on many dimensions simultaneously.

Industry 4.0 will restructure production – and will change global competitiveness – with new

opportunities for companies to generate value.

For full delivery of new scenarios, we will need standards that enable trusted exchange of data, enhanced educationprograms generating a mathematics- and science-savvy workforce, and structured government incentives.

This will require unique government, university, and private enterprise partnerships, such as acatech – the National Academy

of Science and Engineering in Germany – and the Advanced Manufacturing National Program Office in the United States.

Your Path to Industry 4.0

How to get started

Industry 4.0 is not an option. It is already taking off and will accelerate. The successful companies of the future are creatingnew products and services today. They are transforming their businesses with new processes that fulfill the idea-to-performance model. They are upgrading their technology infrastructure – with Big Data, mobile, cloud, analytics, andapplications – to gain the future flexibility they will need to thrive.

We recommend the following to position yourself and generate value for your business. It is a summary of a methodologydeveloped by our value engineering and value architecture teams:

Create ideas for new business scenarios

Provide design thinking workshops that help drive innovation momentum

Decide which topics are most strategic

Evaluate your ideas according to dimensions such as value generation or consumption of resources and environmentalexpectations


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Build a road map

Develop an appropriate sequence of activities that help you build new processes on top of more fundamental componentsand services

Glossary

Terms you have to know

Fourth industrial revolution

The next wave of automation and industrialization through the use of cyberphysical systems in manufacturing and production.

Additive manufacturing

Fully automated production of a product from a virtual model through 3D printing or similar technologies.

Cyberphysical systems (CPSs)

Embedded system that leverages physical objects with software and Internet services using data from sensors and actors,connected through real-time networks.

End-to-end digital engineering

Holistic view on individual products, resources, and the entire production system in a highly adaptive and flexible physical andvirtual environment.

Horizontal integrationSupply chain integration into a holistic IT landscape between different stages of production and the respective resource andinformation flow within a factory and across companies along the value chain.

Internet of Things (IoT)

Infrastructure, technologies, and applications that bridge the gap between the real world and the virtual world.

Real-time, value-added networks

Value creation within and from networks through the use of business-relevant information out of Big Data in real time.

Smart item

An object (product, tool, material, work equipment) that can autonomously recognize, measure, process, decide,

communicate, and act.

Smart product

Physical product that can provide technical and process information about its production and features.

Smart factory

Full integration of information and communications technology (ICT) into flexible and highly adaptive production, logistics, andmanufacturing processes through the use of real-time information from machines and products and other sources (for example, social media and back-end systems).

Vertical integration

Information integration and system interoperability across technological and business levels in production and logistics (sensor,control, production, manufacturing, execution, production planning, and management level).

More Information

Check out the following resources:

Visit our Web site under SAP Manufacturing (http://www54.sap.com/solution/lob/manufacturing.html)

Explore manufacturing solutions from SAP (http://www54.sap.com/solution/lob/manufacturing/software/overview /highlights.html)

Check out theidea-to-performance approach (http://www54.sap.com/solution/lob/r-and-d/software/idea-performance/index.html)

Visit SAP HANA (http://www.saphana.com/welcome)

Explore our cloud solutions (http://www54.sap.com/pc/tech/cloud/software/overview/index.html)


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