SAP Industry 4.0 strategy

The Digital Transformation of Manufacturing Companies

SAP’s Strategy for Industry 4.0

Executive Summary

The digital transformation of manufacturing companies is no longer optional. In the light of global disruptions and challenges companies need to find a path to leverage digital technology for nurturing growth and profitability. Challenges are, for example, how to increase productivity while producing individualized offerings or deal with lack of visibility and agility as barriers to respond to disruptions.

Many manufacturing leaders recognize Industry 4.0 as a strategic priority to turn these challenges into opportunities creating tangible business outcomes. A recent study1 shows that Industry 4.0 has significantly impacted productivity and profitability, with 63% of manufacturing companies reporting profitability increase of more than 5% compared to the year before. 61% of companies report that Industry 4.0 is already a competitive differentiator and another 37% it will be.

With Industry 4.0, the entire industrial environment is fully digitalized connecting the physical world of engineering, manufacturing and supply chain with enterprise business information, processes, and systems. To move Industry 4.0 forward, SAP found that companies apply four winning strategic initiatives putting intelligence into products, factories and logistics, assets and empowering people.

Your organization can truly achieve the benefits and impact of Industry 4.0 by embracing it holistically across your entire organization. Here is how SAP® can help you and add value with our unique capabilities.

SAP’s Industry 4.0 strategy helps you move digitalization from factory-focused initiatives to a company-wide, competitive business strategy that combines manufacturing automation with enterprise business execution. SAP is uniquely positioned to connect your horizontal business processes across your entire company, orchestrating sales, engineering, maintenance, service, and logistics with manufacturing to transform how you work.
SAP helps you turn raw data into improved business process automation and actionable insights. Our strength is our ability to deeply embed the wealth of contextualized machine, sensor, and device data (IoT data) into business processes across your value chain leveraging artificial intelligence, thereby significantly improving productivity and agility in industrial environments.
SAP helps you to standardize your business processes. Imagine running one standardized operational process spanning all available resources globally eliminating non-value add operations. That means you can shift production flexibly across facilities. With our robust cloud solutions SAP helps you scale Industry 4.0 across your global operations and move beyond plant specific pilots. The vibrant ecosystem of partners and leading institutions for Industry 4.0. driven by SAP gives you the holistic support you need.

SAP offers a broad solution portfolio for Industry 4.0 combining SAP solutions for design, manufacture, logistics, and operations in one offering. This enables you to steer your business resources in real time and make the right business decisions at the right time.

_{1. MPI 2021 Industry 4.0 Study, The MPI Group}

Why Industry 4.0 is so Important

Until recently, supply chains were mainly measured by efficiency metrics. Today’s world presents complex challenges and puts the supply chain at the center of not only business success but also of a company’s differentiation strategy. Supply chains need to become resilient in times of high volatility in demand and supply as witnessed during the pandemic. A resilient supply chain is able to quickly respond and to recover from unanticipated events.

Manufacturing companies face numerous challenges. They need to increase productivity while producing individualized offerings with highest quality in a constantly changing environment due to varying customer demand and sourcing complexities. Global competition and cost pressures force many companies to continually optimize business operations to stay profitable. Lack of visibility and agility are barriers to sensing, predicting, and responding to disruptions. Increasingly regulations especially in sustainability and in life sciences (such as good-manufacturing-practices and FDA compliance) require companies to rethink their business processes. Technological advancements such as artificial intelligence, e-mobility, autonomous driving and hyper-automation make digitalization a necessity.

Many companies recognize Industry 4.0 as a strategic priority to turn these challenges into opportunities creating tangible business outcomes leading to increased productivity, revenues, and profitability:

Increased ability to deliver on customer demand and expectations
Increased productivity of assets and people
Higher agility and visibility to respond to changing environments
Improved time-to-market and agility for customization of products
Sustainable operations meeting societal demands
New revenue streams through business model innovations
Coverage of industry specific needs, for example, segment of one for industrial machinery and component or compliance to regulations for pharma companies
Higher visibility across logistics operations with condition and status tracking

With Industry 4.0 the entire industrial environment is fully digitalized connecting the physical world of engineering, manufacturing and supply chain with enterprise business information, processes and systems. This enables agile, predictive business steering through autonomous machines connected to each other and connected to business systems. Data in (near) real-time is collected, processed, and shared from machines, vehicles, and people through sensors and devices. Enriching this data leveraging artificial intelligence and combining it with business data create meaningful information across sales, service, engineering, manufacturing, logistics to improve the business.

Companies that had implemented Industry 4.0 best practices prior to the pandemic found themselves better positioned to respond to the pandemic crisis. According to a study conducted by MPI2 companies implementing Industry 4.0 realize tangible improvements, for example,

More than 10% increase in profitability by 21% of companies and more than 5% by 42% companies
An increase in product quality by 56% of companies
An increase in customer satisfaction by 43% of companies

Companies successfully deploying Industry 4.0 focus on business value not technology, mobilize and train their workforce on new technologies and processes, and move toward an integrated IT infrastructure and automation technology stack. And they manage the company by data-driven processes rather than transactional processes.

_{2. MPI 2021 Industry 4.0 Study, The MPI Group}

Winning Strategic Initiativesfor Industry 4.0

Are you ready to embrace Industry 4.0 best practices to increase productivity and customer satisfaction? Here are four winning strategic initiatives companies apply to embrace Industry 4.0. Intelligent products are built and configured to meet exactly what customers require.

Figure 1: Winning Strategic Initiatives

INTELLIGENT PRODUCTS

Consumer and business buyer demands have never been greater. They require more-customized, sustainable, higher-quality products, and they want them instantly. Intelligent products in discrete industries meet customers’ unique configuration needs and are designed to be monitored for maximized performance over time. This leads to higher customer satisfaction, stronger brand loyalty, and competitive differentiation in the market.

These intelligent products can share information about how they perform when used by customers through built-in sensors that capture real-time data. How are products being used and for how long? Are they operating in a sustainable and regulatory compliant way regarding emissions? When will they break down? Monitoring products in operation enables new business models where the manufacturer owns and maintains the asset with service level agreements in place and charging the customer only for usage, uptime, or some other quantifiable metric.

In process industries where gases, liquids or powders / granulates are made, the term intelligent products has a different meaning. In this case, products are extended with digital services that provide guidance about how to apply products, for example, provisioning of field prescriptions to farmers that recommend when to apply which agrochemicals and in what dosage. In these markets, IoT data from industrial machinery is used to ascertain how the products are performing under differing conditions and adjusting as needed for product optimization and improvement of technical support.

To successfully innovate with intelligent products, companies use a seamless process from engineering and development to manufacturing that manages product complexity and quickly responds to changing demands. In discrete industries this includes a standard process for phasing late engineering changes into manufacturing and understanding the business impact of engineering or sales order configuration changes on manufacturing. In process industries product formulation and their scale-up to production is increasingly supported by digital capabilities such as machine learning (ML) to find the right recipe.

Customer example: Stara is the first Brazilian company to equip agricultural machinery with SAP Internet of Things solution technology linked to the SAP Cloud Platform to truly revolutionize their business. With a platform connected to the cloud, farmers can now monitor vital farming processes. They can collect real-time data about planting, soil preparation, fertilizing, harvesting, and more – allowing them to better manage their farms digitally. With real-time data at their fingertips, they determine the exact amount of fertilizer to apply in each section of farmland and optimize crop yields while reducing waste and lowering costs. This results in increased resource productivity and more sustainable farming. Stara’s Digital Farming Platform monitors the movement and use of every piece of connected equipment in their extended business – linking manufacturers, equipment retailers and farmers. With this approach of providing shared knowledge and technologies, the whole ecosystem benefits.

INTELLIGENT FACTORIES AND LOGISTICS

Today’s manufacturing environment is changing. The focus is moving from maximizing capacity and lowering cost, to agility in operations that enables companies to respond quickly to customer needs and market dynamics while still controlling cost, capacity and quality. Intelligent factories use real-time data and artificial intelligence to run as autonomously and flexibly as possible. This leads to reduced operational cost, increased ability to deliver, improved asset performance and throughput, higher productivity, process efficiency, and reduced risk.

An intelligent factory is agile, adaptable, and ready to support different production scenarios. It consists of flexible manufacturing units making it possible to reduce lot or batch sizes that increase product variety at affordable cost. It’s also elastic and able to manage variable production configurations, demand volume, and manufacturing technologies.

With Industry 4.0, businesses can visualize their entire global operation, shifting production as needed on a global level. Whether operations are based in Asia, Europe or North America, businesses cannot look at each plant as a single silo. They must look at all plants in their global operation and determine how best to leverage facilities to deliver on customer demand. By building standardization and intelligence across plants, companies can understand how to best balance production. This is enabled by digital operations management with both predictive and prescriptive capabilities, along with real-time data, engineering / manufacturing / asset management feedback loops, and network capabilities for design collaboration.

Intelligent logistics is tightly integrated with manufacturing for advanced receiving/shipping and production supply management. Warehouse and production supply lines align more closely for efficient operations with full digital transparency. Using smart sensing with IoT devices, goods receipt and issue are posted automatically, and Kanban processes are triggered to fulfill production supply needs.

Customer example: Smart Press Shop, a joint venture between Porsche and Schuler, set up a new milestone in automotive production by establishing a greenfield plant that showcases the art of the possible for automotive component manufacturing. The objectives for the new facility are to enable fully paperless production and to instill a completely automated process for configuring production line machinery to manufacture automotive body parts.

The SAP Digital Manufacturing Cloud solution and the SAP S/4HANA® Cloud software enables the company to automate the setup of its tools whenever a new order for automotive body parts is scheduled for production. The ability to configure the production line for new products quickly and without manual intervention means that Smart Press Shop can manufacture small batches of components much more efficiently than a traditional production plant. In the automotive industry, where responsive manufacturing is a key requirement, this approach gives Smart Press Shop a significant competitive advantage

INTELLIGENT ASSETS

Intelligent factories with high automation and connected processes require high operational asset performance of machines and equipment used. However, in many companies the actual asset health is unknown, and data is collected and handled in several silos. This leads to a significant amount of avoidable downtime and inefficiency. Companies that rely on their assets for business operations seek to enhance asset management practices that will help them improve their profitability, productivity, environmental, and social outcomes. They re-think existing asset management approaches to turn them into data-driven processes using contextualized insights derived from sensor and failure data to support better decision making.

Intelligent assets are linked to every process and are dynamically maintained. For example, they apply predictive maintenance strategies using IoT sensor data with predictive analytics, simulation, and machine learning, which automatically triggers ‘perfect-time’ maintenance recommendations for execution. Maintenance schedules are driven by ‘listening’ to the assets themselves.

To achieve this, companies integrate maintenance operations across the enterprise, apply advanced technologies, merge asset performance management and maintenance operations, and adopt collaborative maintenance and service processes with equipment suppliers and maintenance service providers. They collaborate in a business network for exchanging digital content of assets and improving work processing.

Customer example: Endress + Hauser is a global leader in measurement instrumentation, services, and solutions for industrial process engineering across a wide range of industries. With that the company helps business optimizing processes with regards to economic efficiency, safety, and environmental protection. Endres + Hauser leverages SAP Business Technology Platform to reinvent itself with new services around asset performance management that drive innovation in the process industry by enabling fact-based actions, such as predictive maintenance. With improved visibility into flowmeters of their process industry customers, they can alert their customers and give them the necessary amount of time to react to flowmeter problems. With predictive asset analytics, based on the SAP IoT Application Enablement toolkit, increased visibility into the state of the pipes is achieved so that the right spare parts can be ordered in advance of service and maintenance execution. Fixing the issue is now less time consuming since historical data gives insight to the root cause of failures resulting in an increase of the overall asset availability for their customers.

EMPOWERED PEOPLE

No matter how far automation goes, manufacturers will always need people. The role of operators moves away from manual intervention towards monitoring and exception handling. The tasks become intellectually more demanding and require the right skills and information to make better decisions.

People are and will continue to be a crucial resource.

Giving people the tools and real-time information at the point of work is therefore a pre-requisite and helps motivate people to perform their job more intuitively and effectively, especially in unforeseen situations that require ad-hoc decisions to be made in near real time. Operators and maintenance technicians need to know what is happening on the shop floor, so that they are ready to respond in a more effective and timely fashion.

Companies use technology to provide contextual data to help the front-line workers make the right decisions. Access to corporate business data combined with live data from sensors, such as usage data from assets, enriched by ML can help operators to reduce delays and response times, and detect root-causes faster.

Customer example: Schaeffler is an automotive and industrial supplier with global operations. Schaeffler delivers high-quality, intelligent products that are shaping the future of mobility today. To continue paving the way toward innovation Schaeffler created a digital assistant to support their distributed base of worldwide employees. The digital assistant based on the SAP Conversational AI service drives intelligent employee engagement by integrating machine learning, predictive analytics, and cloud technologies in decision-making processes while consolidating the appropriate SAP applications in one place. User experience is simplified through intuitive graphical user interfaces and natural-language processing. This means Schaeffler can save training expenses and avoid problems such as how employees engage with IT systems more simply through use the entire system via speech interaction.

Our Approach to Industry 4.0

For many organizations, Industry 4.0 is a manufacturing or distribution center-focused effort. And while that is a part of the SAP story, it’s not the whole story. Your organization can truly achieve the benefits and impact of Industry 4.0 by embracing the philosophy holistically across the entire organization. SAP calls this holistic approach Industry 4.Now and here is how it can help you and add value:

Figure 2: SAP ́s Industry 4.0 Approach

CONNECT THE ENTIRE COMPANY

SAP’s Industry 4.0 can help you move digitalization from factory-focused initiatives to a company-wide, competitive business strategy that combines manufacturing automation with enterprise business information and execution. SAP is uniquely positioned to connect your entire company, orchestrating sales, engineering, maintenance and service, finance, and logistics with manufacturing to transform how you work. This process of connecting all core business operations revolves around the transformation of four often disparate but integral pillars: Intelligent products, intelligent factories and logistics, intelligent assets, and empowered people, as outlined in the previous chapter.

Here is an example of connecting the pillars: Customer orders are individualized through variant configuration in an integrated environment. Design requirements are smoothly integrated with production engineering, and engineering bills of materials or recipes are managed through a consistent digital thread and handed over to manufacturing. Production engineering keeps last-minute engineering changes in sync with the shop floor. Then, raw materials and parts supplied to the production lines are orchestrated between manufacturing execution and warehouse management systems. Asset operations are transformed from reactive to predictive models leveraging machine learning. Production and machine maintenance schedules are aligned to maximize up time of your machines.

MOVE TO DATA-DRIVEN BUSINESS

Industrial IoT devices and sensors, as an example, provide the ability to collect, process, and share (near) real-time information from machines, vehicles, and people. SAP helps you turn this raw data into improved business process automation and actionable insights. SAP ́s strength is our ability to deeply embed the wealth of contextualized machine, sensor, and device data (IoT data) and operations data into business processes from engineering to manufacturing and logistics to maintenance and service. The resulting real-world situational awareness of the business helps you significantly improve productivity and agility in industrial environments. By combining enterprise business data with IoT data, you can automate processes with embedded artificial intelligence and increase visibility and efficiency. This is enabled by SAP ́s capabilities for smart sensing, big data management, intelligent edge, and analytics and intelligence.

This provides, for example, capabilities to track the temperature of inbound raw materials and automatically post inventories for supply-to-production. During production sensors measure machine performance and give data points for recommended corrective action. A visual inspection ML algorithm detects quality issues based on image data. Intelligent assets anticipate failures through insights gained by analyzing IoT data, and advanced analytics, such as reliability-centered assessments drive maintenance strategies. Finally, shipments are automatically tracked when leaving the facility all the way to their final destination. Beyond that, closed-feedback loops of intelligent products enabled through the IoT allow your engineering department to address rapidly changing consumer requirements proactively and ultimately reduce the time for new-product introduction.

Figure 3: Improve Business Processes with Industry 4.0 transformation

STANDARDIZE AND SCALE OPERATIONS

SAP helps you to standardize your business processes. Imagine running one standardized operational process spanning all available resources globally, eliminating non-value add operations, bringing in lean principles and connecting end-to-end business processes from the enterprise to the shop floor. With that you can shift production flexibly across facilities. Capacity is optimized and enables you to move production closer to demand delivering on customer expectations. This requires consistent systems across all operations supported digital technologies, flexible processes, and access to data.T

o support this, SAP is highly engaged in standardization bodies, for example, in the OPC Foundation driving the OPC unified architecture or engaging in the Asset Administration Shell (AAS) to describe assets digitally in a standardized manner. SAP also engages in industry consortiums and continues to drive the conversation forward. SAP is one of the founding members of alliances, such as the Platform Industrie 4.0 and the Open Industry 4.0 Alliance which are among the leading institutions driving standardization and execution for Industry 4.0.

Today, many companies use on-premise solutions in their plants requiring significant time for implementation and innovation. Leading companies change the approach and adopt cloud / edge solutions for solving these challenges. With our robust cloud solutions SAP helps you to scale Industry 4.0 across your global operations and move beyond plant specific pilots. With operations standardized on a common solution and a single data taxonomy across facilities you can implement changes faster and innovate responsively to your customer needs. Business processes are standardized and orchestrated in a central cloud for improved information flow and advanced analytics. An extensibility framework gives customers and partners the ability to configure standardized processes and applications to specific factory needs.

For safeguarding mission-critical business processes operated in the cloud, SAP offers distributed edge capabilities. The edge includes dedicated hardware and software components deployed on the production site and orchestrated centrally from the cloud.

Another important aspect for scaling Industry 4.0 is the ecosystem. Advancing Industry 4.0 requires strong cooperation between ecosystem players. Nobody can do it alone, due to current market fragmentation, complexity of the shop floor, and expectations of digitalization. SAP orchestrates a strong ecosystem with partners of complementary strengths. Together with our partners, SAP delivers Industry 4.0 relevant solutions to the owners and operators of manufacturing sites, plants, and factories.

Our Solutions for Industry 4.0

Explore our broad solution portfolio that unlocks the value of Industry 4.0 by combining the power of intelligent manufacturing in factories and plants with end-to-end business process execution across the supply chain.

OUR SOLUTIONS TODAY

The Industry 4.0 strategy combines SAP solutions for design, manufacture, delivery, and operation in one holistic offering supporting the Industry 4.0 strategic initiatives and best practices. SAP offers a range of leading business solutions, for example, the SAP Enterprise Product Development and SAP Digital Manufacturing Cloud solutions and the SAP Asset Strategy and Performance Management and SAP Environmental Health and Safety applications to drive implementation of Industry 4.0 capabilities. Technically, the solution portfolio consists of SAP S/4HANA as the business backbone, integrated with SAP Business Technology Platform, with cloud business applications that extend the core with innovative Industry 4.0 scenarios and connectivity to devices in the factory.

In addition, SAP Internet of Things provides the data backbone with comprehensive capabilities for smart sensing, big data management, analytics and intelligence, and intelligent edge technology. This enables device connectivity, data lake management, edge processing, a powerful rules engine, and business contextualization of IoT data. The solution enables you to orchestrate business processes in a central cloud environment combined with edge processing to help overcome challenges such as latency and intermittent connectivity to the manufacturing or plant site. You have flexibility and choice between SAP and various hyperscalers for storing and managing data lakes.

Figure 4: Selected SAP Solutions that Support the Industry 4.0 Strategic Initiatives

Figure 5: SAP Internet of Things Capabilities

The unique mix of SAP business applications, technology platform and edge/IoT services enables you move digitalization from factory-focused initiatives to a company-wide, competitive business strategy that combines manufacturing automation with enterprise business information and execution.

OUR SOLUTIONS TOMORROW

Going forward, the SAP solution portfolio will evolve to a comprehensive, integrated digital operations management suite of modular solutions (figure 6). SAP’s strategy is to provide all capabilities required to run end-to-end factory and plant operations at enterprise scale based on data driven processes. State-of-the-art discrete and process manufacturing operations will be supported, such as modular production, hyper automation and application validation, for example, for life sciences companies. The capabilities will cover the entire manufacturing operations value chain from requirements management, to manufacturing engineering and production planning / dispatching, to logistics and shop floor execution, to insights and intelligence, quality management and asset operations. An imperative for this suite of solutions is to enable data driven end-to-end business processes based on the industrial Internet of Things. Big data management, edge computing and ML capabilities will truly enable process automation and intelligence.

These capabilities can be deployed in a modular fashion, tightly integrated to the entire suite and ERP processes, for example in SAP S/4HANA. Here are example capabilities of the digital operations management suite:

Preparing for the manufacturing execution, the ‘mission’, production engineering converts engineering to manufacturing bill-of-materials and assigns recipes to plants and labels respectively. Any engineering and recipes changes are governed and the impact to downstream processes are managed. Even complex configure-to-order and engineer-to-order processes are facilitated seamlessly.
Production planning and scheduling not only optimizes labor, tools, and equipment but also is deeply integrated to cross-plant network planning. Disruptions to the shop floor such as sudden tool breakage or machine failures are managed with what-if analysis and ad-hoc decision support. An AI-based recommendation engine proposes resolutions to these disruptions to optimize shop floor operations based on service levels, such as a desired overall equipment effectiveness, customer lead times or quality levels.
Mission control covers production execution and process control on the shop floor and worker guidance. Intralogistics ensure material delivery to the line as required, highly automated with the help of autonomous guided vehicles. Modular manufacturing setup is supported with a dynamic routing engine and deeply integrated intra-logistics for work-in-progress and material staging. Shop floor efficiency is increased by intelligent shift reports highlighting non-conformances and safety incidents to drive sustainable process improvements.
Mission assurance provides insights into global plant and production performance. Intelligence such as visual inspections is infused to quality, intralogistics and production operations. Advanced quality management looks at failure mode and effects analysis and resolves issues and complaints in a guided methodology. ML algorithms propose potential root causes to a quality engineer based on previously identified causes for similar cases.
Asset performance management maximizes the overall effectiveness of machines. Reliability centered strategies drive maintenance recommendations based on clear failure mode and effects analysis.
Smart sensing enables business processes in logistics such as Kanban, goods issue / receipt and plant maintenance such as maintenance notifications driving higher automation and efficiency.

The Industrial Internet of Things Foundation not only provides a common data model, big data management, a decision engine framework but also edge computing capabilities to run even the most mission critical processes with highest availability. Machines, sensors, and devices are seamlessly connected, embracing standards such as the asset administration shell and OPC-UA.

Figure 6: SAP Digital Operations Management suite

To complement SAP’s Industry 4.0 business process capabilities, SAP provides an architecture to support interoperability, integration, and extension. Where needed, standard solutions can be augmented with customer-specific capabilities as well as partner applications. This helps to strike the balance between process standardization and visibility on an enterprise level with the individual factory and plant requirements.

How to Get Started andImplement Industry 4.0

SAP offers you a portfolio of services to simplify and accelerate the journey to Industry 4.0 across industries and lines of business. Each service offers a library of proven best practices, preconfigured solutions, deployment options, and integrated business content. In addition, SAP runs innovation hubs as regional innovation workspaces chartered to accelerate the Industry 4.0 journey and adoption. The live factory setup in the hubs helps to visualize the possibilities of Industry 4.0 and make high-value use cases tangible.

Figure 7: SAP Services for Industry 4.0

These services emphasize essential processes, integration, technology adoption, and scalability. This provides key business outcomes through real-time insights to drive critical decision-making, improved reliability, and automated processes. These services include your choice of the following:

Pre-built packages with quick-start services and upgrade services
Fully customized implementation services and enhancement packages
To fully support different customer engagement models, SAP offers value assurance services for partner-led implementations as well as premium engagement services, such as SAP MaxAttention for co-innovation.

GETTING STARTED

Identify your starting point and deep dive into the opportunities the Innovation Services package offers.
Accelerate and safeguard your transformation journey. Start to address your business challenges and speed up your Industry 4.0 journey with an accelerated implementation of SAP Industry 4.0 solutions by focusing on future business requirements, technology adoption, and scalability.