ERP and Industry 4.0

Aaron Ricadela | Content Strategist | November 17, 2023

More manufacturers are building digitized factories to boost output capacity, improve product quality, and pare costs. Digitalization typically includes technologies such as wireless sensors, 5G networking, automated robots, and powerful data processing. This approach is known as Industry 4.0, which refers to a fourth industrial revolution (after those sparked by steam, electricity, and electronic automation).

Most manufacturers are turning to cloud enterprise resource planning (ERP) software to execute an Industry 4.0 approach. In addition to finance and HR capabilities, cloud ERP systems encompass functions such as procurement, supply chain planning, logistics, and more. Sophisticated ERPs can take in the data flowing from machines, robots, and other tools in various production facilities, then use it to inform and improve manufacturing processes. Manufacturers with an Industry 4.0 strategy might use ERP to help orchestrate production around predicted bottlenecks or to automatically order materials when supplies are low, for example. They can also use ERP to visualize their processes and measure effectiveness, helping them grow more competitive as they refine their workflows.

In short, cloud ERP helps manufacturers realize the full benefits of Industry 4.0.

What Is Industry 4.0?

Industry 4.0 involves smart factories where sensor-enabled machines collect data about their usage and maintenance needs, then communicate with one another and with workers. The end products, such as aircraft engines and tractors, often communicate with end users via similar technology. These sensor-equipped machines are the foundation of the Internet of Things (IoT). Among other things, IoT sensors can connect factory-floor activities to software that analyzes and controls machines on the production line. The sensors provide data about the machines’ maintenance status and output, which manufacturers can use to boost product quality, reduce defects, and prevent equipment failures.

The smart manufacturing that’s core to Industry 4.0 also encompasses automated production lines, robotics, additive manufacturing (3D printing), AI, machine learning, and digital twins: virtual representations of equipment, vehicles, and processes that let manufacturers virtually test products and equipment and output them faster.

Key Takeaways

  • Manufacturers can achieve game-changing increases in throughput and product quality while cutting downtime with Industry 4.0 technologies.
  • ERP systems take in, organize, and analyze real-time production data, producing insights that manufacturers use to make decisions that optimize Industry 4.0 workflows.
  • Cloud-based ERP provides the data security crucial to running a smart factory, and it aids manufacturers in scaling Industry 4.0 across production sites.

Why Is Industry 4.0 Important for Manufacturing?

Manufacturers that implement an Industry 4.0 approach can produce more products faster with higher quality, lowering costs and speeding time to market. For example, by analyzing machine output data in real time, they can quickly identify production bottlenecks and reconfigure lines as needed. Some smart factories also involve closed-loop systems that eliminate the need for human intervention; for example, on a production line for painting car frames, an automaker could task AI and analytics software with automatically adjusting processes on the fly, without sending data back to a central server. Industry 4.0 is also helping United States manufacturers compete with those overseas, where labor is often cheaper.

With an Industry 4.0 approach, manufacturers often see 30% to 50% reductions in machine downtime and 10% to 30% increases in throughput, according to McKinsey & Company.

How ERP Supports Industry 4.0

Industry 4.0 requires access to real-time production data and the ability to interact instantly with machines, often from mobile devices. An ERP system is the hub from which to access and act on this data. ERP helps manufacturers plan, control, execute, and automate the processes that make up Industry 4.0.

1. Actionable insights

In a smart factory, sensors and other devices collect data from machines, vehicles, and workers on the shop floor. An ERP system combines that information with other business data to deliver insights that the manufacturing, sales, service, engineering, and logistics teams can use to improve operations and forecasts. For example, food and beverage producers might use IoT devices and software for tracing the flow of goods through their distribution chain to find the source of quality problems or customer complaints about taste or freshness. Insights from ERP dashboards and alerts can also help automate smart factory processes. For example, when stock of a given raw material falls below a certain level, the system can take note and automatically generate a purchase order for more.

2. Data security

Factory machines connected to the internet can pose cybersecurity risks, and a single vulnerable point in production can end up exposing an entire plant or company to a potential cyberattack. An ERP system that delivers cloud computing as a service can help. These types of systems ensure manufacturers always run the latest version of the software, delivering frequent updates for optimal security. Cloud platforms often also offer services that analyze potential cybersecurity vulnerabilities in connected machines and recommend remedies.

3. Scalability

Often, manufacturers get stuck in pilot phase and have difficulty scaling Industry 4.0 projects across factories. Implementing these projects in siloes, separate from central IT, is a common reason they fail to scale, according to McKinsey. A well-designed cloud ERP system can address these issues. It offers organizations a single set of data, without duplication, to use in managing manufacturing, inventory, the supply chain, finance, and other functions. Data flows from the production floor or items in transit (via RFID tags) into an ERP system for any department across multiple manufacturing sites and offices to access.

4. Real-time decision-making

ERP provides accurate data that’s readily available for processing. This fuels a main discipline of Industry 4.0: predictive maintenance of machines. In smart factories, IoT sensors measure machine vibrations, noise, temperature, and other signals during production, then transmit those signals in real time to ERP predictive monitoring modules. There, manufacturers can view machines that may need maintenance and plan to service them before they fail. On average, this reduces maintenance costs by 25% and breakdowns by 70%, according to Deloitte. ERP can also help synchronize production with changing customer demand, communicating with manufacturing systems and the programmable controllers on machines.

5. Cloud computing

ERP systems that run as cloud software can help companies scale their Industry 4.0 projects. A car manufacturer, for example, may consolidate sensor data from its 20 plants in a cloud ERP system instead of in multiple systems hosted locally at plants. Cloud ERP systems can also help drive innovation because they update automatically. Manufacturers always run the latest version of the software with the most up-to-date capabilities, which they can leverage to design new products and offer new services.

6. Customization

Using an ERP system to manage IoT data gives manufacturers a better handle on custom orders, so they can give customers more realistic delivery times and regular progress updates. In the best ERP systems, manufacturers can quickly reconfigure their workflows to fit the specific needs of their industry and their company. Often, large manufacturers work with ERP vendors to develop specialized fields, reports, and other features.

7. Workflow optimization

Industry 4.0 requires continuous improvement: Manufacturers must optimize an entire job, not just its individual parts. They can use ERP to do this, making quick decisions using machine-generated data and coordinating production processes with broader business goals or supply chain partners. For example, Mazda Motor uses ERP along with warehouse management and transportation management systems so staff can manage ordering, deliveries, and invoices for its auto parts from a common user interface. And defense contractor General Dynamics uses cloud ERP to track work orders on the shop floor alongside product quality data and financial metrics.

Choosing the Right ERP for Your Business

To fully support an Industry 4.0 approach, an ERP system must help manufacturers use data to inform processes that span engineering, production, logistics, and services.

Combining smart factory data with data from across the business can help automate processes, quickly deliver reports on plant performance, prioritize work based on material availability, visualize supply chains, and more. Consider Titan International, a US-based manufacturer of wheels for agriculture, construction, and forestry vehicles. Titan implemented an ERP system and IoT applications that deliver real-time readouts of shop-floor data for the team to check against manufacturing goals. The company used the software to easily scale its Industry 4.0 project, expanding production monitoring and automatic work-order completion to more than 10 production lines for faster quality reporting and more accurate data when scheduling customer deliveries. Instead of taking as long as two hours to manually enter manufactured parts into a software system, teams now see the data reflected instantaneously and automatically, eliminating shipping holdups.

Manufacturers should also look for tightly integrated ERP and manufacturing software. For example, Precision Group, a maker of plastic packaging and molds in the United Arab Emirates, moved from a legacy system to Oracle Fusion Cloud Manufacturing for tighter integration among ERP, supply chain, and IoT software. The manufacturer now has more insight into its order-to-cash cycle, and employees can view all analytics dashboards on their phones. Teams use production insights to make decisions that boost speed and efficiency, helping Precision Group stay ahead of competitors, according to its CIO.

Join the Industrial Revolution with Oracle

With Industry 4.0 software from Oracle, manufacturers get automation, insights into how to improve their operations, and more. Oracle Fusion Cloud Manufacturing can capture and analyze shop-floor data, with built-in integration with supply chain management and ERP. Mixed-mode manufacturing software can track production of bulk products, liquid products, and individual units such as packaging, all of which may be produced in the same plant.

Oracle Fusion Cloud Internet of Things Intelligent Applications let manufacturers monitor work in progress using sensor data and increase machines’ uptime with predictive maintenance analysis based on that data. The applications include modules for machine monitoring, supply chain tracking, and logistics.

Oracle Manufacturing systems for discrete and process manufacturing monitor shop-floor production, giving supervisors and operators immediate access to the updated information they need to manage production runs for ultimate efficiency.

ERP Industry 4.0 FAQs

What are some of the key technologies that power Industry 4.0?
Industrial IoT, data analytics, AI, cloud computing, 3D printing, autonomous robots, and digital twins are some of the technologies that power Industry 4.0.

What are some of the business advantages of Industry 4.0?
With an Industry 4.0 approach, manufacturers can reduce costs, improve product quality, better track goods through the supply chain, and model changes in manufacturing and other processes to inform adjustments.

What are some of the perceived risks of adopting these technologies?
Automating processes in smart factories often requires manufacturers to invest in upskilling current employees or hire for highly specialized roles. Equipping machines with internet-connected sensors leaves some leaders concerned about increased risk of cyberattacks, though cloud ERP systems can significantly mitigate this risk.

Discover how ERP helps you not only deploy an Industry 4.0 approach but also deliver on other top priorities for manufacturers.