---
title: "What Is Industry 4.0? This Down-to-Earth Article Finally Makes It Clear"
description: "The author, Brother Tu, explains Industry 4.0 in an accessible way, starting from the evolution of industry through the three previous industrial revolutions, and then detailing the challenges of the current era of overcapacity and the internet. He breaks down Industry 4.0 into six levels, from smart production to the ultimate stage of a Matrix-like world, illustrating each with practical examples and analogies."
author: "New Distribution"
publisher: "New Distribution"
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published: "2016-01-10"
language: "en"
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---

# What Is Industry 4.0? This Down-to-Earth Article Finally Makes It Clear

> The author, Brother Tu, explains Industry 4.0 in an accessible way, starting from the evolution of industry through the three previous industrial revolutions, and then detailing the challenges of the current era of overcapacity and the internet. He breaks down Industry 4.0 into six levels, from smart production to the ultimate stage of a Matrix-like world, illustrating each with practical examples and analogies.

By Brother Tu

> _In my early years, I worked in the industrial automation industry. Later, to earn some extra money for pocket change, I gave lectures in several cities on a course called "Industrial Internet and the History of Industrial Civilization." As a result, many people think I know a lot about the industrial internet (actually, I'm just a half-baked expert). This morning, a good buddy from LeEco asked me what Industry 4.0 really is. I had promised to explain it to him alone, but then I thought, why not organize the materials and ideas and share them with everyone? So today, let's talk about this mysterious Industry 4.0._
>
> _First, let me clarify: Brother Tu is just a porter of knowledge. What I say may not be correct; it's just the result of digesting and understanding a lot of materials. In fact, there is no standard answer for Industry 4.0, not even the Germans have one._

First, let's look at three concepts:

* **Industry 1.0**
Mechanization: Marked by the steam engine, using steam power to drive machines instead of human labor. From then on, handicraft separated from agriculture and formally evolved into industry.

* **Industry 2.0**
Electrification: Marked by the widespread use of electricity, using electric power to drive machines instead of steam power. From then on, parts production and product assembly were divided, and industry entered the era of mass production.

* **Industry 3.0**
Automation: Marked by the application of PLC (Programmable Logic Controller) and PCs. From then on, machines not only took over most of human physical labor but also part of mental labor. Industrial production capacity has since surpassed human consumption capacity, and humanity has entered an era of overcapacity.

These three definitions are quite academic. Rest assured, this is the most academic paragraph in the whole article. From here on, I'll tell the story in the manner of an old monk telling stories.

To understand Industry 4.0, we first need to look at the current situation, which we call Industry 3.X. In the trendy description of cultivation novels, it's the mid-to-late stage of 3.0, a state of complete automation and partial informatization.

We have to start with the business model of a factory.

A factory exists for only two purposes: produce products and sell them. So in industrial enterprises, there are usually two major departments: the production department and the business department. The former is managed through MES (Manufacturing Execution System), and the latter through ERP (Enterprise Resource Planning).

What's the difference between these two systems? ERP focuses more on financial information management, while MES focuses more on production process control. Simply put, ERP tells you how many bottles the customer needs, when to order, and when to deliver, while MES is responsible for monitoring and managing each step and process of producing those bottles.

In many workshops in Chinese factories, the various production equipment, and between production equipment and controllers, have basically achieved connectivity. In more impressive companies, the entire factory is connected through MES, and the business departments are all connected through ERP.

**Did you spot the problem?**

**ERP and MES are not actually connected!**

So when ERP issues a production plan to MES, if deviations occur during production (e.g., equipment breakdown, unqualified raw materials), MES will adjust according to the actual workshop situation. But ERP doesn't know! So it continues to execute orders according to the original plan. Over time, the financial system and the actual situation in the factory will diverge significantly.

Why aren't they connected? Two reasons: First, the companies that develop ERP and MES are usually two different groups. Financial people and production people cooperate, but they don't understand each other's professional jargon, it's like a chicken talking to a duck, and they look down on each other. Second, the business department and production department are usually run separately within the company, and each leader has their own preferred suppliers (you know why).

Of course, the wisdom of the masses is infinite. They certainly won't just wait for the gap between the two systems to grow. Since the systems aren't up to the task, we'll do it manually. Our workers have strength. So factory workshops regularly make a table of MES adjustments and hand it to the business department, which then manually adjusts the ERP.

The ERP and MES problem is just a microcosm of the system gaps within a factory. In fact, there are many other systems in a factory—design, manufacturing, procurement, office, etc. These systems are all information silos, each unaware of what the others are doing or how far along they are. If one part has a special situation, the others don't know until the problem surfaces, and then they have to backtrack and modify all systems one by one.

By the way, the reason Lao Luo's Smartisan phone was so hard to produce is that during design, the production staff didn't have real-time understanding of the situation. So when actual production began, they found that the original brilliant design would lead to a low yield rate, and they had to go back and redesign. Every product has to be modified repeatedly, so it often takes one to two years for an industrial product to go from design to mass production.

Of course, this isn't something new. In the industrial era, product life cycles were long. My old employer, Siemens, sold one model of frequency converter for thirty years. So a one-to-two-year R&D and launch time didn't seem that long. Other problems were handled through manual communication; although there were errors, things were generally fine.

However, the wolves have finally come.

**These two wolves are called overcapacity and the internet.**

**Global overcapacity** has made competition among enterprises increasingly fierce. The old practice of selling one product for thirty years no longer works. If you're slow, there are faster ones. Lao Luo's Smartisan phone was only a few months late, and it went from a highly anticipated hit to an outdated product. Product life cycles have been greatly shortened.

**The advent of the internet era** has shaken a major foundation of the industrial age: information asymmetry. In the industrial age, because manufacturers couldn't understand each customer's needs at low cost, they often adopted a one-size-fits-all approach: combining the most demanded features into one product.

For example, if you want a pair of shoes that fit your feet, the shoe factory can't know your foot size. So they measure many people's feet and divide the most common sizes into 40, 41, 42, etc. But if your feet are wide or narrow, sorry, we don't cater to that.

The internet has changed this. People and people, people and manufacturers, can connect at low cost, amplifying individual needs. People increasingly like personalized things. But the demand for personalized items is not that large, so industrial enterprises need to achieve small-batch, rapid production.

**These two wolves force traditional industry to do one thing, the thing industrial society hates most: rapid, small-batch, customized production.**

At this point, some preparatory work is needed. Industry 3.0 must first evolve to 3.X. The so-called Industry 3.X is actually about thoroughly connecting information systems like ERP and MES, so that all the information silos in the factory are connected. At this point, it moves from complete automation and partial informatization to complete automation and complete informatization, which is the perfect stage of Industry 3.0.

Don't underestimate this process. Just this one step might take China ten years or even longer to complete.

Okay, the above are all real-world problems. After the perfection of 3.0, we're going to start a sci-fi, brain-burning journey. We're finally going to impact Industry 4.0. In this process, the complete automation and informatization from 3.0 will start to do one thing: get married and have children.

This process is called Industry 4.0 in Germany, Industrial Internet in the United States, and the integration of informatization and industrialization by our Ministry of Industry and Information Technology. The fanatical fans of the Internet of Things call it the Internet of Everything.

Here I need to mention: when all things need to be interconnected and communicate, there's a problem: what language do they speak? English, German, or Sichuan dialect?

What is the communication protocol? This is a key issue. You might say, why not use the current internet communication method, the TCP/IP protocol? This is a technical issue, and I can't explain it clearly to a novice like you (actually, I, a former half-baked automation engineer, don't understand it very well either). Simply put, the internet communication method is too slow, not precise enough, and not secure enough. In industrial production, the requirements for speed, precision, and security are far higher than the requirements for downloading movies of the talented and virtuous Teacher Cang at home.

So the Internet of Everything requires a dedicated communication protocol.

This is also the core issue hidden behind these fashionable terms: Germany's Industry 4.0, America's Industrial Internet, and China's integration of the two and Made in China 2025. Everyone is competing for this communication standard. The United States is number one in the internet, so Americans want to descend from the informatization layer to the automation layer. Germany is strongest in mechanical manufacturing, so it prefers to ascend from the automation layer to the informatization layer. China, being the largest manufacturing country and the second strongest internet country, doesn't want to follow either side and plans to create its own Internet+, also called Made in China 2025.

Following the convention of cultivation novels, each realm is divided into smaller sub-realms to highlight differences and awesomeness. I'll use this method to divide Industry 4.0 into six heavens.

**Industry 4.0, First Heaven: Smart Production.**

Earlier, we mentioned that production equipment and management information systems are each connected, and equipment and information systems are also connected. Do you feel something is missing? That's right, the raw materials and production equipment are not yet connected.

At this point, we need something called RFID, Radio Frequency Identification. You probably don't understand, but simply put, it's like a QR code that can carry information. What makes it better than a QR code is that it can communicate wirelessly.

Let me describe a scenario: In a Pepsi production workshop, three bottles come down the production line in succession. Each bottle has its own QR code, recording that it's a customized cola for Zhang San, Li Si, and Wang Erma.

> _When the first bottle reaches the filling station, it uses the QR code's wireless communication to tell the controller in the central control room that Zhang San likes it sweeter, add more sugar. Then the controller tells the filling robot, "Add two jin of sugar!" (Poor Zhang San...)_
>
> _The second bottle comes and says Li Si is diabetic, no sugar. The controller tells the robot, "No sugar for this guy!"_
>
> _The third bottle comes and says Wang Erma wants Fanta. The controller tells the cola-filling robot, "Take a break," and tells the Fanta-filling robot, "You're up!"_

See, multi-variety, small-batch, customized production. Every can of cola is customized for you from the moment you place your order online. All its characteristics match your preferences.

This is smart production.

**Industry 4.0, Second Heaven: Smart Products.**

If the production process is intelligent, then the industrial products themselves can also be intelligent. This is not hard to understand. The smart bracelets, smart bicycles, smart running shoes, and other smart hardware you see are all based on this idea: treat the product as a data collection terminal, continuously collect user data, and upload it to the cloud for user management.

One of the core differences between German Industry 4.0 and American Industrial Internet is whether to build smart factories first or smart products first. Germany prefers the former, the US the latter. As for China, we just do "plus"—this "plus" thing is good; you can add it in any direction, as long as it can fool everyone.

**Industry 4.0, Third Heaven: Production as a Service.**

As mentioned, smart products will continuously collect user data and status and upload it to the manufacturer. This makes a new business model possible: charging for services. Many years ago, when I was at Siemens, Siemens proposed charging for services. At the time, I thought it was a stupid decision made by the Germans on a whim. But now I understand that it was laying the groundwork for the servitization of production in Industry 4.0. What's your impression of Siemens? Refrigerators? You silly! Over the years, Siemens has quietly acquired many famous software companies and become the second-largest software company in Europe, second only to SAP.

What is this service? For example, Siemens produces a traction motor for high-speed trains. In the past, they just sold a motor. Now, during operation, the motor continuously transmits data back to Siemens' factory, so Siemens knows the motor's current operating status and when it needs maintenance. How did high-speed train manufacturers do it before? One-size-fits-all: set a time, and regardless of whether it needs repair, they repair it at that time, just like our car maintenance. Now Siemens can tell you when it needs repair and when it needs maintenance. If you want to know, sorry, pay up.

Another example: After smart products are realized, every car will continuously collect surrounding data to determine its driving route. The entire transportation system will be fully servitized. No one will need to buy a car. One day, driving yourself might become a serious illegal act because the equipment is intelligent, but humans are indeed uncontrollable.

**At this stage, all manufacturers will transform into service providers.**

**Industry 4.0, Fourth Heaven: Cloud Factory.**

When the integration of informatization and industrialization in factories deepens further, another new business model will be born: the cloud factory.

The equipment in the factory is now also intelligent. They continuously collect their own data and upload it to the industrial internet. At this point, we can see which factories' production lines are running at full capacity and which have idle capacity. Factories with idle capacity can then sell their production capabilities to produce for others who need it.

Why has the internet industry developed so fast? Because entrepreneurs only need to focus on product and model innovation. They don't need to buy their own servers; they can directly rent cloud services. But current industrial entrepreneurs still have to constantly struggle with whether to find OEM manufacturing or build their own factories, which greatly limits innovation in the industrial field. When cloud factories are realized, I predict that China's industrial sector will see an innovation and entrepreneurship wave more than a hundred times larger than the internet. At that time, everything in society will be profoundly changed.

**Industry 4.0, Fifth Heaven: Cross-Border Strikes.**

The internet industry talks about dimensional reduction attacks on traditional industries every day, like Google, Xiaomi, Alibaba, LeEco. But let me tell you, when Industry 4.0 enters the fifth heaven, the cross-border strikes by industrial enterprises will be a hundred times more ferocious than those internet companies. This process will fundamentally shake the foundations of modern economics and management, reshaping the entire business society.

For example, a watch manufacturer produces a watch that sticks to your body every day, collecting various data about your body. This data might be useless to the watch manufacturer, but it's a goldmine for insurance companies. At that point, the watch manufacturer can transform into the best insurance company.

**When automation and informatization are deeply integrated, cross-border competition will become the norm, and all business models will be reshaped.**

**Industry 4.0, the Ultimate Perfection: The Matrix.**

The entire Industry 4.0 process is the continuous integration of automation and informatization, and also the process of redefining the world with software.

In the future, a multiverse will become reality in the virtual world. One real world will correspond to countless virtual worlds. Changing the real world will change the virtual world; changing the virtual world will also change the real world. Everything will be precisely controlled based on data. Most of human physical and mental labor will be replaced by machines and artificial intelligence. All current economic principles will no longer apply.

But some things will not change, I believe.

_This article is from the WeChat public account Brother Tu._

**-END-**

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