6 Industry 4.0 Challenges and Risks

Industry 4.0, the manufacturing approach that combines internet-connected shop-floor machines with computer analysis of production, can yield big efficiency gains. Shifting to an Industry 4.0 manufacturing setup can raise throughput, lower costs, boost product quality, speed time to market, and increase machine uptime. Adopting Industry 4.0 technologies can also sharpen manufacturers’ competitiveness and lessen their environmental impact.

While the benefits of Industry 4.0 are many, manufacturers must remain clear-eyed about the challenges and risks they may face as they implement an Industry 4.0 approach: integrating new technologies with legacy IT systems, increased cybersecurity threats, and more. Solutions include planning, boosting collaboration, and investing in technologies that facilitate secure and efficient manufacturing.

What Is Industry 4.0?

Industry 4.0 uses automation and data analysis technologies to create smart factories consisting of networked machines that share production data with workers. The main benefits of this smart manufacturing approach include producing a higher volume of products faster, with higher quality. An important component of Industry 4.0 is the Industrial Internet of Things (IIoT), the application of Internet of Things (IoT) technologies in manufacturing: Think of sensors that monitor a machine’s maintenance status and transmit production data for analysis. Industry 4.0 also relies on technologies, including wireless internet coverage in plants, ports, and shipping yards; automated robots; and advanced data processing systems.

Key Takeaways

• Top challenges in Industry 4.0 deployments include security concerns, technology standards and interoperability struggles, and workforce reskilling.
• To overcome these challenges, manufacturers must boost collaboration across departments—for example, they can overcome cost challenges by launching smaller-scale Industry 4.0 projects and refining them with constant, valuable feedback from a mix of teams.
• Technology plays a starring role in overcoming Industry 4.0 challenges and mitigating risks. Integration software aids in retrofitting older facilities into smart factories, and cloud computing protects against cyberattacks, for example.

Industry 4.0 Challenges Explained

Manufacturers adopting Industry 4.0 approaches often face issues as they implement technology aimed at automating factory processes. Costs can be high, especially for small and midsized businesses that may struggle to invest in new equipment, sensors, and software. Plant workers may lack skills to oversee cyber-physical production systems, use portable computing devices, and adjust processes according to software recommendations. Manufacturers may also need to consider hiring engineers, data scientists, and software developers, roles for which the supply of qualified workers may be short. The challenges extend beyond costs and staffing: Integrating Industry 4.0 technologies in a factory can expose machinery and networks to data breaches or cyberattacks.

6 Industry 4.0 Challenges and Solutions

Roadblocks to Industry 4.0 adoption include the high costs of scaling deployments; organizational challenges, such as getting management buy-in for smart factory initiatives; and technology challenges, such as choosing the required software and an implementation partner, according to a 2020 McKinsey survey of more than 800 manufacturers worldwide. In a separate 2022 survey of IT decision makers by market researcher IDC, top challenges in implementing IoT projects included security concerns (cited by 35% of respondents), concerns about the capabilities and stability of the technology (27%), and costs of deployment (26%).

For each challenge, however, there’s at least one solution that manufacturers can use to reap the benefits of Industry 4.0.

1. Legacy IT Systems

Manufacturers with outdated IT infrastructure may find that it doesn’t integrate with newer software for analyzing production data, requiring them to undertake time-consuming retrofitting.

• Solution: Before building a smart factory or retrofitting a current factory with Industry 4.0 technology, lay some IT groundwork. Analyze the state of your business management systems across R&D, procurement, purchasing, production, and warehousing. Consider the technology implications of Industry 4.0 projects across your manufacturing sites, not just at one plant, and ensure your IT department works collaboratively with other departments.

2. Interoperability

Many factories run a mix of newer and decades-old equipment that lacks the sensors and internet connectivity crucial to a smart factory, yet it isn’t possible to retrofit older machines and manufacturers don’t want to replace them. Many manufacturers also lack IT systems capable of evaluating data coming in from connected machines.

• Solutions: Connecting isolated data sources has long been a challenge for manufacturers, but falling sensor costs and standardized communications protocols make it easier to overcome. Manufacturers can use integration software to connect computers in the data center or cloud with machines on the shop floor. Invest in an ERP system that allows for production planning to flow to a manufacturing execution system, then down to the machine-control level, in an approach called connected manufacturing that lets production planners and the shop floor exchange information.

3. Costs and Resource Limitations

Launching a smart factory requires investments in making IoT systems compatible with older manufacturing control and execution systems, which may use different technology standards. Constraints on technology investment can prevent scaling Industry 4.0 projects from pilot phases to implementations at multiple plants. Manufacturers also often cite deployment costs and difficulty gaining management buy-in as obstacles to broader rollout of an Industry 4.0 approach.

• Solution: Instead of waiting until a complete IT architecture is defined and rolled out before implementing Industry 4.0 projects, manufactures can take a minimum viable product approach, introducing projects on shorter lead times and course-correcting based on users’ feedback. The approach can also help focus spending and define the scope of projects.

4. Workforce Skills Gap

Attracting talent and retraining current staff are among manufacturers’ HR challenges in implementing Industry 4.0, since many workers haven’t been schooled in integrating digital systems with production work. Manufacturers often need to retrain workers to operate the touch screens, tablets, and other devices that let them interact with connected systems, and to refine production processes using data-backed insights.

• Solutions: Machine operators in smart factories must learn how to interpret new types of information, step in and fix processes when needed, and control machines in new ways. Training on the factory floor rather than at a desk can help. Engineers, too, should be trained on new, analytical approaches to improving manufacturing processes. Manufacturers also need to consider hiring for highly technical roles, such as robotics specialists and digital twin engineers.

5. Change Management

Industry 4.0 isn’t limited to the shop floor—manufacturers need to establish an organization wide understanding of where processes need to change and which departments need to coordinate to conduct successful Industry 4.0 pilots and broader rollouts. That requires new ways of working that differ from longstanding processes.

• Solutions: In advance of an IIoT rollout, manufacturers should identify use cases and sites that will yield quick wins and financial returns, to prove the value of Industry 4.0 technologies and ease change management. The success of Industry 4.0 projects depends on employees actively using the new technology; proving ROI to managers can help get teams on board.

6. Cybersecurity

The traditional way of protecting factory equipment from cyberattacks involved connecting as little of it as possible to the open internet. Industry 4.0 takes a different approach, connecting machines to each other and business management systems via the internet. IIoT decision makers frequently cite concerns about the security of Industry 4.0 technologies, which are founded: The Stuxnet malware of more than a decade ago affected manufacturing and power facilities, and in 2017, the then-rampant Petya virus halted production in more than a dozen plants of Nivea skin cream manufacturer Beiersdorf.

• Solutions: Cloud computing can bolster security since cloud providers ensure customers are always running the most up-to-date software versions, and cloud infrastructure can provide security at multiple layers of a computer network. Businesses implementing IoT are increasingly setting up private LTE and 5G networks, wherein they own and control the radio spectrum used to transmit sensor data, which bolsters IoT security. Manufacturers can also decrease risk by implementing cybersecurity standards and limited access rights to IoT systems.

Overcome Industry 4.0 Challenges with Oracle

With Industry 4.0 software from Oracle, manufacturers can gain more insight into their operations and easily integrate ERP and supply chain management software with production lines.

Oracle Fusion Cloud Manufacturing captures data from the factory floor, which managers can act on from a PC, phone, or tablet. The data is integrated with other supply chain management and ERP applications, equipping manufacturers to knock down information silos that can hold back the expansion of Industry 4.0 projects.

Meanwhile, Oracle Fusion Cloud Internet of Things Intelligent Applications let manufacturers use machine sensor data for predictive maintenance to maximize uptime. Software for asset monitoring and maintenance work together to produce alerts and visualize components, flagging sensor data that shows what to inspect. Oracle Manufacturing Execution System for Discrete Manufacturing monitors production and lifts productivity by guiding operators through a list of daily activities. The software can prioritize important activities and help spot wasteful ones. Finally, mixed-mode manufacturing software handles discrete and batch manufacturing in the same plant, so consumer packaged goods manufacturers, for example, can track production of snacks and packaging using a common software.

Industry 4.0 Challenges FAQs

What are some of the perceived risks of adopting Industry 4.0 technologies?
Manufacturing automation can eliminate or redefine some workers’ roles, requiring manufacturers to invest in hiring workers with different skills or retraining current ones. Machines equipped with internet-connected sensors may also be more prone to cyberattack than machines without the sensors. Companies also risk not realizing projected returns on investment as they scale Industry 4.0 projects from pilot to production.

How can manufacturers better scale Industry 4.0 projects from initial pilots?
Manufacturers need to define clear business processes and data flows through their networks, then get managers on board with the changes. If resources are limited, rolling out a minimum viable product, gathering users’ feedback, and refining the system can help achieve scale. Manufacturers may also need to hire talent or retrain current staff to scale their Industry 4.0 projects.

What are some of the technologies that comprise Industry 4.0?
Sensor networks, edge computing, data analysis software, and machine learning support Industry 4.0 initiatives. Many manufacturers use 3D printing, also called additive manufacturing, to forge parts. They might also employ digital twins, testing changes to factory layouts and production lines in computerized models before implementing them.