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Handbook of Industry 4.0
and SMART Systems
Handbook of Industry 4.0
and SMART Systems
Diego Galar Pascual

Pasquale Daponte
Uday Kumar
CRC Press
Taylor & Francis Group
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Boca Raton, FL 33487-2742
© 2020 by Taylor & Francis Group, LLC

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Contents
Preface...................................................................................................................................................... vii
Authors....................................................................................................................................................... xi
1. Fundamentals of Industry 4.0.......................................................................................................... 1
2. SMARTness and Pervasive Computing........................................................................................ 47
3. The Industry 4.0 Architecture and Cyber-Physical Systems..................................................... 79
4. Cloud Computing, Data Sources and Data Centers.................................................................. 119
5. Big Data Analytics as Service Provider...................................................................................... 155
6. IoT and the Need for Data Rationalization................................................................................. 189
7. OPERATOR 4.0............................................................................................................................ 239
8. Cybersecurity and Risk................................................................................................................ 287
9. Industry 4.0 across the Sectors.................................................................................................... 349
Index....................................................................................................................................................... 365
v
Preface
Modern market becomes more global and less national or local. Developed world market is reflected in
the wide range of new products, the rapid obsolescence of products, and the emergence of new products,
high quality standards, short delivery, and decreasing costs. Such conditions are very difficult for the
classical industrial production we have today, and thanks to the 29 progress of modern technological
achievements, such as communication networks and the Internet, that force us to develop and introduce
a new modern era of industrial production based on communicational informational linking of manufac-
turers and customers. This transformative shift in production and manufacturing paradigm is popularly
termed as Industry 4.0. Industry 4.0 has elicited much interest from both industry and academia. A recent
literature survey identified the basic concept, perspectives, key technologies, and industrial applications
of Industry 4.0 and examined its challenges and future trends [1,2] . However, no work has established
a systematic framework of smart manufacturing systems for Industry 4.0 that guides academic research
and industrial implementation until now. To fill the gap, this study proposes a conceptual framework for
Industry 4.0 and Smart Systems.
Actually many disruptive technologies, such as Cloud Computing, Internet of Things (IoT), big data
analytics, and artificial intelligence, have emerged. These technologies are permeating the manufacturing
industry and make it smart and capable of addressing current challenges, such as increasing customized
requirements, improved quality, and reduced time to market. An increasing number of sensors are being
used in equipment (e.g., machine tools) to enable them to self-sense, self-act, and communicate with one
another. Through these technologies, real-time production data can be obtained and shared to facilitate
rapid and accurate decision making. The connection of physical manufacturing equipment and devices
over the Internet together with big data analytics in the digital world (e.g., the cloud) has resulted in the
emergence of a revolutionary means of production, namely, Cyber Physical Production Systems (CPPS).
CPPS are a materialization of the general concept CPS in the manufacturing environment. The intercon-
nection and interoperability of CPS entities in manufacturing shop floors together with analytics and
knowledge learning methodology provide an intelligent decision support system. The widespread appli-
cation of CPS (or CPPS) has ushered in the fourth stage of industrial production, namely, Industry 4.0.
CPPS consist of autonomous and cooperative elements and subsystems, connecting communications
and interactions in different situations, at all levels of production, machines, processes to manufacturing,
and logistics networks. Their operational modeling and forecasting allows the implementation of a series
of basic applied oriented research tasks, and above all controlled systems at any level. The basic assump-
tion in terms of CPPS is reflected in the research and defining relations through the prism of autonomy,
cooperation, optimization and response to the assigned tasks. By integrating analytic and simulation-
based approaches, this prediction may be described in greater detail than ever before. Such systems must
confront a series of new challenges in terms of operational sensor networks, smart actuators, databases
and many others, above all, communication protocols.
CPPS will enable and support the communication between humans, machines, and products alike.
The elements of a CPPS are able to acquire and process data, and can self-control certain tasks and
interact with humans via interfaces.
Although extensive effort continues to be exerted to make systems smart, smart systems do not have a
widely accepted definition. In Industry 4.0, CPPS can be regarded as smart manufacturing systems. CPPS
comprise smart machines, warehousing systems, and production facilities that have been developed digi-
tally and feature end-to-end Information and Communication Technology (ICT)-based integration from
inbound logistics to production, marketing, outbound logistics, and service. Smart manufacturing sys-
tems can generally be defined as fully integrated and collaborative manufacturing systems that respond
in real time to meet the changing demands and conditions in factories and supply networks and satisfy
vii
viii Preface
varying customer needs. Key enabling technologies for smart manufacturing systems include CPS, IoT,
Internet of Services (IoS), cloud-based solutions, Artificial Intelligence (AI), and Big Data Analytics.
Today we are on the threshold of a new industrial revolution, the revolution by which digital networks
are related to operating values in the intelligent factory, and that includes everything from the initial
idea, through design, development, and manufacture, to maintenance, service, and recycling. Industries
4.0 include horizontal integration of data flow between partners, suppliers, and customers, as well as
vertical integration within the organization’s frames – from development to final product. It merges the
virtual and the real world. The result is a system in which all processes are fully integrated – system in
information in real-time frame. The speed and rate of changes in consumer trends will be a significant
driver of Industry 4.0.
Since the products are configured to respond to the preferences of individual users, production must
be more flexible and must be shorter.
The point is to create value for customers, and that means to involve them in the process from the
beginning. Of course, the companies that use the highly efficient mass production to achieve economies
of scale are in benefit, while at the same time they have the opportunity to offer a high level of adaptation.
The industries in developed countries in Europe and North America are based on the exploitation of
CPS through technology based on the integration of wireless systems, wireless control system, machine
learning, and production-based sensors. Such industries are developing a national platform for new pro-
duction systems and new age of Industry4.0-based access to the Internet and CPS.
CPS are a new generation of systems that integrate computer and physical abilities. With the combi-
nation of cyber systems and physical systems, user semantic laws can be traced and thus communicate
with people. Cybernetic systems are a summation of logic and sensor unit, while the physical systems
are a summation of actuator units. Through the ability to interact and expand capabilities of the physical
world using computing power, communication technologies and control mechanisms, CPS allow feed-
back loops, improving production processes and optimum support of people in their decision-making
processes. By using the corresponding sensor technology, CPS are able to receive direct physical data
and convert them into digital signals. They can share this information and access the available data that
connect it to digital networks, thereby forming an IOT.
On the other hand, production of new generation should be adjusted to changeable conditions and
issues put before it. Optimization of plant operations will be implemented by improving and speeding
up communications. Starting points are the solutions offered by a vision of “smart environment” for
production.
In order to create a large-scale smart system, smart devices are used. The term “smart” (often used
to mark intelligence) seems to be applicable in different contexts, because its meaning with respect to
objects is not yet clearly defined.
Smart, in some contexts, refers to an independent device, which usually consists of the sensor, and/or
to activate the microprocessor and transceiver. However, adjective smart is used to characterize and that
contributes to the implementation of additional meanings, which introduced multi-platform communi-
cation and increase of its computing capacity. Intelligence is revealed through cooperation in networks
with other smart devices, which have the possibility to check the system updates and decide whether to
act on them or not. Such a network is called smart grid. They may find a reference to smart objects as
objects that have the ability to connect the stored data, as well as offer access to it for human or machine’s
needs. There are so much smart products that are equipped with memory options so that they can be
understood as a kind of living product.
This era, which is which sensors and chips identify and locate products, and in which products know
their history and current status. This network of machines, storage systems, and manufacturing plants
that will exchange inevitably ahead of us is by the scientific circles of developed European countries
cooled new industrial revolution or Industry 4.0.
The modern process of globalization is characterized by its essential dimensions. First, it marks the
objective planetary processes:
Preface ix
• The essence of technological evolution; compression of time and space, reducing the distance
and time required for more branched, global communication.
• Close connection and interdependence of societies; everything is in a wider range of activities
that have become transnational, and cannot be managed solely within the individual states.
Globalization means the spread of identical form (industrialism and then post-industrialism,
market economy and multi-party political system) to almost the entire social world space.
Retrospectively looking at previous revolutionary development of manufacturing from its beginning

until today, we can see that the period between these revolutions drastically reduced and that we are
walking rapid steps into the future. The emergence of the Internet and Internet technologies of modern
times undoubtedly made a big progress in all human activities. It is an inevitable integration into produc-
tion systems, which will further affect the increase in the complexity of the existing production systems,
as well as new systems coming to us, such as CPPS. The development of production systems in the spirit
of CPPS, use of digitization and e-business imperative is to aspire to smart factories – factories of the
future.
Machines take up the human role in factories. But still the human integration is inevitable with a digi-
tal, electronic, virtual world, so that our work is preceded by further development of production systems
in terms of reliability, efficiency, safety, etc. The current and future development is characterized by
profound and rapid scientific and technological changes, which result with reindustrialization existing
industries and the revitalization of a wide range of human activities and public functions in private life.
Technological development, as the most important factor and an important prerequisite of general
development, presupposes the development and application of new technologies and imposes the need
for restructuring of existing , as well as designing new plants with new settings (fractal, virtual factory).
Therefore, the necessary rapid and immediate change in the existing situation is needed, and it must
include:
• General support in defining development strategies and policies of its realization,

• Strategically oriented factors, research institutions, and supporting institutions, and
• Industrially organized development of new scientific knowledge and their direct transfer into
the economy of the region. Simultaneous changes are possible only on the basis of unique
development strategy in which an important place should take the establishment of regional ,
especially innovation networks of smart factory, which should be the generator of new prod-
ucts, services, and job creation.
The book covers a wide range of topics, including Fundamentals and Architecture of Industry 4.0, Cyber
Physical Systems (CPS), Smartness and Pervasive Computing, Cloud Computing, Big Data Analytics,
Cybersecurity and Risks, and finally Industry 4.0 across the sectors. A number of demonstrative sce-
narios are presented, and current challenges and future research directions are discussed.
We expect that the book will be useful for the beginners as well as for the researchers working in the
field of Industry 4.0 and smart systems
Authors
Diego Galar Pascual is a Professor of Condition Monitoring in the Division of Operation and
Maintenance Engineering at Luleå University of Technology (LTU), where he is coordinating several
H2020 projects related to different aspects of cyber-physical systems, Industry 4.0, IoT, or industrial Big
Data. He was also involved in the SKF UTC center located in Lulea focusing on SMART bearings and
also actively involved in national projects with the Swedish industry or funded by Swedish national agen-
cies such as Vinnova. He has been involved in the raw materials business of Scandinavia, especially with
mining and oil and gas for Sweden and Norway, respectively. Indeed, LKAB, Boliden or STATOIL have
been partners or funders of projects in the CBM field for specific equipment such as loaders, dumpers,
rotating equipment, linear assets, and so on.
He is also the principal researcher in Tecnalia (Spain), heading the Maintenance and Reliability
research group within the Division of Industry and Transport.
He has authored more than 500 journal and conference papers, books, and technical reports in the
field of maintenance, working also as a member of editorial boards, scientific committees, and chairing
international journals and conferences and actively participating in national and international commit-
tees for standardization and R&D in the topics of reliability and maintenance.
In the international arena, he has been a Visiting Professor at the Polytechnic of Braganza (Portugal),
University of Valencia, NIU (USA) and the Universidad Pontificia Católica de Chile. Currently, he is
Visiting Professor at the University of Sunderland (UK), University of Maryland (USA), University of
Stavanger (NOR), and Chongqing University (China).
Pasquale Daponte was born in Minori (SA), Italy, on March 7, 1957. He obtained his bachelor’s degree
and master’s degree “cum laude” in Electrical Engineering in 1981 from the University of Naples, Italy.
He is a Full Professor of Electronic Measurements at the University of Sannio—Benevento.
From 2016, he is the Chair of the Italian Association on Electrical and Electronic Measurements. He is
Past President of IMEKO.
He is a member of I2MTC Board, Working Group of the IEEE Instrumentation and Measurement
Technical Committee N°10 Subcommittee of the Waveform Measurements and Analysis Committee,
IMEKO Technical Committee TC-4 “Measurements of Electrical Quantities,” Editorial Board
of Measurement Journal, Acta IMEKO and of Sensors. He is an Associate Editor of IET Science
Measurement & Technology journal.
He has organized some national or international meetings in the field of Electronic Measurements and
European cooperation, and he was the General Chairman of the IEEE Instrumentation and Measurement
Technical Conference for 2006, and Technical Programme Co-Chair for I2MTC 2015.
He was a co-founder of the IEEE Symposium on Measurement for Medical Applications MeMeA; now,
he is the Chair of the MeMeA Steering Committee (memea2018.ieee-ims.org). He is the co-founder of the
IEEE Workshop on Metrology for AeroSpace (www.metroaerospace.org), IEEE Workshop on Metrology
for Archaeology and Cultural Heritage (www.metroarcheo.com), IMEKO Workshop on Metrology for
Geotechnics (www.metrogeotechnics.org), IEEE Workshop on Metrology for the Sea (www.metrosea.org),
and IEEE Workshop on Metrology for Industry 4.0 and IoT (www.metroind40iot.org).
He is involved in some European projects. He has published more than 300 scientific papers in journals
and presented papers at national and international conferences on the following subjects: Measurements
and Drones, ADC and DAC Modelling and Testing, Digital Signal Processing, and Distributed
Measurement Systems.
He received the award for the research on the digital signal processing of the ultrasounds in echo-
ophthalmology in 1987 from the Italian Society of Ophthalmology, the IEEE Fellowship in 2009, the
Laurea Honoris Causa in Electrical Engineering from Technical University “Gheorghe Asachi” of
xi
xii Authors
Iasi (Romania) in 2009, “The Ludwik Finkelstein Medal 2014” from the Institute of Measurement and
Control of United Kingdom, and the “Career Excellence Award” from the IEEE Instrumentation and
Measurement Society “For a lifelong career and outstanding leadership in research and education on
instrumentation and measurement, and a passionate and continuous service, international in scope, to the
profession” in May 2018, and IMEKO Distinguished Service Award in September 2018.
Uday Kumar is Chair Professor of Operation and Maintenance Engineering, Director of Research and
Innovation (Sustainable Transport), and Director of Luleå Railway Research Center at Luleå University
of Technology, Luleå, Sweden.
His teaching, research, and consulting interests are equipment maintenance, reliability and maintain-
ability analysis, product support, life cycle costing (LCC), risk analysis, system analysis, eMaintenance,
and asset management.
He is a Visiting Faculty at the Center of Intelligent Maintenance System (IMS) – a center sponsored by
National Science Foundation, Cincinnati, USA, since 2011; External Examiner and Program Reviewer
for Reliability and Asset Management Program of the University of Manchester; Distinguished Visiting
Professor at Tsinghua University, Beijing; honorary professor at Beijing Jiao Tong University, Beijing; etc.
Earlier, he has been a Visiting Faculty at Imperial College London; Helsinki University of Technology,
Helsinki; University of Stavanger, Norway; etc.
He has more than 30 years of experience in consulting and finding solutions to industrial problems,
directly or indirectly related to maintenance of engineering asserts. He has published more than 300
papers in international journals and conference proceedings dealing with various aspects of maintenance
of engineering systems, and has coauthored four books on Maintenance Engineering and contributed to
World Encyclopaedia on Risk Management.
He is an elected member of Royal Swedish Academy of Engineering Sciences.
1
Fundamentals of Industry 4.0
CONTENTS
1.1 Introduction....................................................................................................................................... 3
1.2 Industry 4.0....................................................................................................................................... 4
1.2.1 Definition of Industry 4.0.................................................................................................... 5
1.2.2 What Is Industry 4.0?.......................................................................................................... 5
1.2.2.1 Industry 4.0—What Is It?................................................................................... 5
1.2.2.2 Talking about a Revolution: What Is New in Industry 4.0?............................... 6
1.2.2.3 On the Path to Industry 4.0: What Needs to Be Done?..................................... 6
1.2.3 Key Paradigm of Industry 4.0............................................................................................. 6
1.2.4 Industry 4.0 Conception...................................................................................................... 7
1.2.4.1 Five Main Components of Networked Production............................................ 7
1.2.5 Framework of Industry 4.0: Conception and Technologies................................................ 8
1.2.6 Nine Pillars of Technological Advancement...................................................................... 8
1.2.6.1 Big Data and Analytics...................................................................................... 9
1.2.6.2 Autonomous Robots..........................................................................................11
1.2.6.3 Simulation.........................................................................................................11
1.2.6.4 Horizontal and Vertical System Integration.....................................................11
1.2.6.5 Industrial IoT.....................................................................................................11
1.2.6.6 Cybersecurity................................................................................................... 12
1.2.6.7 The Cloud......................................................................................................... 12
1.2.6.8 Additive Manufacturing................................................................................... 12
1.2.6.9 Augmented Reality........................................................................................... 12
1.2.7 Macro Perspective of Industry 4.0.................................................................................... 12
1.2.8 Micro Perspective of Industry 4.0......................................................................................14
1.2.9 Industry 4.0 Components.................................................................................................. 15
1.2.9.1 Cyber-Physical Systems (CPS)......................................................................... 15
1.2.9.2 Internet of Things............................................................................................. 15
1.2.9.3 Internet of Services...........................................................................................16
1.2.9.4 Smart Factories.................................................................................................17
1.2.10 Industry 4.0: Design Principles..........................................................................................17
1.2.10.1 Interoperability..................................................................................................17
1.2.10.2 Virtualization....................................................................................................18
1.2.10.3 Decentralization................................................................................................18
1.2.10.4 Real-Time Capability........................................................................................18
1.2.10.5 Service Orientation...........................................................................................18
1.2.10.6 Modularity.........................................................................................................18
1.2.11 Impact of Industry 4.0........................................................................................................18
1.2.11.1 Quantifying the Impact: Germany as an Example...........................................18
1.2.11.2 Producers: Transforming Production Processes and Systems......................... 19
1.2.11.3 Manufacturing-System Suppliers: Meeting New Demands and Defining
New Standards................................................................................................. 21
1
2 Handbook of Industry 4.0 and SMART Systems
1.2.12 The Way Forward.............................................................................................................. 21

1.2.12.1 Producers Must Set Priorities and Upgrade the Workforce............................. 22
1.2.12.2 Manufacturing-System Suppliers Must Leverage Technologies...................... 22
1.2.12.3 Infrastructure and Education Must Be Adapted.............................................. 22
1.3 RAMI 4.0 (Reference Architecture Model Industry 4.0)............................................................... 23
1.3.1 RAMI 4.0.......................................................................................................................... 23
1.3.2 Additional Details of RAMI 4.0....................................................................................... 24
1.3.2.1 Function of Layers on Vertical Axis................................................................ 24
1.3.2.2 Function of Layers on the Horizontal Left Axis.............................................. 25
1.3.2.3 Hierarchical System Architecture in Industry 4.0........................................... 26
1.3.3 Industry 4.0 Component Model........................................................................................ 26
1.3.3.1 Specification of the Industry 4.0 Component Model....................................... 27
1.4 Servitization.................................................................................................................................... 29
1.4.1 The Concept of Servitization............................................................................................ 29
1.4.2 Defining Servitization....................................................................................................... 30
1.4.2.1 Drivers of Servitization.....................................................................................31
1.4.3 Features of Servitization................................................................................................... 32
1.4.4 Current State of Servitization and Impacts from Industry 4.0......................................... 32
1.4.5 Industry 4.0 Services......................................................................................................... 33
1.4.5.1 Industry 4.0 Servitization Framework............................................................. 33
1.5 Product Service-System (PSS)........................................................................................................ 34
1.5.1 Definition of a PSS............................................................................................................ 34
1.5.2 Features of a PSS.............................................................................................................. 35
1.5.2.1 Product-Oriented PSS (PoPSS)........................................................................ 37
1.5.2.2 Use-Oriented PSS (UoPSS)............................................................................. 37
1.5.2.3 Result-Oriented PSS (RoPSS).......................................................................... 38
1.5.3 Why PSS?.......................................................................................................................... 38
1.5.3.1 Environmental Rationales................................................................................ 39
1.5.3.2 Economic Rationales........................................................................................ 40
1.5.3.3 Customer-Driven Rationales.............................................................................41
1.5.3.4 Technological Drivers.......................................................................................41
References................................................................................................................................................. 42
LIST OF FIGURES
Figure 1.1 Main technologies of Industry 4.0...................................................................................... 8

Figure 1.2 Nine advances transforming industrial production............................................................. 9
Figure 1.3 Industry 4.0 is changing traditional manufacturing relationships.................................... 10
Figure 1.4 Macro perspective of Industry 4.0.................................................................................... 13
Figure 1.5 Micro perspective of Industry 4.0......................................................................................14
Figure 1.6 In Germany, Industry 4.0 will generate significant productivity gains............................ 20
Figure 1.7 In Germany, Industry 4.0 will lead to increased manufacturing employment................. 21
Figure 1.8 RAMI 4.0 model................................................................................................................ 24
Figure 1.9 New control pyramid of RAMI 4.0................................................................................... 26
Figure 1.10 Industry 4.0 component model.......................................................................................... 27
Figure 1.11 Industry 4.0 component..................................................................................................... 28
Fundamentals of Industry 4.0 3
Figure 1.12 Repository of the digital factory........................................................................................ 29

Figure 1.13 I4 servitization framework................................................................................................ 33
Figure 1.14 Evolution of the product-service system concept.............................................................. 36
Figure 1.15 (a) Traditional purchase of photocopier; (b) purchase of a document management
capability........................................................................................................................... 37
Figure 1.16 Product-service systems.................................................................................................... 38
Figure 1.17 PSS exemplification........................................................................................................... 39
Figure 1.18 Smiling curve in a servitization perspective..................................................................... 40
LIST OF TABLES
Table 1.1 Trends and expected developments in value creation factors................................................16

Table 1.2 Design principles of each industry 4.0 component................................................................17
Table 1.3 Servitization definitions........................................................................................................ 30
Table 1.4 Popular definitions of a product-service system................................................................... 35
1.1 Introduction
Industry 4.0 is one of the most frequently discussed topics among practitioners and academics today.
For example, the German federal government announced Industry 4.0 as one of the key initiatives of its
high-tech strategy in 2011 (Kagermann et al., 2013). Since then, numerous academic publications, practi-
cal articles and conferences have focused on the topic (Hermann et al., 2015).
The fascination for Industry 4.0 is twofold. First, for the first time, an industrial revolution has been
predicted a priori, not observed ex-post (Drath, 2014). This provides opportunities for companies and
research institutes to actively shape the future. Second, the economic impact of this industrial revolu-
tion is supposed to be huge, as Industry 4.0 promises substantially increased operational effectiveness
as well as the development of entirely new business models, services and products (Kagermann et al.,
2013; Kagermann et al., 2014; Kempf et al., 2014). A recent study has estimated that these benefits will
have contributed as much as 78 billion euros to the German GDP by the year 2025 (Bauer et al., 2014).
Germany will not be the sole country to profit; similar benefits are expected throughout the world.
With Industry 4.0 becoming a top priority for many research centers, universities and companies within
the past three years, the manifold contributions from academics and practitioners have made the mean-
ing of the term more blurry than concrete (Bauernhansl et al., 2014). Even the key promoters of the idea,
the “Industry 4.0 Working Group” and the “Plattform Industry 4.0,” only describe the vision, the basic
technologies the idea aims at and selected scenarios (Kagermann et al., 2013). They do not provide a
clear definition. As a result, a generally accepted definition of Industry 4.0 has not been published to date
(Bauer et al., 2014).
According to Jasperneite et al. (2012), scientific research is always impeded if clear definitions are
lacking, as any theoretical study requires a sound conceptual and terminological foundation. Companies
also face difficulties when trying to develop ideas or take action, but are not sure what exactly for. “Even
though Industry 4.0 is one of the most frequently discussed topics these days, I could not explain to
my son what it really means,” a production site manager with automotive manufacturer Audi puts it.
This comment reflects the finding of a recent study that “most companies in Germany do not have a
clear understanding of what Industry 4.0 is and what it will look like” (eco—Verband der deutschen
Internetwirschaft, 2014).
As the term is unclear, companies are struggling when it comes to identifying and implementing
Industry 4.0 scenarios. Design principles explicitly address this issue by providing a “systemization of
knowledge” (Gregor et al., 2009) and describing the constituents of a phenomenon. In this way, design
principles support practitioners by developing appropriate solutions. From an academic perspective,
design principles are the foundation of design theory (Gregor et al., 2002). However, we could not find
any explicit Industry 4.0 design principles during our search of the literature (Hermann et al., 2015).
This chapter aims to fill this gap in the research. Based on a literature review, it provides a definition
of Industry 4.0 and identifies six design principles that companies should consider when implementing
Industry 4.0 solutions (Hermann et al., 2015).
1.2 Industry 4.0

The term “Industry 4.0” is used for the industrial revolution taking place currently. This industrial revo-
lution has been preceded by three other industrial revolutions. The first was the introduction of mechani-
cal production facilities starting in the second half of the eighteenth century; this intensified throughout
the nineteenth century. The introduction of electricity and the division of labor (i.e., Taylorism) in the
1870s led to the second industrial revolution. The third industrial revolution, also called “the digital
revolution,” started in the 1970s, when advanced electronics and information technology (IT) developed
the automation of production processes (Hermann et al., 2015).
The term “Industry 4.0” was introduced in Germany in 2011, when an association of representatives
from business, politics and academia promoted the idea as an approach to strengthening the competi-
tiveness of the manufacturing industry (Kagermann et al., 2011). The German federal government sup-
ported the idea by announcing that Industry 4.0 would be an integral part of its “High-Tech Strategy
2020 for Germany” initiative, aimed at technological innovation leadership. The subsequently formed
“Industry 4.0 Working Group” developed recommendations for implementation; these were published in
April 2013 (Kagermann et al., 2013). In this publication, Kagermann et al. (2013) describe their vision
of Industry 4.0 as follows.
In the future, businesses will establish global networks that incorporate their machinery, warehousing
systems and production facilities in the shape of cyber-physical systems (CPS). In the manufacturing envi-
ronment, these CPS comprise smart machines, storage systems and production facilities capable of autono-
mously exchanging information, triggering actions and controlling each other independently. This facilitates
fundamental improvements to the industrial processes involved in manufacturing, engineering, material
usage and supply chain and life cycle management. The smart factories that are already beginning to appear
employ a completely new approach to production. Smart products are uniquely identifiable, may be located
at all times and know their own history, current status and alternative routes to achieving their target state.
The embedded manufacturing systems are vertically networked with business processes within factories and
enterprises and horizontally connected to dispersed value networks that can be managed in real time—from
the moment an order is placed right through to outbound logistics. In addition, they both enable and require
end-to-end engineering across the entire value chain (Kagermann et al., 2013).
These ideas built the foundation for the Industry 4.0 manifesto published in 2013 by the German
National Academy of Science and Engineering (Acatech, 2013).
The term is currently used globally. At the European level, the public–private partnership for Factories
of the Future (FoF) addresses and develops Industry 4.0-related topics (European Commission, 2015).
In the United States, Industry 4.0 is promoted by the Industrial Internet Consortium (IIC) (Stock and
Seliger, 2016).
The paradigm of Industry 4.0 has the following three dimensions (Industry 4.0: Whitepaper FuE-
Themen, 2015; Acatech, 2015; VDI/VDE-GMA, 2015a):
1. Horizontal integration across the entire value creation network,

2. End-to-end engineering across the entire product life cycle and
3. Vertical integration and networked manufacturing systems.
Horizontal integration across the entire value creation network includes cross-company and internal
company intelligent cross-linking and digitalization of value creation modules throughout the value
chain of a product life cycle and between value chains of adjoining product life cycles.
End-to-end engineering across the entire product life cycle refers to intelligent cross-linking and digi-
talization throughout all phases of a product life cycle, from the raw material acquisition to manufactur-
ing, product use, and product end of life.
Vertical integration and networked manufacturing systems include the intelligent cross-linking and
digitalization within the different aggregation and hierarchical levels of a value creation module from
manufacturing stations via manufacturing cells, lines and factories, also integrating the associated value
chain activities, such as marketing and sales or technology development (Acatech, 2015).
Intelligent cross-linking and digitalization covers the application of an end-to-end solution using infor-
mation and communication technologies (ICTs) embedded in the cloud (Stock and Seliger, 2016).
In a manufacturing system, intelligent cross-linking is realized by the application of CPS operating in
a self-organized and decentralized manner (Acatech, 2015; Gausemeier et al., 2015; Spath et al., 2013).
They are based on embedded mechatronic components, i.e., applied sensor systems for collecting data,
as well as actuator systems for influencing physical processes (Gausemeier et al., 2015). Cyber-physical
systems are intelligently linked with each other and are continuously interchanging data via virtual
networks such as the cloud in real-time. The cloud itself is implemented in the Internet of Things (IoT)
and services (Acatech, 2015). As part of a sociotechnical system, CPS use human–machine interfaces to
interact with operators (Hirsch-Kreinsen and Weyer, 2014).
1.2.1 Definition of Industry 4.0

Based on the findings of the literature review, we define Industry 4.0 as follows: Industry 4.0 is a collec-
tive term for technologies and concepts of value chain organization. Within the modular structured smart
factories of Industry 4.0, CPS monitor physical processes, create a virtual copy of the physical world
and make decentralized decisions. Over the IoT, CPS communicate and cooperate with each other and
humans in real time. Through the IoS, both internal and cross-organizational services are offered and
utilized by participants in the value chain (Hermann et al., 2015).
1.2.2 What Is Industry 4.0?

Industry 4.0 is multifaceted. It includes screws communicating with assembly robots, self-driving fork-
lifts stocking high shelves with goods, and intelligent machines coordinating independently running
production processes. In Industry 4.0, people, machines and products are directly connected with each
other (Plattform Industrie 4.0).
1.2.2.1 Industry 4.0—What Is It?

Industry 4.0 refers to the intelligent networking of machines and processes in industry with the help of
ICT. There are many ways for companies to use intelligent networking. The possibilities include:
• Flexible production: Many companies use a step-by-step process to develop a product. By

being digitally networked, these steps can be better coordinated and the machine load better
planned.
• Convertible factory: Future production lines can be built in modules and quickly assembled for
tasks. Productivity and efficiency will be improved; individualized products can be produced
in small quantities at affordable prices.
• Customer-oriented solutions: Consumers and producers will move closer together. The cus-
tomers themselves can design products according to their wishes—for example, sneakers
designed and tailored to the customer’s unique foot shape. At the same time, smart products
that are already being delivered and in use can send data to the manufacturer. By using these
data, the manufacturer can improve his or her products and offer the customer novel services.
• Optimized logistics: Algorithms can calculate ideal delivery routes; machines indepen-
dently report when they need new material—smart networking enables an optimal flow
of goods.
• Use of data: Data on the production process and the condition of a product can be combined and
analyzed. Data analysis will provide guidance on how to make a product more efficiently. More
importantly, there is a foundation for completely new business models and services. For exam-
ple, lift manufacturers can offer their customers “predictive maintenance”: elevators equipped
with sensors that continuously send data about their condition. Product wear can be detected
and corrected before it leads to an elevator system failure.
• Resource-efficient circular economy: The entire life cycle of a product can be considered with
the support of data. The design phase will be able to determine which materials can be recycled
(Plattform Industrie 4.0).
1.2.2.2 Talking about a Revolution: What Is New in Industry 4.0?

Since the 1970s, IT has been incorporated into business. Desktop PCs, the use of office IT and the first
computer-aided automation revolutionized the industry. For Industry 4.0, it is not the computer that is the
core technology, but rather the Internet. Digitalizing production is gaining a new level of quality with
global networking across corporate and national borders. With IoT and machine-to-machine communi-
cation, manufacturing facilities are becoming more intelligent (Plattform Industrie 4.0).
1.2.2.3 On the Path to Industry 4.0: What Needs to Be Done?

Implementing Industry 4.0 is a complex project: the more processes companies digitalize and network,
the more interfaces are created between different actors. Uniform norms and standards for different
industrial sectors, IT security and data protection play an equally central role as the legal framework,
changes in education and jobs, the development of new business models and corresponding research
(Plattform Industrie 4.0).
1.2.3 Key Paradigm of Industry 4.0

Industry 4.0 can be broken down into three major paradigms: the smart product, the smart machine and
the augmented operator.
The guiding idea of the smart product is to extend the role of a product so that it becomes an active
rather than passive part of the system. Products have memory in which operational data and require-
ments are stored so that the product itself requests the required resources and orchestrates the production
processes required for its completion (Loskyll et al., 2012). The ultimate goal is the creation of self-
configuring processes in highly modular production systems (Weyer et al., 2015).
In the paradigm of the smart machine, machines become cyber-physical production systems. The tradi-
tional production hierarchy is replaced by a decentralized self-organization enabled by CPS (Zamfirescu
et al., 2014). The autonomic components with local control intelligence can communicate to other field
devices, production modules and products through open networks and semantic descriptions. In this way,
machines are able to self-organize within the production network. Production lines are so flexible and
modular that even the smallest lot size can be produced under conditions of highly flexible mass pro-
duction. A CPS-based modular production line allows an easy plug-and-play integration or the replace-
ment of one production line with a new manufacturing unit, e.g., in the case of reconfiguration (Weyer
et al., 2015).
The augmented operator targets the technological support of workers in the challenging environ-
ment of highly modular production systems. Industry 4.0 is not gravitating toward worker-less pro-
duction facilities (unlike the Computer Integrated Manufacturing (CIM) approach of the 1980s).
Human operators are acknowledged as the most flexible parts of a production system, as they can
adapt to challenging work environments (Schmitt et al., 2013). As the most flexible entity in production
systems, workers will be faced with a variety of jobs, ranging from specification and monitoring to ver-
ification of production strategies. By the same token, they will manually intervene in the autonomously
organized production system, if required. Optimum support can be provided by mobile, context-
sensitive user interfaces and user-focused assistance systems (Gorecky et al., 2014). Established inter-
action technologies offer forward-looking solutions, including some from the consumer goods market
(e.g., tablets, smart glasses and smart watches). Of course the latter need to be adapted to industrial
conditions. Through technological support, workers can realize their full potential, thereby becoming
strategic decision-makers and fl exible problem solvers capable to handle the steadily rising technical
complexity (Weyer et al., 2015).
1.2.4 Industry 4.0 Conception

In the twenty-first century, product life cycles are shorter and consumers demand more complex, unique
products in larger quantities. Both pose challenges to production.
There are many indications that current practices in the utilization of resources are not sustainable,
with a consequent effect on production.
The industrial sector is experiencing a paradigm shift, which will change production drastically.
The traditional, centrally controlled and monitored processes will be replaced by decentralized control
built on the self-regulating ability of products and work units that communicate with each other.
The essence of Industry 4.0 is the introduction of network-linked intelligent systems to achieve self-
regulating production: in this new workplace, people, machines, equipment and products will commu-
nicate with one another.
The goal is to ensure flexible, economical and efficient production. All parts of the production process
will communicate with all other parts via a central production control system.
In effect, products will control their own production, with virtual and actual reality merging during
production. Scheduling will be also controlled by communicating units. Factories will be self-regulating
and optimize their own operation (Gubán and Kovás, 2017).
1.2.4.1 Five Main Components of Networked Production

The five main elements of networked production are the following:
• Digital workpieces
Each workpiece knows the dimensions, quality requirements and order of its own processing.
• Intelligent machines
Intelligent machines communicate simultaneously with the production control system and the
workpiece being processed, so that the machine coordinates, controls and optimizes itself.
• Vertical network connections
After processing the customer’s unique specifications for the product to be manufactured, the
production control system forward automated rules to the equipment. Essentially, the products
control their own manufacturing process, as they communicate with the equipment, devices
and other workpieces on the conditions of production.
• Horizontal network connections
Communication is realized not only within one factory, but throughout the whole supply chain,
between the suppliers, manufacturers and service providers. The main purpose is to enhance
the efficiency of production and to utilize the resources in a more economical way.
• Smart workpieces
The product to be manufactured senses the production environment with internal sensors and
controls and monitors its own production process to meet the production standards; it can do
so because it can communicate with the equipment, as well as with the components already
incorporated or about to be incorporated.
Industry 4.0 is not a future technology. In July 2015, the Changing Precision Technology Company
(in Dongguan, China) became the first factory where only robots work. Each labor process is exe-
cuted by machines: production is done by computer-operated robots and transport is implemented
by self-driven vehicles; even the storage process is completely automatic (Gubán and Kovás, 2017).
1.2.5 Framework of Industry 4.0: Conception and Technologies

Through the production in a global network, the manufacturing process can flexibly adapt to unique
customer demands, to the activity of the other parties of the supply chain and to the rapidly changing
economic environment.
Industry 4.0 is recognized globally. A 2016 survey by PricewaterhouseCoopers (PwC) identifies three
main areas where it affects the corporate world:
• Integration and digitalization of horizontal and vertical value chains,

• Digitalization of products and services, and
• Formation of digital business models and customer relations.
The new connected technologies are shown in Figure 1.1.
1.2.6 Nine Pillars of Technological Advancement

Technological advances have driven dramatic increases in industrial productivity since the dawn of the
Industrial Revolution. The steam engine powered factories in the nineteenth century, electrification led
to mass production in the early part of the twentieth century, and industry became automated in the
1970s. In the decades that followed, industrial technological advancements were incremental, as break-
throughs transformed IT, mobile communications and e-commerce.
Currently, we are in the midst of a fourth wave of technological advancement: the rise of new digital
industrial technology known as Industry 4.0. The transformation is powered by nine major advances in
Autonomous
Robots
System
Cybersecurity
integraon
Big Data Internet of

Things
Augmented INDUSTRY 4.0

reality Simulaon
Cloud Addive
compung manufacturing
FIGURE 1.1 Main technologies of Industry 4.0. (From Rübmann, M. et al., Industry 4.0: The Future of Productivity and
Growth in Manufacturing Industries, The Boston Consulting Group (BCG), 2015.)
Autonomous
Big data and Robots
analy cs
Simula on
Augmented Horizontal and ver cal

reality system integra on
INDUSTRY 4.0
Addi ve The Industrial

manufacturing Internet of Things
The Cloud Cybersecurity
FIGURE 1.2 Nine advances transforming industrial production. (From Rübmann, M. et al., Industry 4.0: The Future of
Productivity and Growth in Manufacturing Industries, The Boston Consulting Group (BCG), 2015.)
technology: big data and analytics; autonomous robots, simulation, horizontal and vertical system inte-
gration, the Industrial IoT, cybersecurity, the cloud, additive manufacturing and augmented reality (see
Figure 1.2). In this transformation, sensors, machines, workpieces and IT systems are connected along
the value chain beyond a single enterprise. These connected systems (also called CPS) can interact with
one another using standard Internet-based protocols. They can analyze data to predict failure, config-
ure themselves and adapt to changes. Industry 4.0 will make it possible to gather and analyze data across
machines, enabling faster, more flexible and more efficient processes to produce high-quality goods at
reduced costs. This, in turn, will increase manufacturing productivity, shift economics, foster industrial
growth and modify the profile of the workforce, ultimately changing the competitiveness of companies
and regions (Rübmann et al., 2015).
Many of the nine advances in technology are already used in manufacturing, but with Industry 4.0,
they will totally transform production: isolated, optimized cells will come together as a fully integrated,
automated and optimized production flow, leading to greater efficiency and changing traditional produc-
tion relationships among suppliers, producers and customers, as well as between human and machine
(see Figure 1.3) (Rübmann et al., 2015).
1.2.6.1 Big Data and Analytics

The first of the nine pillars is big data and analytics. Analytics based on large data sets have recently
emerged in the manufacturing world; such analytics optimize production quality, save energy, and
improve equipment service. In the Industry 4.0 context, the collection and comprehensive evaluation
of data from many different sources (production equipment and systems as well as enterprise- and
customer-management systems) will become a standard support in real-time decision-making.
For instance, the semiconductor manufacturing company, Infineon Technologies, has decreased prod-
uct failures by correlating single-chip data captured in the testing phase at the end of the production
process with process data collected in the wafer status phase earlier in the process. In this way, Infineon
can identify patterns that help discharge faulty chips early in the production process and improve produc-
tion quality (Rübmann et al., 2015).
10
...to fully integrated data and

product flows across borders
Greater automoon will
displace some of the least
skilled labor but will require
Integrated communicaon higher skilled labor for
along the enre value chain monitoring and managing
reduces work in progress the factory of the future
inventory
From isolated,
opmized cells... TODAY INDUSTRY 4.0
Automated
Automated
Automated
Automated Automated
Machine to machine and machine to human interacon

enables customizaon and small batches
FIGURE 1.3 Industry 4.0 is changing traditional manufacturing relationships. (From Rübmann, M. et al., Industry 4.0: The Future of Productivity and Growth in Manufacturing
Industries, The Boston Consulting Group (BCG), 2015.)
Handbook of Industry 4.0 and SMART Systems
1.2.6.2 Autonomous Robots

Manufacturers in many industries have long used robots to tackle complex assignments, but robots are
evolving for even greater utility. They are becoming more autonomous, flexible and cooperative. Eventually,
they will interact with one another and work safely side by side with humans and learn from them. These
robots will cost less and have a greater range of capabilities than those used in manufacturing today.
For example, Kuka—a European manufacturer of robotic equipment—offers autonomous robots that
interact with one another. These robots are interconnected so that they can work together and auto-
matically adjust their actions to accommodate the next unfinished product in line. High-end sensors and
control units enable close collaboration with humans. Similarly, industrial-robot supplier ABB is launching
a two-armed robot called YuMi that is specifically designed to assemble products (such as consumer
electronics) alongside humans. Two padded arms and computer vision allow safe interaction and parts
recognition (Rübmann et al., 2015).
1.2.6.3 Simulation
In the engineering phase of production, three-dimensional (3-D) simulations of products, materials and
production processes are already used, but in the future, simulations will be used more extensively in
plant operations as well. These simulations will leverage real-time data to mirror the physical world in
a virtual model, which can include machines, products and humans. This will allow operators to test
and optimize the machine settings for the next product in line in the virtual world before the physical
changeover, thereby reducing machine setup times and increasing quality.
For example, Siemens and a German machine-tool vendor developed a virtual machine that can simu-
late the machining of parts using data from the physical machine. This lowers the setup time for the
actual machining process by as much as 80% (Rübmann et al., 2015).
1.2.6.4 Horizontal and Vertical System Integration

Most of today’s IT systems are not fully integrated. Companies, suppliers, and customers are rarely
closely linked, nor are departments such as engineering, production and service. In addition, func-
tions from the enterprise to the shop floor level are not fully integrated. Even engineering itself—from
products to plants to automation—lacks complete integration. However, with Industry 4.0, companies,
departments, functions and capabilities will become much more cohesive, as cross-company, universal
data-integration networks evolve and enable truly automated value chains.
For instance, Dassault Systèmes and BoostAeroSpace launched a collaboration platform for the
European aerospace and defense industry. The platform, AirDesign, serves as a common workspace for
design and manufacturing collaboration and is available as a service on a private cloud. It manages the
complex task of exchanging product and production data among multiple partners (Rübmann et al., 2015).
1.2.6.5 Industrial IoT

Today, only some of a manufacturer’s sensors and machines are networked and make use of embedded
computing. They are typically organized in a vertical automation pyramid in which sensors and field
devices with limited intelligence and automation controllers feed into an overarching manufacturing-
process control system. However, with the Industrial IoT, more devices (sometimes including even unfin-
ished products) will be enriched with embedded computing and connected using standard technologies.
This will allow field devices to communicate and interact both with one another and with more central-
ized controllers, as necessary. It will also decentralize analytics and decision-making, enabling real-time
responses.
Bosch Rexroth, a drive-and-control-system vendor, has outfitted a production facility for valves with a
semi-automated, decentralized production process. Products are identified by radio-frequency identifica-
tion codes, and workstations “know” which manufacturing steps must be performed for each product and
can adapt to perform the specific operation (Rübmann et al., 2015).
1.2.6.6 Cybersecurity
Many companies still rely on unconnected or closed management and production systems. With the
increased connectivity and the use of the standard communications protocols accompanying Industry
4.0, the need to protect critical industrial systems and manufacturing lines from cybersecurity threats
increases dramatically. As a result, secure, reliable communications, as well as sophisticated identity and
access management of machines and users, are essential.
Several industrial-equipment vendors have joined forces with cybersecurity companies through part-
nerships or acquisitions (Rübmann et al., 2015).
1.2.6.7 The Cloud

Companies are already using cloud-based software for some enterprise and analytics applications, but
with Industry 4.0, more production-related undertakings will require increased data sharing across sites
and company boundaries. At the same time, the performance of cloud technologies will improve, achiev-
ing reaction times of just several milliseconds. As a result, machine data and functionality will increas-
ingly be deployed in the cloud, enabling more data-driven services for production systems. Even systems
that monitor and control processes may become cloud-based.
Vendors of manufacturing execution systems have started to offer cloud-based solutions (Rübmann
et al., 2015).
1.2.6.8 Additive Manufacturing

Companies have just begun to adopt additive manufacturing, such as 3-D printing, which they use mostly
to prototype and produce individual components. With Industry 4.0, these additive-manufacturing meth-
ods will be widely used to produce small batches of customized products that offer construction advan-
tages, such as complex, lightweight designs. High-performance, decentralized additive manufacturing
systems will reduce transport distances and stock on hand.
For instance, aerospace companies are already using additive manufacturing to apply new designs that
reduce aircraft weight, lowering their expenses for raw materials such as titanium.
1.2.6.9 Augmented Reality

Augmented-reality-based systems support a variety of services, such as selecting parts in a warehouse
and sending repair instructions over mobile devices. These systems are currently in their infancy, but in
the future, companies will make much broader use of augmented reality to provide workers with real-
time information to improve decision-making and work procedures.
For example, workers may receive instructions on how to replace a particular part as they are looking
at the actual system needing repair. This information may be displayed directly in their field of vision
using devices such as augmented-reality glasses.
Another application is virtual training. Siemens has developed a virtual plant-operator training mod-
ule for its COMOS software; the module uses a realistic, data-based 3-D environment with augmented-
reality glasses to training plant personnel to handle emergencies. In this virtual world, operators can
learn to interact with machines by clicking on a cyber-representation. They can also change parameters
and retrieve operational data and maintenance instructions.
1.2.7 Macro Perspective of Industry 4.0

The macro perspective of Industry 4.0, as shown in Figure 1.4, covers horizontal integration and the
end-to-end engineering dimension of Industry 4.0. This visualization is based on a strong product-
life-cycle-related point of view; in other words, cross-linked product life cycles become a central element
of the value creation networks (Stock and Seliger, 2016).
Smart Logis cs
Smart Factory
Manufacturing
Mining
Consumer
Raw Water Reservoir

Material
acquisi on Use and Smart Grid
Service
Cloud
Smart Home
Renewable Energies
Product Lyfe Cycle

End of Life
Energy Supply
Water Supply
FIGURE 1.4 Macro perspective of Industry 4.0. (From Stock, T. and Seliger, G., Opportunities of Sustainable
Manufacturing in Industry 4.0. 13th Global Conference on Sustainable Manufacturing—Decoupling Growth from
Resource Use, Institute of Machine Tools and Factory Management, Technische Universität Berlin, 10587 Berlin, Germany.
2212–8271© 2016 The Authors. Published by Elsevier B.V, 2016.)
From the macro perspective, horizontal integration is characterized by a network of value cre-
ation modules. Value creation modules are defined as the interplay of different value creation factors,
i.e., equipment, human, organization, process and product (Seliger et al., 2007). The value creation
modules, represented in their highest level of aggregation by factories, are cross-linked throughout
the complete value chain of a product life cycle, as well as with the value creation modules in value
chains of adjoining product life cycles. This linkage results in an intelligent network of value creation
modules covering the value chains of different product life cycles. This intelligent network provides
an environment for new and innovative business models and is thus leading to a change in business
models.
As shown in Figure 1.4, end-to-end engineering from the macro perspective is the cross-linking of
stakeholders, products and equipment along the product life cycle, beginning with the raw material acqui-
sition phase and ending with the end-of-life phase. The products, the various stakeholders such as cus-
tomers, workers or suppliers, and the manufacturing equipment are embedded in a virtual network and
are interchanging data in and between the phases of a product life cycle. This life cycle consists of the
raw material acquisition phase, the manufacturing phase—containing the product development, the engi-
neering of the related manufacturing system and the manufacturing of the product—the use and service
phase, the end-of-life phase—containing reuse, remanufacturing, recycling, recovery and disposal—and
the transport between all phases.
These value creation modules, i.e., factories embedded in this ubiquitous flow of smart data, will
evolve to become smart factories. Smart factories are already manufacturing smart products and are
being supplied with energy from smart grids and with water from freshwater reservoirs. The material
flow along the product life cycle and between adjoining product life cycles will be accomplished by
smart logistics. The stream of smart data between the various elements of the value creation networks is
interchanged via the cloud (Stock and Seliger, 2016).
Smart data are created by expediently structuring information from big data; smart data can be used
for knowledge advances and decision-making throughout the product life cycle (Smart Data Innovation
Lab., 2015). When smart factories use embedded CPS for value creation, the smart product can self-
organize its required manufacturing processes and its flow throughout the factory in a decentralized
manner by interchanging smart data with the CPS (Kletti et al., 2015).
A smart product contains information on its requirements for the manufacturing processes and manu-
facturing equipment. Smart logistics use CPS to support the material flow within the factory and between
factories, customers and other stakeholders. They are controlled in a decentralized manner according to
the requirements of the product. A smart grid using renewable energies dynamically matches the energy
generation of suppliers with the energy demand of consumers, e.g., smart factories or smart homes, by
using short-term energy storages for buffering. Within a smart grid, energy consumers and suppliers can
be the same (Stock and Seliger, 2016).
1.2.8 Micro Perspective of Industry 4.0

The micro perspective of Industry 4.0 presented in Figure 1.5 covers horizontal and vertical integration
within smart factories and is also part of the end-to-end engineering dimension.
As a value creation module at the highest level of aggregation, the smart factory contains various
value creation modules on lower aggregation levels, including manufacturing lines, manufacturing
cells or manufacturing stations. Smart factories will increasingly use renewable energies in addition
to the supply provided by the external smart grid (Berger et al., 2014). The factory will thus become
an energy supplier and consumer at the same time. The smart grid, along with the energy management
system of the smart factory, will handle the dynamic requirements of energy supply and feedback.
The supply of fresh water is another essential resource, requiring adequate water reservoirs (Stock
and Seliger, 2016).
Smart Factory
Consumer
Smart Grid
Outbound
Logiscs
Renewable Final
Water Energies Product
Reservoir
In-house Transport Value Creaon

Value
Supplies Creaon
Factors
Inbound
Module
Logiscs
Product
Manufacturing
Markeng and
Process
Supplier Sales
Cloud Service
Procurement
Technology Human
Development
Human Resource
Management
Infrastructure
Value Chain Acvies
FIGURE 1.5 Micro perspective of Industry 4.0. (From Stock, T., and Seliger G., Opportunities of Sustainable
Manufacturing in Industry 4.0. 13th Global Conference on Sustainable Manufacturing—Decoupling Growth from
Resource Use, Institute of Machine Tools and Factory Management, Technische Universität Berlin, 10587 Berlin, Germany.
2212–8271© 2016 The Authors. Published by Elsevier B.V, 2016.)
From the micro perspective, horizontal integration is characterized by cross-linked value creation
modules along the material flow of the smart factory and smart logistics. The in- and outbound
logistics to and from factories will be characterized by transport equipment able to agilely react
to unforeseen events, such as a change in traffic or weather, and to autonomously operate between
the starting point and the destination. The autonomously operating transport equipment such as
automated guided vehicles (AGVs) will be used for in-house transport along the material flow. All
transport equipment will interchange smart data with the value creation modules to achieve the
decentralized coordination of supplies and products with the transport systems. For this purpose,
the supplies and products will contain identification systems, e.g., radio-frequency identification
(RFID) chips or QR codes, to enable a wireless identification and localization of all materials in the
value chain (Stock and Seliger, 2016).
From the macro perspective, vertical integration requires the intelligent cross-linking of value creation
factors, including products, equipment and humans, along the various aggregation levels of the value
creation modules, from manufacturing stations via manufacturing cells, to manufacturing lines, up to the
level of the smart factory. This networking throughout the aggregation levels includes the cross-linking
of the value creation modules with the different value chain activities, e.g., marketing and sales, service,
procurement and so on. (Porter 2015).
The value creation module in a factory refers to an embedded CPS. The manufacturing equipment,
e.g., machine tools or assembly tools, use sensor systems to identify and localize the value creation fac-
tors, such as the products or the humans, and to monitor the manufacturing processes, e.g., the cutting,
assembly or transport processes. Depending on the monitored smart data, the applied actuators in the
manufacturing equipment can react in real time on specific changes in products, humans or processes.
The communication and the exchange of the smart data between the value creation factors, between the
value creation module and the transport equipment and between the different levels of aggregation and
value chain activities are executed via the cloud.
Table 1.1 provides an overview of the main trends and expected development in the value creation fac-
tors of Industry 4.0 (Stock and Seliger, 2016).
1.2.9 Industry 4.0 Components

1.2.9.1 Cyber-Physical Systems (CPS)
An important component of Industry 4.0 is the fusion of the physical and the virtual world (Kagermann
et al., 2014). This fusion is made possible by CPS. Cyber-physical systems are “integrations of com-
putation and physical processes. Embedded computers and networks monitor and control the physical
processes, usually with feedback loops where physical processes affect computations and vice versa”
(Lee et al., 2008). The development of CPS can be divided into three phases. The first generation of
CPS includes identification technologies such as RFID tags, which allow unique identification. Storage
and analytics have to be provided as a centralized service. The second generation of CPS is equipped
with sensors and actuators with a limited range of functions. In the third generation, CPS can store and
analyze data, are equipped with multiple sensors and actuators and are network compatible (Bauernhansl
et al., 2014). One example of a CPS is the intelligent bin (iBin) by Würth. It contains a built-in infrared
camera module for C-parts management; the camera determines the number of C-parts within the iBin.
If the quantity falls below the safety stock, the iBin automatically orders new parts via RFID. This allows
consumption-based C-parts management in real time (Günthner et al., 2014).
1.2.9.2 Internet of Things

According to Kagermann, the integration of the IoT with the Internet of Services (IoS) in the manu-
facturing process initiated the fourth industrial revolution (Kagermann et al., 2013). The IoT allows
“things” and “objects,” such as RFID, sensors, actuators and mobile phones, to “interact with each
other and cooperate with their neighboring ‘smart’ components, to reach common goals” (Giusto et al.,
2010). Based on the definition of CPS stated above, “things” and “objects” can be understood as CPS.
TABLE 1.1
Trends and Expected Developments in Value Creation Factors
Equipment Manufacturing equipment will be characterized by the application of highly automated machine
tools and robots. The equipment will be able to flexibly adapt to changes in the other value
creation factors; for example, robots will work together collaboratively with human workers
on joint tasks (Kagermann et al., 2015).
Human Jobs in manufacturing sectors are likely to become automated (Frey and Osborne, 2013). The numbers
of workers will thus decrease. The remaining manufacturing jobs will contain more knowledge work
and more short-term and hard-to-plan tasks (Spath et al., 2013). Workers increasingly have to monitor
automated equipment, are being integrated in decentralized decision-making, and are participating in
engineering activities as part of the end-to-end engineering.
Organization The increasing organizational complexity in the manufacturing system cannot be managed centrally
from a certain point. Decision-making will thus become decentralized. Decision-making will
autonomously incorporate local information (Kletti et al., 2015). The decision itself will be made
by the workers or by the equipment using methods from artificial intelligence.
Process Additive manufacturing technologies, also known as 3-D printing, will be increasingly deployed in
value creation processes, as the costs of additive manufacturing are rapidly dropping and speed and
precision are simultaneously increasing (Hagel III et al., 2015). This allows designing more
complex, stronger, and more lightweight geometries and the application of additive manufacturing
to higher quantities and larger scales of the product (Hagel III et al., 2015).
Product Products will be manufactured in a batch size according to the individual requirements of the
customer (Acatech 2015). This mass customization of the product integrates the customer as
early as possible in the value chain. The physical product will also be combined with new
services offering functionality and access rather than product ownership to the customer as
part of new business models (Hagel III et al., 2015).
Source: Stock, T. and Seliger, G., Opportunities of Sustainable Manufacturing in Industry 4.0, 13th Global Conference on
Sustainable Manufacturing—Decoupling Growth from Resource Use, Institute of Machine Tools and Factory
Management, Technische Universität Berlin, 10587 Berlin, Germany. 2212–8271© 2016 The Authors. Published
by Elsevier B.V, 2016.
Therefore, the IoT can be defined as a network in which CPS cooperate with each other through unique
addressing schemas. Application examples of the IoT include smart factories, smart homes, and smart
grids (Bauernhansl et al., 2014).
1.2.9.3 Internet of Services

The IoS enables “service vendors to offer their services via the Internet. […] The IoS consists of partici-
pants, an infrastructure for services, business models and the services themselves. Services are offered
and combined into value-added services by various suppliers; they are communicated to users as well as
consumers and are accessed by them via various channels” (Buxmann et al., 2009). This development
allows a new and dynamic variation of the distribution of individual value chain activities (Industry
4.0: Whitepaper FuE-Themen, 2015). It is conceivable that this concept will be transferred from sin-
gle factories to entire value-added networks in the future. Factories may go one step further and offer
special production technologies instead of just production types. These production technologies will be
offered over the IoS and used to manufacture products or compensate production capacities (Scheer
et al., 2013). The idea of the IoS has already been implemented in a project named SMART FACE
under the “Autonomics for Industry 4.0” program initiated by the German Federal Ministry for Economic
Affairs and Energy. The project has developed a new distributed production control for the automotive
industry, based on a service-oriented architecture. This allows the use of modular assembly stations that
can be flexibly modified or expanded. The transportation between the assembly stations is ensured by
AGVs. Both assembly stations and AGVs offer their services through the IoS. The vehicle bodies know
their customer-specific configuration and can decide autonomously which working steps are needed.
Therefore, they can individually compose the required processes through the IoS and autonomously navi-
gate through the production (Fraunhofer-Institut für Materialfluss und Logistik (IML), 2014).
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schemes at a favorable moment, and the equally prompt recession
when conditions alter; the investment of great resources in
enterprises which yield no immediate return; the decision and
secrecy important in overcoming competitors; the unhesitating
sacrifice of workmen and their families when the market calls for a
shut-down of production—such traits as these are of the utmost
importance to commercial success, and belong to arbitrary control
rather than to anything of a more popular sort. On the other hand, it
would be easy to show at any length desired that such control is
accompanied by a widespread disaffection of spirit on the part of the
working classes, which, expressed in unwilling labor, strikes and
agitation, is a commercial disadvantage, and a social problem so
urgent as to unsettle the whole economic system.
The autocratic system has evidently a special advantage in a time
of rapid and confused development, when conditions are little
understood or regulated, and the state of things is one of somewhat
blind and ruthless warfare; but it is quite possible that as the new
industries become established and comparatively stable, there will
be a commercial as well as a social demand for a system that shall
invite and utilize more of the good-will and self-activity of the
workman. “The system which comes nearest to calling out all the
self-interests and using all the faculties and sharing all the benefits
will outcompete any system that strikes a lower level of motive
faculty and profit.”[120] And the penetrating thinker who wrote this
sentence believed that the function of the autocratic “captain of
industry” was essentially that of an explorer and conqueror of new
domains destined to come later under the rule of a commonwealth.
Indeed the rise, on purely commercial grounds, of a more humane
and individualizing tendency, aiming in one way or another to
propitiate the self-feeling of the workman and get him to identify
himself with his work, is well ascertained. Among the familiar phases
of this are the notable growth of coöperative production and
exchange in Belgium, Russia and other European countries, the
increasing respect for labor unions and the development by large
concerns of devices for insurance, for pensions, for profit-sharing
and for the material and social comfort of their employees. “As a
better government has come up from the people than came down
from the kings, so a better industry appears to be coming up from
the people than came down from the capitalists.”[121]
In some form or other the democratic principle is sure to make its
way into the economic system. Coöperation, labor unions, public
regulation, public ownership and the informal control of opinion will
no doubt all have a part; the general outcome being that the citizen
becomes a more vital agent in the life of the whole.
Before discussing further the power of the capitalist-manager
class, we ought to think out clearly just what we mean by social
power, since nowhere are we more likely to go astray than in
vagueness regarding such notions.
Evidently the essence of it is control over the human spirit, and the
most direct phases of power are immediately spiritual, such as one
mind exercises over another by virtue of what it is, without any
means but the ordinary symbols of communication. This is live,
human power, and those who have it in great degree are the prime
movers of society, whether they gain any more formal or
conventional sort or not. Such, for instance, are the poets, prophets,
philosophers, inventors and men of science of all ages, the great
political, military and religious organizers, and even the real captains
of industry and commerce. All power involves in its origin mental or
spiritual force of some sort; and so far as it attaches to passive
attributes, like hereditary social position, offices, bank-accounts, and
the like, it does so through the aid of conventions and habits which
regard these things as repositories of spiritual force and allow them
to exercise its function.
In its immediate spiritual phase power is at a maximum of vitality
and a minimum of establishment. Only a few can recognize it. Its
possessors, then, strive to establish and organize it, to give it social
expression and efficacy, to gain position, reputation or wealth. Since
power is not apparent to the common mind until it takes on these
forms, they are, to superficial observation and in all the conventional
business of life, the only valid evidence of it. And yet by the time
these symbols appear, the spiritual basis has often passed away.
Primary power goes for the most part unseen, much of it taking on
no palpable form until late in life, much yielding only posthumous
reputation, and much, and that perhaps the finest sort, having never
any vulgar recognition whatever.
Regarding money-value we may say, in general, that it is one
expression of the conventional or institutional phase of society, and
exhibits all that mixture of grandeur and confusion with which nature
usually presents herself to our understanding. I mean that its
appraisal of men and things is partly expressive of great principles,
and partly, so far as we can see, unjust, trivial or accidental. Some
gains are vital or organic, springing from the very nature of life and
justified as we come to understand that life; some are fanciful,
springing from the tastes or whims of the rich, like the value of
diamonds or first editions, and some parasitical, like those of the
legally-protected swindler. In general the values of the market are
those of the habitual world in all its grossness; spiritual values,
except those that have become conventional, being little felt in it.
These appeal to the future. The detailed working of market value has
no ascertainable connection with moral worth, and we must not
expect it to have. If a man’s work is moral, in the higher sense, it is in
its nature an attack upon the habitual world which the latter is more
likely to resent than reward. One can only take up that useful work
that seems best suited to him, trying to be content if its value is
small, and, if large, to feel that the power over money it gives him is
rightly his only in so far as he uses it for the general good.
The more tangible kind of social power—so far as it is intrinsic to
the man and not adventitious like inherited wealth—depends chiefly
upon organizing capacity, which may be described as the ability to
build and operate human machinery. It has its roots in tact and skill
in dealing with men, in tenacity, and in a certain instinct for
construction. One who possesses it sees a new person as social
material, and is likely to know what can be made of him better than
he knows himself.[122]
Of all kinds of leadership this has the readiest recognition and the
highest market value; and naturally so, since it is essential to every
sort of coöperative achievement. Its possessors understand the
immediate control of the world, which they will exercise no matter
what the apparent forms of organization may be. In all ages they
have gained and held the grosser forms of power, whenever these
were at all open to competition. Thus, during the early Middle Age,
men of energy and management, more or less favored by situation,
built up for themselves local authority and estate, or perhaps
exploited the opportunities for still wider organization, like the
founders of Burgundy and Brittany and the early kings of France;
very much in the same manner as men of our own day build up
commercial and industrial systems and become senators and railway
presidents.
Indeed, this type of ability was never in such demand as it now is,
for the conduct of the vast and diverse social structures rising about
us—industrial enterprises, political parties, labor unions,
newspapers, universities and philanthropies.
It has its high money value partly because of its rarity and partly
because there is a regular market for it; the need being so urgent
and obvious as to create a steady and intelligent demand. In this
latter respect it contrasts with services, like moral leadership, which
people need but will seldom pay for. A third reason is that its
possessors are almost always clever enough to know their own
value and secure its recognition.
In discussing the power of the capitalist class there is no question
of the finer and higher forms of power. We shall rarely find among
the rich any pregnant spiritual leadership, theirs being a pedestrian
kind of authority which has a great deal to do with the every-day
comfort of their contemporaries but does not attempt to sway the
profounder destinies of the race. Nor does the world often accord
them enduring fame: lacking spiritual significance their names are
writ in water. Even in industry the creative thought, the inventions
which are the germs of a new era, seldom come from money-
winners, since they require a different kind of insight.
The capitalist represents power over those social values that are
tangible and obvious enough to have a definite standing in the
market. His money and prestige will command food, houses, clothes,
tools and all conventional and standard sorts of personal service,
from lawn-mowing to the administration of a railroad, not genius or
love or anything of that nature. That wealth means social power of
this coarser sort is apparent in a general way, and yet merits a
somewhat closer examination.
We have, first, its immediate power over goods and services: the
master of riches goes attended by an invisible army of potential
servitors, ready to do for him anything that the law allows, and often
more. He is in this way, as in so many others, the successor of the
nobleman of mediæval and early modern history, who went about
with a band of visible retainers eager to work his will upon all
opposers. He is the ruler of a social system wherever he may be.
The political power of wealth is due only in part to direct
corruption, vast as that is, but is even more an indirect and perfectly
legal pressure in the shape of inducements which its adroit use can
always bring to bear—trade to the business man, practice to the
lawyer and employment to the hand-worker: every one when he
thinks of his income wishes to conciliate the rich. Influence of this
sort makes almost every rich man a political power, even without his
especially wishing to be. But when wealth is united to a shrewd and
unscrupulous political ambition, when it sets out to control legislation
or the administration of the laws, it becomes truly perilous. We
cannot fail to see that a large part of our high offices are held by men
who have no marked qualification but wealth, and would be
insignificant without it; also that our legislation—municipal, state and
national—and most of our administrative machinery, feel constantly
the grasp of pecuniary power. Probably it is not too much to say that
except when public opinion is unusually aroused wealth can
generally have its way in our politics if it makes an effort to do so.
As to the influence of the rich over the professional classes—
lawyers, doctors, clergymen, teachers, civil and mechanical
engineers and the like—we may say in general that it is potent but
somewhat indirect, implying not conscious subservience but a moral
ascendency through habit and suggestion. The abler men of this sort
are generally educated and self-respecting, have a good deal of
professional spirit and are not wholly dependent upon any one
employer. At the same time, they get their living largely through the
rich, from whom the most lucrative employment comes, and who
have many indirect ways of making and marring careers. The ablest
men in the legal profession are in close relations with the rich and
commonly become capitalists themselves; physicians are more
independent, because their art is not directly concerned with
property, yet look to wealthy patients for their most profitable
practice; clergymen are under pressure to satisfy wealthy
parishioners, and teachers must win the good will of the opulent
citizens who control educational boards.
Now there is nothing in social psychology surer than that if there is
a man by whose good will we desire to profit, we are likely to adapt
our way of thinking to his. Impelled to imagine frequently his state of
mind, and to desire that it should be favorable to our aims, we are
unconsciously swayed by his thought, the more so if he treats us
with a courtesy which does not alarm our self-respect. It is in this
way that wealth imposes upon intellect. Who can deny it?
Newspapers are generally owned by men of wealth, which has no
doubt an important influence upon the sentiments expressed in
them; but a weightier consideration is the fact that they depend for
profit chiefly upon advertisements, the most lucrative of which come
from rich merchants who naturally resent doctrines that threaten their
interest. Of course the papers must reach the people, in order to
have a value for advertising or any other purpose, and this requires
adaptation to public opinion; but the public of what are known as the
better class of papers are chiefly the comparatively well-to-do. And
even that portion of the press which aims to please the hand-working
class is usually more willing to carry on a loud but vague agitation,
not intended to accomplish anything but increase circulation, than to
push real and definite reform.
All phases of opinion, including the most earnest and honest
inquiry into social questions, finds some voice in print, but—leaving
aside times when public opinion is greatly aroused—those phases
that are backed by wealthy interests have a great advantage in the
urgency, persistence and cleverness with which they are presented.
At least, this has been the case in the past. It is a general feeling of
thoughtful men among the hand-working class that it is hard to get a
really fair statement of their view of industrial questions from that
portion of the newspaper and magazine press that is read by well-to-
do people. The reason seems to be mainly that the writers live
unconsciously in an atmosphere of upper-class ideas from which
they do not free themselves by thorough inquiry. Besides this, there
is a sense of what their readers expect, and also, perhaps, a vague
feeling that the sentiments of the hand-working class may threaten
public order.
Since the public has supplanted the patron, a man of letters has
least of all to hope or fear from the rich—if he accepts the opinion of
Mr. Howells that the latter can do nothing toward making or marring
a new book.
The power of wealth over public sentiment is exercised partly
through sway over the educated classes and the press, but also by
the more direct channel of prestige. Minds of no great insight, that is
to say the majority, mould their ideals from the spectacle of visible
and tangible success. In a commercial epoch this pertains to the
rich; who consequently add to the other sources of their influence
power over the imagination. Millions accept the money-making ideal
who are unsuited to attain it, and run themselves out of breath and
courage in a race they should never have entered; it is as if the thin-
legged and flat-chested people of the land should seek glory in foot-
ball. The money-game is mere foolishness and mortification for most
of us, and there is a madness of the crowd in the way we enter into
it. Even those who most abuse the rich commonly show mental
subservience in that they assume that the rich have, in fact, gotten
what is best worth having.
As hinted above, there is such a thing as an upper-class
atmosphere, in the sense of a state of mind regarding social
questions, initiated by the more successful money-winners and
consciously or unconsciously imposed upon business and
professional people at large. Most of us exist in this atmosphere and
are so pervaded by it that it is not easy for us to understand or fairly
judge the sentiment of the hand-working classes. The spokesmen of
radical doctrines are, in this regard, doing good service to the public
mind by setting in motion counterbalancing, if not more trustworthy,
currents of opinion.
If any one of business or professional antecedents doubts that he
breathes a class atmosphere, let him live for a time at a social
settlement in the industrial part of one of our cities—not a real
escape but as near it as most of us have the resolution to achieve—
reading working-class literature (he will be surprised to find how well
worth reading it is), talking with hand-working people, attending
meetings, and in general opening his mind as wide as possible to the
influences about him. He will presently become aware of being in a
new medium of thought and feeling; which may or may not be
congenial but cannot fail to be instructive.
FOOTNOTES:
[119] The Spirit of Laws, book v, chap. 6.
[120] Henry D. Lloyd, Man the Social Creator, 255.
[121] Idem, 246. Lloyd was rather a prophet than a man of
science, but there is a shrewd sense of fact back of his visions.
[122] Such a one
“Lässt jeden ganz das bleiben was er ist;

Er wacht nur drüber das er’s immer sei
Am rechten Ort; so weiss er aller Menschen
Vermögen zu dem seinigen zu machen.”
“He lets every one remain just what he is, but takes care that
he shall always be it in the right place: thus he knows how to
make all men’s power his own.” Schiller, Wallenstein’s Lager, I, 4.
CHAPTER XXIV
ON THE ASCENDENCY OF A CAPITALIST CLASS—
Continued
The Influence of Ambitious Young Men—Security of the

Dominant Class in an Open System—Is there Danger of
Anarchy and Spoliation?—Whether the Sway of Riches is
Greater now than Formerly—Whether Greater in
America than in England.
In any society where there is some freedom of opportunity
ambitious young men are an element of extreme importance. Their
numbers are formidable and their intelligence and aggressiveness
much more so: in short, they want an opening and are bound to get
it.
As the members of this class are mainly impecunious, it might be
supposed that they would be a notable offset to the power of wealth;
and in a sense they are. It is their interest to keep open the
opportunity to rise, and they are accordingly inimical to caste and
everything which tends toward it. But it by no means follows that they
are opposed to the ascendency of an upper class based on wealth
and position. This becomes evident when one remembers that their
aim is not to raise the lower class, but to get out of it. The rising
young man does not identify himself with the lowly stratum of society
in which he is born, but, dissatisfied with his antecedents, he strikes
out for wealth, power or fame. In doing so he fixes his eyes on those
who have these things, and from whose example he may learn how
to gain them; thus tending to accept the ideals and standards of the
actual upper class. He gives a great deal of attention to the points of
view of A, a railroad president, B, a senator, and even of C, head of
a labor organization, but to a mere farmer or laborer, whose hand is
on no levers, he is indifferent.
The students of our universities are subject to a conflict between
the healthy idealism of youth, which prevails with the more generous,
and the influences just indicated, which become stronger as
education draws closer to practical affairs. On the whole, possessed
of one great privilege and eager to gain others, they are not so close
in spirit to the unprivileged classes as might be imagined.
Thus the force of ambitious youth goes largely to support the
ascendency of the money-getting class; directly, in that it accepts the
ideals of this class and looks forward to sharing its power; indirectly,
in that it is withdrawn from the resources of the humbler class. How
long will the rising lawyer retain his college enthusiasm for social
reform if the powers that be welcome him and pay him salaries?
We have then the fact, rather paradoxical at first sight, that the
dominant class in a competitive society, although unstable as to its
individual membership, may well be more secure as a whole than
the corresponding class under any other system—precisely because
it continually draws into itself most of the natural ability from the
other classes. Throughout English history, we are told, the salvation
of the aristocracy has been its comparative openness, the fact that
ability could percolate into it, instead of rising up behind it like water
behind a dam, as was the case in pre-revolutionary France. And the
same principle is working even more effectually in our own economic
order. A great weakness of the trades-union movement, as of all
attempts at self-assertion on the part of the less privileged classes, is
that it is constantly losing able leaders. As soon as a man shows that
marked capacity which would fit him to do something for his fellows,
it is ten to one that he accepts a remunerative position, and so
passes into the upper class. It is increasingly the practice—perhaps
in some degree the deliberate policy—of organized wealth to win
over in this way the more promising leaders from the side of labor;
and this is one respect in which a greater class-consciousness and
loyalty on the part of the latter would add to its strength.
Thus it is possible to have freedom to rise and yet have at the
same time a miserable and perhaps degraded lower class—
degraded because the social system is administered with little regard
to its just needs. This is more the case with our own industrial
system, and with modern society in general, than our self-
satisfaction commonly perceives. Our one-sided ideal of freedom,
excellent so far as it goes, has somewhat blinded us to the
encroachments of slavery on an unguarded flank. I mean such
things as bad housing, insecurity, excessive and deadening work,
child labor and the lack of any education suited to the industrial
masses—the last likely to be remedied now that it is seen to threaten
industrial prosperity.
It is hard to say how much of the timidity noticeable in the
discussion of questions of this sort by the comfortable classes is due
to a vague dread of anarchy and spoliation by an organized and self-
conscious lower class; but probably a good deal. If power, under
democracy, goes with numbers, and the many are poor, it would
seem at first glance that they would despoil the few.
To conservative thinkers a hundred, or even fifty, years ago this
seemed almost an axiom, but a less superficial philosophy has
combined with experience to show that anarchy, in Mr. Bryce’s
words, “is of all dangers or bugbears the one which the modern
world has least cause to fear.”[123]
The most apparent reason for this is the one already discussed,
namely, that power does not go with mere numbers, under a
democracy more than under any other form of government; a
democratic aristocracy, that is, one whose members maintain their
position in an open struggle, being without doubt the strongest that
can exist. We shall never have a revolution until we have caste;
which, as I have tried to show, is but a remote possibility. And as an
ally of established power we have to reckon with the inertia of social
structure, something so massive and profound that the loudest
agitation is no more than a breeze ruffling the surface of deep
waters. Dominated by the habits which it has generated, we all of us,
even the agitators, uphold the existing order without knowing it.
There may, of course, be sudden changes due to the fall of what has
long been rotten, but I see little cause to suppose that the timbers of
our system are in this condition: they are rough and unlovely, but far
from weak.
Another conservative condition is that economic solidarity which
makes the welfare of all classes hang together, so that any general
disturbance causes suffering to all, and more to the weak than to the
strong. A sudden change, however reasonable its direction, must in
this way discredit its authors and bring about reaction. The hand-
working classes may get much less of the economic product than
they ought to; but they are not so badly off that they cannot be
worse, and, unless they lose their heads, will always unite with other
classes to preserve that state of order which is the guaranty of what
they have. Anarchy would benefit no one, unless criminals, and
anything resembling a general strike I take to be a childish expedient
not likely to be countenanced by the more sober and hard-headed
leaders of the labor movement. All solid betterment of the workers
must be based on and get its nourishment from the existing system
of production, which must only gradually be changed, however
defective it may be. The success of strikes, and of all similar tactics,
depends, in the nature of things, on their being partial, and drawing
support from the undisturbed remainder of the process. It is the
same principle of mingling stability with improvement which governs
progress everywhere.
And, finally, effective organization on the part of the less privileged
classes goes along with intelligence, with training in orderly methods
of self-assertion, and with education in the necessity of patience and
compromise. The more real power they get, the more conservatively,
as a rule, they use it. Where free speech exists there will always be
a noisy party advocating precipitate change (and a timid party who
are afraid of them), but the more the people are trained in real
democracy the less will be the influence of this element.
Whatever divisions there may be in our society, it is quite enough
an organic whole to unite in casting out tendencies that are clearly
anarchic. And it is also evident that such tendencies are to be looked
for at least as much among the rich as among the poor. If we have at
one extreme anarchists who would like to despoil other people, we
have, at the other, monopolists and financiers who actually do so.
It is a common opinion that the sway of riches over the human
mind is greater in our time than previously, and greater in America
than elsewhere. How far is this really the case?
To understand this matter we must not forget that the ardor of the
chase—as in a fox hunt—may have little to do with the value of the
quarry. The former, certainly, was never so great in the pursuit of
wealth as here and now; chiefly because the commercial trend of the
times, due to a variety of causes, supplies unequalled opportunities
and incitements to engage in the money-game. In this, therefore, the
competitive zeal of an energetic people finds its main expression.
But to say that wealth stands for more in the inner thought of men,
that to have or not to have it makes a greater intrinsic difference, is
another and a questionable proposition, which I am inclined to think
opposite to the truth. Such spiritual value as personal wealth has
comes from its power over the means of spiritual development. It is,
therefore, diminished by everything which tends to make those
means common property: and the new order has this tendency.
When money was the only way to education, to choice of
occupation, to books, leisure and variety of intercourse, it was
essential to the intellectual life; there was no belonging to the
cultured class without it. But with free schools and libraries, the
diffusion of magazines and newspapers, cheap travel, less
stupefying labor and shorter hours, culture opportunity is more and
more extended, and the best goods of life are opened, if not to all,
yet to an ever-growing proportion. Men of the humblest occupations
can and do become gentlemen and scholars. Indeed, people are
coming more and more to think that exclusive advantages are
uncongenial to real culture, since the deepest insight into humanity
can belong only to those who share and reflect upon the common
life.
The effect is that wealth is shorn of much of that prestige of
knowledge, breeding and opportunity which always meant more than
its material power. The intellectual and spiritual centre of gravity, like
the political, sinks down into the masses of the people. Though our
rich are rich beyond the dreams of avarice, they mean less to the
inner life of the time, exercise less spiritual authority, perhaps, than
the corresponding class in any older society. They are the objects of
popular curiosity, resentment, admiration or envy, rather than the
moral deference given to a real aristocracy. They are not taken too
seriously. Indeed, there could be no better proof that the rich are no
overwhelming power with us than the amount of good-natured
ridicule expended upon them. Were they really a dominant order, the
ridicule, if ventured at all, would not be good-natured. Their
ascendency is great when compared with a theory of equality—and
in this sense the remarks in the last chapter should be understood—
but small compared with that of the ruling classes of the Old World.
Over a class of frenzied gold-seekers, rich or poor, chiefly in the
towns, the money-idea is no doubt ascendant; but if you approach
the ordinary farmer, mechanic or sober tradesman you are likely to
find that he sets no high rate on wealth beyond what is necessary for
the frugal support of a family, and that he neither admires nor envies
the rich, but looks at the millionaire and thinks: “After all, it isn’t life.
What does he get out of it more than the rest of us?” The typical
American is an idealist, and the people he looks up to are those who
stand in some way for the ideal life—or whom he supposes to do so
—most commonly statesmen, but often writers, scientists or
teachers. Education and culture, as Mr. Bryce and others have
noticed, is cherished by plain people all over the land, often to a
degree that puts to shame its professed representatives.
We find, then, that agitators who strive to incite the people against
the rich encounter with disgust an idealism which refuses to believe
that their advantages are extravagantly great; and one of the main
grievances of such men is what they look upon as the folly or lack of
spirit of the poor in this regard.
Never before, probably, was there so large a class of people who,
having riches, feel that they are a doubtful blessing, especially in
relation to the nurture of children. Many a successful man is at his
wits’ end to give his children those advantages of enforced industry,
frugality and self-control which he himself enjoyed. One of the richest
men of the day holds that accumulations are generally bad for the
children, as well as for society, and favors almost unlimited
graduated taxation of inheritances.[124] According to the philosophy
which he supports by practice as well as theory, the man who finds
himself rich is to live modestly and use his surplus as a trust fund for
the benefit of the public.
What would a man wish for his own son, if he could choose? First,
no doubt, some high and engrossing purpose, which should fill his
life with the sense of worthy striving and aspiration. After this he
would wish for health, friends, peace of mind, the enjoyment of
books, a happy family life and material comfort. But the last, beyond
that degree which even unskilled labor should bring, he would regard
as of secondary importance. Not a straitened house and table but a
straitened soul is the real evil, and the two are more separable now
than formerly. The more a real democracy prevails, the less is the
spiritual ascendency of riches.
There is, for instance, no such settled and institutional deference
to wealth in the United States as there seems to be in England; the
reason being, in part, that where there are inherited classes there
are also class standards of living, costly in the upper class, to which
those who would live in good company are under pressure to
conform. In England there is actually a ruling order, however ill
defined, which is generally looked up to and membership in which is
apparently the ambition of a large majority of all aspiring men who do
not belong to it by birth. Its habits and standards are such that only
the comparatively rich can be at home in it. There is nothing
corresponding to this with us. We have richer men and the pursuit of
riches is an even livelier game, but there is no such ascendency in
wealth, no such feeling that one must be rich to be respectable. With
us, if people have money they enjoy it; if not, they manage with what
they have, neither regarding themselves nor regarded by others as
essentially inferior.
It is also a general feeling here that wealth should not be a
controlling factor in marriage, and it is not common for American
parents to object seriously to a proposed son-in-law (much less a
daughter-in-law) on the mere ground of lack of means, apart from his
capacity to earn a living. The matter-of-fact mercenariness in this
regard which, as we are led to believe by the novelists, prevails in
the upper circles of England, is as yet somewhat shocking to the
American mind.
Hereditary titles, sometimes imagined to be a counterpoise to the
ascendency of wealth, are really, in our time at least, a support and
sanction to it, giving it an official standing and permanence it cannot
have in democracy. We understand that in England wealth—with
tact, patience and maybe political services—will procure a title,
which, unlike anything one can get for money in America, is
indestructible by vice and folly, and can be used over and over to
buy wealth in marriage. “Nothing works better in America than the
promptness with which the degenerate scions of honored parents
drop out of sight.”[125] Rank is not an offset but a reward and bribe to
wealth; perhaps the only merit that can be claimed for it in this
connection being that the desire and deference for it imposes a
certain discipline on the arrogance of newly acquired riches.
The English idea that those in high offices should have a
magnificent style of living, “becoming to their station,” is also one that
goes with caste feeling. It makes it hardly decent for the poor to hold
such offices, and is almost absent here, where, if riches are
important to political success, the condition is one of which the
people do not approve and would gladly dispense with.
I doubt whether the whole conception which imputes merit to
wealth and seeks at least the appearance of the latter in modes of
dress, attendance and the like, is not stronger everywhere in Europe
than in the United States.
FOOTNOTES:
[123] The American Commonwealth, Chapter 94.
[124] Andrew Carnegie.
[125] T. W. Higginson, Book and Heart, 145.
CHAPTER XXV
THE ORGANIZATION OF THE ILL-PAID CLASSES
The Need of Class Organization—Uses and Dangers of

Unions—General Disposition of the Hand-Working
Classes.
It is not the purpose of this book to add anything to the merely
controversial literature of the time; and in treating the present topic I
intend no more than to state a few simple and perhaps obvious
principles designed to connect it with our general line of thought.
It is quite apparent that an organized and intelligent class-
consciousness in the hand-working people is one of the primary
needs of a democratic society. In so far as this part of the people is
lacking in a knowledge of its situation and in the practice of orderly
self-assertion, a real freedom will also be lacking, and we shall have
some kind of subjection in its place; freedom being impossible
without group organization. That industrial classes exist—in the
sense already explained[126]—cannot well be denied, and existing
they ought to be conscious and self-directing.
The most obvious need of class-consciousness is for self-
assertion against the pressure of other classes, and this is both most
necessary and most difficult with those who lack wealth and the
command over organized forces which it implies. In a free society,
especially, the Lord helps those who help themselves; and those
who are weak in money must be strong in union, and must also exert
themselves to make good any deficiency in leadership that comes
from ability deserting to more favored classes.
That the dominant power of wealth has an oppressive action, for
the most part involuntary, upon the people below, will hardly be
denied by any competent student. The industrial progress of our time
is accompanied by sufferings that are involved with the progress.
These sufferings—at least in their more tangible forms—fall almost
wholly upon the poorer classes, while the richer get a larger share of
the increased product which the progress brings. By sufferings I
mean not only the physical hardship and liability to disease, early
decay, and mutilation or death by accident, which fall to the hand-
worker; but also the debasement of children by premature and
stunting labor, the comparative lack of intellectual and social
opportunities, the ugly and discouraging surroundings, and the
insecurity of employment, to which he and his are subject. There is
no purpose to inflict these things; but they are inflicted, and the only
remedy is a public consciousness, especially in the classes who
suffer from them, of their causes and the means by which they can
be done away with.
The principal expressions of class-consciousness in the hand-
working classes in our day are labor unions and that wider, vaguer,
more philosophical or religious movement, too various for definition,
which is known as socialism. Regarding the latter I will only say at
present that it includes much of what is most vital in the
contemporary working of the democratic spirit; the large problems
with which its doctrines deal I prefer to discuss in my own way.
Labor unions are a simpler matter. They have arisen out of the
urgent need of self-defence, not so much against deliberate
aggression as against brutal confusion and neglect. The industrial
population has been tossed about on the swirl of economic change
like so much sawdust on a river, sometimes prosperous, sometimes
miserable, never secure, and living largely under degrading,
inhuman conditions. Against this state of things the higher class of
artisans—as measured by skill, wages and general intelligence—
have made a partly successful struggle through coöperation in
associations, which, however, include much less than half of those
who might be expected to take advantage of them.[127] That they are
an effective means of class self-assertion is evident from the
antagonism they have aroused.
Besides their primary function of group-bargaining, which has
come to be generally recognized as essential, unions are performing
a variety of services hardly less important to their members, and
serviceable to society at large. In the way of influencing legislation
they have probably done more than all other agencies together to
combat child-labor, excessive hours, and other inhuman and
degrading kinds of work; also to provide for safeguards against
accident, for proper sanitation of factories, and the like. In this field
their work is as much defensive as aggressive, since employing
interests, on the other side, are constantly influencing legislation and
administration to their own advantage.
Their function as spheres of fellowship and self-development is
equally vital and less understood. To have a we-feeling, to live
shoulder to shoulder with one’s fellows, is the only human life; we all
need it to keep us from selfishness, sensuality and despair, and the
hand-worker needs it even more than the rest of us. Usually without
pecuniary resource and insecure of his job and his home, he is, in
isolation, miserably weak and in a way to be cowed and unmanned
by misfortune or mere apprehension. Drifting about in a confused
society, unimportant, apparently, to the rest of the world, it is no
wonder if he feels
“I am no link of Thy great chain,”[128]
and loses faith in himself, in life and in God. The union makes him
feel that he is part of a whole, one of a fellowship, that there are
those who will stand by him in trouble, that he counts for something
in the great life. He gets from it that thrill of broader sentiment, the
same in kind that men get in fighting for their country; his self is
enlarged and enriched and his imagination fed with objects,
comparatively, “immense and eternal.”
Moreover, the life of labor unions and other class associations,
through the training which it gives in democratic organization and
discipline, is perhaps the chief guaranty of the healthy political
development of the hand-working class—especially those imported
from non-democratic civilizations—and the surest barrier against
recklessness and disorder. That their members get this training will
be evident to anyone who studies their working, and it is not
apparent that they would get it in any other way. Men learn most in
acting for purposes which they understand and are interested in, and
this is more certain to be the case with economic aims than with any
other.
Thus, if unions should never raise wages or shorten hours, they
would yet be invaluable to the manhood of their members. At worst,
they ensure the joy of an open fight and of companionship in defeat.
Self-assertion through voluntary organization is of the essence of
democracy, and if any part of the people proves incapable of it it is a
bad sign for the country. On this ground alone it would seem that
patriots should desire to see organization of this sort extend
throughout the industrial population.
The danger of these associations is that which besets human
nature everywhere—the selfish use of power. It is feared with reason
that if they have too much their own way they will monopolize
opportunity by restricting apprenticeship and limiting the number of
their members; that they will seek their ends through intimidation and
violence; that they will be made the instruments of corrupt leaders.
These and similar wrongs have from time to time been brought home
to them, and, unless their members are superior to the common run
of men, they are such as must be expected. But it would be a
mistake to regard these or any other kinds of injustice as a part of
the essential policy of unions. They are feeling their way in a human,
fallible manner, and their eventual policy will be determined by what,
in the way of class advancement, they find by experience to be
practicable. In so far as they attempt things that are unjust we may
expect them, in the long run, to fail, through the resistance of others
and through the awakening of their own consciences. It is the part of
other people to check their excesses and cherish their benefits.
In general no sort of persons mean better than hand-laboring men.
They are simple, honest people, as a rule, with that bent toward
integrity which is fostered by working in wood and iron and often lost
in the subtleties of business. Moreover, their experience is such as to
develop a sense of the brotherhood of man and a desire to realize it
in institutions. Not having enjoyed the artificial support of
accumulated property, they have the more reason to know the
dependence of each on his fellows. Nor have they any great hopes

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Maintenance Costs and Life Cycle Cost Analysis 1st

Robots, Drones, UAVs and UGVs for Operation and

Digital Manufacturing and Assembly Systems in Industry

A Roadmap to Industry 4.0: Smart Production, Sharp

Enabling Technologies for the Successful Deployment of

Industry 4.0-Challenges, Trends, and Solutions in

Information Systems for Managers: With Cases, Edition

Implementing Industry 4.0: The Model Factory as the Key

Diego Galar Pascual

© 2020 by Taylor & Francis Group, LLC

No claim to original U.S. Government works

Printed on acid-free paper

International Standard Book Number-13: 978-1-138-31629-4 (Hardback)

and the CRC Press Web site at

1. Fundamentals of Industry 4.0.......................................................................................................... 1

2. SMARTness and Pervasive Computing........................................................................................ 47

3. The Industry 4.0 Architecture and Cyber-Physical Systems..................................................... 79

4. Cloud Computing, Data Sources and Data Centers.................................................................. 119

5. Big Data Analytics as Service Provider...................................................................................... 155

6. IoT and the Need for Data Rationalization................................................................................. 189

7. OPERATOR 4.0............................................................................................................................ 239

8. Cybersecurity and Risk................................................................................................................ 287

9. Industry 4.0 across the Sectors.................................................................................................... 349

Retrospectively looking at previous revolutionary development of manufacturing from its beginning

• General support in defining development strategies and policies of its realization,

1.2.12 The Way Forward.............................................................................................................. 21

Figure 1.1 Main technologies of Industry 4.0...................................................................................... 8

Figure 1.12 Repository of the digital factory........................................................................................ 29

Table 1.1 Trends and expected developments in value creation factors................................................16

1.2 Industry 4.0

1. Horizontal integration across the entire value creation network,

1.2.1 Definition of Industry 4.0

1.2.2 What Is Industry 4.0?

1.2.2.1 Industry 4.0—What Is It?

• Flexible production: Many companies use a step-by-step process to develop a product. By

1.2.2.2 Talking about a Revolution: What Is New in Industry 4.0?

1.2.2.3 On the Path to Industry 4.0: What Needs to Be Done?

1.2.3 Key Paradigm of Industry 4.0

1.2.4 Industry 4.0 Conception

1.2.4.1 Five Main Components of Networked Production

1.2.5 Framework of Industry 4.0: Conception and Technologies

• Integration and digitalization of horizontal and vertical value chains,

The new connected technologies are shown in Figure 1.1.

1.2.6 Nine Pillars of Technological Advancement

Big Data Internet of

Augmented INDUSTRY 4.0

Augmented Horizontal and ver cal

Addi ve The Industrial

The Cloud Cybersecurity

1.2.6.1 Big Data and Analytics

...to fully integrated data and

Machine to machine and machine to human interacon

1.2.6.2 Autonomous Robots

1.2.6.4 Horizontal and Vertical System Integration

1.2.6.5 Industrial IoT

1.2.6.7 The Cloud

Figure 1.1 Main technologies of Industry 4.0...................................................................................... 8

Machine to machine and machine to human interacon

In-house Transport Value Creaon

Value Chain Acvies